1. If in the course of the winding up of a company, it appears that any business of the company has been carried on with intent to defraud creditors of the company or any other persons or for any fraudulent purpose, the Tribunal, on the application of the Official Liquidator, or the Company Liquidator or any creditor or contributory of the company, may, if it thinks it proper so to do, declare that any person, who is or has been a director, manager, or officer of the company or any persons who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Tribunal may direct:
Provided that: on the hearing of an application under this sub-section, the Official Liquidator or the Company Liquidator, as the case may be, may himself give evidence or call witnesses.
2. Where the Tribunal makes any such declaration, it may give such further directions as it thinks proper for the purpose of giving effect to that declaration and, in particular,
a. make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from the company to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the company held by or vested in him, or any person on his behalf, or any person claiming as assignee from or through the person liable or any person acting on his behalf;
b. make such further order as may be necessary for the purpose of enforcing any charge imposed under this sub-section.
3. Where any business of a company is carried on with such intent or for such purpose as is mentioned in sub-section (1 ), every person who was knowingly a party to the carrying on of the business in the manner aforesaid, shall be liable for action under section 447.
4. This section shall apply, notwithstanding that the person concerned may be punishable under any other law for the time being in force in respect of the matters on the ground of which the declaration is to be made.
Explanation.- —For the purposes of this section,
a. the expression "assignee" includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the interest was created, but does not include an assignee for valuable consideration, not including consideration by way of marriage, given in good faith and without notice of any of the matters on the ground of which the declaration is made;
b. the expression "officer" includes any person in accordance with whose directions or instructions the directors of the company have been accustomed to act.
Legal Commentary & Landmark Judgments: Section 339
Section 339 is the legendary 'fraudulent trading' provision, empowering the National Company Law Tribunal to impose personal and unlimited liability on directors who carried on business with intent to defraud creditors.
This statutory framework establishes clear operational guidelines, balancing legal compliance with procedural safeguards.
Section 339 is the ultimate statutory weapon piercing the corporate veil in insolvency. When a company is wound up leaving banks and suppliers unpaid, the Liquidator files a Section 339 application before the NCLT. If the Tribunal finds that directors continued trading or diverted goods while knowing liquidation was imminent, it attaches their personal residential properties, bank accounts, and investments to pay corporate debts in full.