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Section 351: Liquidator not to deposit monies into private banking account

Companies Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 2013
Section 350 All 470 Sections of Companies Act Section 352
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Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 351

Section 351 of the Companies Act, 2013 imposes an absolute statutory prohibition against any Official Liquidator or Company Liquidator depositing monies received by them in their official capacity into any private banking account.

  • Absolute Non-Commingling Mandate: Strictly forbids depositing liquidation proceeds into personal, firm, or private corporate bank accounts.
  • Universality of Application: Applies across both Official Liquidators (court-attached) and private Company Liquidators / Insolvency Professionals appointed under the Act.
  • Criminal and Professional Breach: Violation constitutes criminal breach of trust, statutory misconduct, and immediate disqualification from acting as an insolvency professional or liquidator.
Key Landmark Precedents:
  • Official Liquidator v. P.A. Tendolkar, (1973) 1 SCC 602: The Supreme Court affirmed that fiduciaries administering company assets are under an inviolable duty of strict segregation, and mixing trust funds with private funds constitutes misfeasance.
  • Official Liquidator v. B.S. Suri, (1987) 62 Comp Cas 458 (Del): Held that depositing liquidation funds into a personal or private partnership account constitutes gross professional delinquency warranting disciplinary prosecution and recovery.
  • Re: Bipin Behari Sen, AIR 1959 Cal 403: Held that the prohibition against private banking accounts is vital for maintaining the integrity of the judicial liquidation administration, preventing private interest from conflicting with statutory duty.
Courtroom Practice & Strategic Litigation Guidance:

An allegation of commingling under Section 351 should be substantiated by bank transaction ledgers and IFSC/account records. Upon establishing that official funds flowed into a personal or firm account, move the Tribunal for immediate freeze of the private account, appointment of a replacement liquidator, and referral to the Insolvency and Bankruptcy Board of India (IBBI) for professional cancellation.

Section 350 All 470 Sections of Companies Act Section 352