Section 331 of CA 2013 : Section 331: Liabilities And Rights Of Certain Persons Fraudulently Preferred

Explanation using Example

Imagine a scenario where XYZ Pvt. Ltd. is going through a liquidation process. Prior to the commencement of the winding-up, the company had, under dubious circumstances, cleared a large debt to one of its secured creditors, ABC Corp., which had a charge over some of XYZ's assets. The liquidator suspects this was a fraudulent preference, as it was done to put ABC Corp. in a better position than other creditors.

Under Section 331 of the Companies Act, 2013, the transaction can be challenged. If proven to be a fraudulent preference, ABC Corp. would be treated as if it had pers...

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