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The Companies Act, 2013

Chapter XX - Winding Up (270 - 365)

Section 328- Fraudulent preference.

Section 328 notified with effect from 15.12.2016 vide S.O. 3676 (E) dated 07.12.2016]

Section 328- Fraudulent preference. [Corresponds to Section 531 of the Companies Act, 1956]

(1) Where a company has given preference to a person who is one of the company’s creditors or a surety or guarantor for any of the company’s debts or other liabilities, and the company does anything or suffers anything done which has the effect of putting that person into a position which, in the event of the company going into liquidation, will be better than the position he would have been in if that thing had not been done prior to six months of making winding up application, the Tribunal, if satisfied that, such  transaction is a  fraudulent preference may order as it may think fit for restoring the position to what it would have been if the company had not given that preference.

(2) If the Tribunal is satisfied that there is a preference transfer of property, movable or immovable, or any delivery of goods, payment, execution made, taken or done by or against a company within six months before making winding up application, the Tribunal may order as it may think fit and may declare such transaction invalid and restore the position.