Companies Act Section 347

Companies Act, Section 347: Disposal of Books and Papers of a Company After Winding Up 

Section 347 of the Companies Act, 2013 deals with the management, disposal, and preservation of a company's books and papers after the company has been completely wound up and is about to be dissolved. It provides a legal framework for the final handling of a company’s records including those maintained by the Company Liquidator while also ensuring that rights of interested parties such as creditors and contributories are protected for a reasonable time.

The section lays out procedural guidance, assigns accountability, and empowers both the Tribunal and the Central Government to issue directions and frame rules concerning the preservation or destruction of such records.

1. Tribunal’s Power to Direct Disposal of Records

Once the affairs of a company have been completely wound up that is, when:

All assets have been liquidated, Liabilities and debts have been settled, Surplus (if any) has been distributed among contributories, The Company Liquidator has filed his final report.
The company is about to be formally dissolved by the Tribunal under Section 302, the question arises as to what should be done with the books, papers, and records of the company and of the Liquidator.

Key Provision:

Section 347(1) empowers the Tribunal to issue directions on the manner of disposal of:

The books and papers of the company, and the records and documents maintained by the Company Liquidator during the course of the liquidation. These may include:

Statutory registers, Financial statements and ledgers, Tax filings, Contractual documents, Legal correspondences, Meeting minutes, Liquidation accounts and reports, etc. The Tribunal may:

Order the retention or destruction of such records, Direct the transfer of custody to a government authority or third party, Impose conditions for future access or use of the records.
2. No Liability After Five Years from Dissolution

This sub-section provides legal immunity and closure regarding the books and papers after a reasonable period of time has passed post-dissolution.

Key Provision: After five years from the official date of dissolution of the company: No responsibility or liability shall rest on:
The company (which, by then, no longer legally exists), The Company Liquidator, or Any person or entity to whom the books and records were entrusted (such as a storage agency, custodian, or government department), merely because a book or paper is not available to someone who now claims an interest in it.

Implication: This clause provides:

Legal protection to those previously in custody of the records, A clear limitation period beyond which no claims can be made regarding missing records, Finality to the record-keeping obligation tied to the company’s lifecycle.
For example, if a former creditor tries to access a document from the company’s books six years after dissolution, and it cannot be found, the Company Liquidator or custodian cannot be held liable.

3. Rulemaking Powers of the Central Government

This sub-section vests the Central Government with authority to issue rules governing the retention, preservation, or destruction of the books and records of a company that has been wound up.

Clause (a): Power to Prevent Destruction

The Central Government may, by rule:

Prohibit the destruction of the books and papers of a company and of the Company Liquidator, For such period as it deems appropriate. This power ensures that important records are preserved when needed for:

Legal proceedings or appeals, Investigations (e.g., under SFIO or tax authorities), Resolving pending claims or disputes. The period of preservation may vary depending on:

The size or nature of the company, Whether fraud or misconduct was suspected, Whether any related proceedings are still ongoing.
Clause (b): Right to Represent and Appeal

The Government must also provide a mechanism for stakeholders to participate in this process. It may frame rules to:

Enable any creditor or contributory to make representations to the Government regarding the proposed preservation or destruction of records, and allow them to appeal to the Tribunal if they are aggrieved by any decision or order made by the Government on such matters.
This ensures that the rulemaking process is fair, consultative, and subject to judicial oversight.

4. Penalty for Contravention of Rules or Orders

This sub-section introduces a penal consequence for violating any rule or order made by the Government under Sub-section (3).

Key Provision: If any person acts in contravention of:

A rule framed by the Central Government under Sub-section (3), or an order issued by the Government on the subject of books and records, then such a person shall be punishable with a fine which may extend up to ?50,000. This provision ensures that:

The rules and orders regarding disposal and preservation are enforceable, Stakeholders take their responsibilities seriously, and No one unilaterally destroys or tampers with records in violation of prescribed norms.