Companies Act Section 429

Companies Act, Section 429: Power of the Tribunal to Seek Assistance of Magistrates or District Collector

Section 429 of the Companies Act, 2013 strengthens the authority of the National Company Law Tribunal (NCLT) by enabling it to seek direct support from higher administrative and judicial officers, such as the Chief Metropolitan Magistrate, Chief Judicial Magistrate, or the District Collector, in matters involving the custody and protection of assets of a company facing winding up or insolvency proceedings.

This provision is especially significant because, in situations where a company is being liquidated or undergoing insolvency resolution, its properties, records, and financial documents need to be immediately secured to prevent misuse, concealment, or illegal disposal.

1. Assistance for Securing Company Assets

During winding up proceedings under the Companies Act or any process under the Insolvency and Bankruptcy Code, 2016, the Tribunal may issue a written request to the appropriate authority such as:

The Chief Metropolitan Magistrate, or The Chief Judicial Magistrate, or The District Collector, depending on the location where the company’s property, books of account, or other relevant documents are found or situated.

Upon receiving such a request, the authority must act and carry out the following:

a) Take possession of the property, accounts, or documents.

b) Entrust them to the Tribunal or to a person authorized by the Tribunal (such as a liquidator or insolvency professional).

This ensures that the Tribunal can exercise proper control over assets critical to adjudication and distribution among stakeholders.

2. Power to Use Necessary Force

Sometimes, cooperation may not be voluntary, especially where individuals attempt to hide assets or obstruct legal proceedings. Therefore:

The Magistrate or District Collector is empowered to take any necessary steps and use reasonable force to secure possession of the assets and documents.

This provision acts as a deterrent against unlawful interference by company management or others who may try to prevent asset recovery.

3. Protection of Actions Taken Under This Section

To ensure smooth functioning and compliance, the law provides:

Absolute protection to all actions taken by the Magistrate or District Collector under this section.

Such actions cannot be challenged before any court or authority on any ground whatsoever. This clause ensures that:

There are no legal delays due to challenges against enforcement. Authorities can confidently carry out Tribunal orders without fear of litigation.

The Tribunal’s ability to control company assets remains effective and uncompromised.

Purpose and Importance of Section 429

This section plays a vital role in insolvency and winding-up matters by:

Preventing disappearing or fraudulent transfer of assets. Securing crucial records for investigation and legal proceedings.

Ensuring efficient and effective enforcement of Tribunal orders. Supporting liquidators and insolvency professionals in fulfilling statutory duties.

Protecting rights and recoveries of creditors and stakeholders.It creates a strong enforcement mechanism that promotes accountability and safeguards the economic interests involved in corporate failures.