338. Liability where proper accounts not kept
(1) Where a company is being wound up, if it is shown that proper books of
account were not kept by the company throughout the period of two years immediately
preceding the commencement of the winding up, or the period between the incorporation of
the company and the commencement of the winding up, whichever is shorter, every officer of
the company who is in default shall, unless he shows that he acted honestly and that in the
circumstances in which the business of the company was carried on, the default was excusable,
be punishable with imprisonment for a term which shall not be less than one year but which
may extend to three years and with fine which shall not be less than one lakh rupees but
which may extend to three lakh rupees.
(2) For the purposes of sub-section (1), it shall be deemed that proper books of
account have not been kept in the case of any company,—
(a) if such books of account as are necessary to exhibit and explain the
transactions and financial position of the business of the company, including books
containing entries made from day-to-day in sufficient detail of all cash received and all
cash paid, have not been kept; and
(b) where the business of the company has involved dealings in goods,
statements of the annual stock takings and, except in the case of goods sold by way of
ordinary retail trade, of all goods sold and purchased, showing the goods and the
buyers and the sellers thereof in sufficient detail to enable those goods and those
buyers and sellers to be identified, have not been kept.