Section 331 - Liabilities and rights of certain persons fraudulently preferred

Fraudulent preference in winding up treats the preferred person as personally liable like a surety to secured extent.

If a winding-up transaction is invalid as a fraudulent preference of a person with an interest in mortgaged or charged property, that person is subject to the same liabilities and entitled to the same rights as if personally liable as a surety, limited to the mortgage or charge or the value of the interest, whichever is less. The interest's value is determined at the transaction date as if free of encumbrances except those attaching to the mortgage or charge. The Tribunal may determine disputes between payee and surety or guarantor, grant relief, and permit impleader; this framework applies mutatis mutandis to non-payment transactions.