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BNS 2024ACTIVE FRAMEWORK
Section 322
Dishonestly or Fraudulently Preventing Debt Being Available for Creditors
Replaces colonial-era: IPC 422
BailableCognizable: Non-CognizableAny Magistrate
Reform Highlights
1
Renumbered from IPC 422 to BNS 322.
2
2-year maximum and non-cognizable status preserved.
THE STATUTE
The Clause
Whoever dishonestly or fraudulently prevents any debt or demand due to himself or to any other person from being made available according to law for payment of his debts or the debts of such other person, shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both.
Legal Commentary
Section 322 is a companion to Section 321 — targeting a slightly different form of creditor fraud. While Section 321 covers moving or concealing property, Section 322 covers preventing a debt owed to the debtor from being collected for the benefit of the debtor's own creditors. A debtor who forgives a large debt owed to them, or who arranges for debts owed to them to be diverted to third parties, or who refuses to collect monies owed to them — all to frustrate their own creditors from accessing these funds — commits this offence. This is particularly relevant in complex corporate insolvency scenarios where directors may manipulate inter-company loans and receivables to reduce the assets available to creditors.
Case Simulations
"A debtor who fictitiously writes off large receivables owed to his business so that his creditors cannot recover from those funds — Section 322."
"A company director who waives inter-company loans owed to the debtor company just before insolvency proceedings — Section 322."
Expert Insights
Yes — dishonestly preventing a debt owed to you from being available to your own creditors is the precise target of Section 322.