Section 221: Freezing of assets of company on inquiry and investigation
Companies Act, 2013 · Chapter XIV: Inspection, Inquiry And Investigation · In force
This section allows the Tribunal to freeze a company's assets and imposes penalties if the company or its officers violate this order.
Penalty
(2) In case of any removal, transfer or disposal of funds, assets, or properties of the company in contravention of the order of the Tribunal under sub-section (1), the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.
The section, clause by clause
What the section says
In plain terms
(1)Where it appears to the Tribunal, on a reference made to it by the Central Government or in connection with any inquiry or investigation into the affairs of a company under this Chapter or on any complaint made by such number of members as specified under sub-section (1) of section 244 or a creditor having one lakh amount outstanding against the company or any other person having a reasonable ground to believe that the removal, transfer or disposal of funds, assets, properties of the company is likely to take place in a manner that is prejudicial to the interests of the company or its shareholders or creditors or in public interest, it may by order direct that such transfer, removal or disposal shall not take place during such period not exceeding three years as may be specified in the order or may take place subject to such conditions and restrictions as the Tribunal may deem fit.
The Tribunal can order a company to not transfer, remove, or dispose of its funds, assets, or properties for up to three years if it believes this would be prejudicial to the company or its stakeholders.
(2)In case of any removal, transfer or disposal of funds, assets, or properties of the company in contravention of the order of the Tribunal under sub-section (1), the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.
If a company violates the Tribunal's order, it can be fined between one lakh rupees and twenty-five lakh rupees, and its officers can be imprisoned for up to three years or fined between fifty thousand rupees and five lakh rupees.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
1. Ins. by Act 1 of 2018, s. 72 (w.e.f. 9-2-2018).
2. Subs. by Act 21 of 2015, s. 18, for “by the seal” (w.e.f. 29-5-2015).
Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.