Sections 221 and 222 of the Companies Act, 2013: Freezing of Assets and Restrictions on Securities
Updated: 17 September 2026
Sections 221 and 222 form part of Chapter XIV of the Companies Act, 2013, which deals with inspection, inquiry and investigation. These provisions empower the National Company Law Tribunal (NCLT) to preserve company assets and to restrict dealings in securities where the statutory conditions are satisfied.
Meaning and purpose of Sections 221 and 222
Section 221 is an asset-preservation provision. It enables the Tribunal to prevent or regulate the removal, transfer or disposal of the funds, assets or properties of a company when there is a reasonable basis to apprehend a transaction prejudicial to the company, its shareholders, creditors or the public interest.
Section 222 is directed specifically at securities. In connection with an investigation under Section 216, or on a complaint, the Tribunal may impose restrictions on securities where those restrictions are considered necessary for discovering relevant facts about securities issued or proposed to be issued by a company.
| Provision | Main subject | Maximum period of Tribunal order |
|---|---|---|
| Section 221 | Freezing or conditional dealing with company funds, assets and properties | Up to 3 years |
| Section 222 | Restrictions upon securities for finding relevant facts | Up to 3 years |
Section 221 - Freezing of assets of company on inquiry and investigation
What Section 221 provides
Under Section 221(1), the Tribunal may act on a reference made by the Central Government, in connection with an inquiry or investigation into the affairs of a company under Chapter XIV, on a complaint by the number of members specified in Section 244(1), on a complaint by a creditor having one lakh rupees outstanding against the company, or on the basis of another person having reasonable grounds as contemplated by the section.
If it appears that the removal, transfer or disposal of the company's funds, assets or properties is likely to occur in a manner prejudicial to the company, its shareholders or creditors, or to the public interest, the Tribunal may direct that the transaction shall not take place for the period stated in its order, not exceeding three years. The Tribunal may instead permit the transaction subject to conditions and restrictions it considers fit.
Who may trigger consideration under Section 221?
The statutory routes include a Central Government reference, a matter connected with an inquiry or investigation under Chapter XIV, a qualifying members' complaint under Section 244(1), a creditor meeting the monetary condition stated in Section 221, and another person satisfying the reasonable-ground requirement contained in the provision.
Penalty for contravention of an order under Section 221
Section 221(2) provides that if funds, assets or properties are removed, transferred or disposed of in contravention of the Tribunal's order, the company is punishable with a fine of not less than Rs. 1 lakh and up to Rs. 25 lakh. Every officer of the company who is in default may be punished with imprisonment up to three years, or a fine of not less than Rs. 50,000 and up to Rs. 5 lakh, or both.
Section 222 - Imposition of restrictions upon securities
When can the Tribunal impose restrictions?
Section 222(1) applies where, in connection with an investigation under Section 216 of the Companies Act, 2013, or on a complaint made by any person in this behalf, it appears to the Tribunal that there is good reason to ascertain relevant facts concerning securities issued or proposed to be issued by a company.
If the Tribunal is of the opinion that those facts cannot be found out unless restrictions are imposed, it may order that the securities be subject to such restrictions as it considers fit for a period specified in the order, not exceeding three years.
Penalty for contravention of an order under Section 222
Under Section 222(2), where securities are issued, transferred or acted upon in contravention of the Tribunal's order, the company is punishable with a fine of not less than Rs. 1 lakh and up to Rs. 25 lakh. Every officer in default may be punished with imprisonment up to six months, or a fine of not less than Rs. 25,000 and up to Rs. 5 lakh, or both.
Difference between Section 221 and Section 222
| Point | Section 221 | Section 222 |
|---|---|---|
| Subject matter | Funds, assets and properties of the company | Securities issued or proposed to be issued by a company |
| Core purpose | Prevent prejudicial removal, transfer or disposal | Enable discovery of relevant facts about securities |
| Maximum duration | 3 years | 3 years |
| Officer imprisonment for breach | Up to 3 years | Up to 6 months |
Official legal resources
For the authoritative statutory text and current notifications, refer to the Government of India resources below. The provisions on this page are intended as a reader-friendly explanation and should be checked against the current official text when used for professional or legal purposes.