Section 221 – Freezing of assets of company on inquiry and investigation.

Freezing of assets of a company on inquiry and investigation defined under Section 221 and 222 of the Indian Companies Act 2013. Mismanagement and scam are quite common in companies. Picking these loopholes isn’t easy for the authority. Thanks to sections 222 and 221, which has been proved quite effective in averting these anomalies.

Important Provisions on Freezing of the company’s assets on investigation & inquiry

Section 221 of Indian Companies Act 2013[1] “Freezing of a company’s assets on inquiry and investigation.”

“(1) Whenever the Tribunal gets the implication via a recommendation made by Central Government or in connection with any investigation of a company as per this chapter or any complaint lodged by members as per sub-section (1) of section 244 or a creditor having an outstanding amount of one lakh rupees against the company or a person who strongly believe, that removal or transfer of assets, funds, properties of the company is probably going to be exposed to unethical and illegals business practice which might disrupt shareholder’s interest, it may by order direct that such actions shall not be practiced during such timespan.”

Penalty provisions under Section 221 of Companies Act 2013

(2) Whenever the company found guilty of violating the Tribunal’s order under sub-section (1), w.r.t transfer, removal, or disposal of assets, funds, or properties of the company, shall be imposed with a fine of Rs one lakh, which could be extended to twenty-five lakh rupees. The involved officials in such a case will subject to imprisonment of 3 years along with a fine of Rs 50,000. Keep in mind this fine can be raised to 5 Lakh, depending on the intensity of the violation.