Section 221 lets the Tribunal restrict transfer, removal or disposal of company assets during specified inquiry/investigation circumstances. Section 222 is different: it restricts transfer of securities for a limited period where a transfer may frustrate action concerning those securities. Neither provision permits an automatic freeze merely because a complaint exists.
Section 221: asset restraint
On a qualifying reference, investigation or complaint, the Tribunal may order that assets of the company must not be transferred, removed or disposed of for the period specified where it appears such action is likely and may prejudice the interests of the company, shareholders, creditors or the public. The statutory conditions and order wording control the restraint.
Who can trigger consideration
The provision identifies routes including a reference by the Central Government in connection with an inquiry or investigation, a complaint by members meeting section 244(1), or a creditor owed the statutory amount. A person's unsupported belief alone does not freeze assets; the Tribunal must exercise its power.
Penalty for contravention
Contravention of a section 221 order can expose the company and officers in default to the fines and imprisonment specified in the current text. Because penalty provisions may be amended, quote the operative India Code version on the date of advice rather than relying on copied historical rupee figures.
Section 222: securities
Section 222 addresses transfer of shares or other securities, not the company's general asset pool. Where a securities transfer is likely to take place and may frustrate or adversely affect action under the investigation chapter, the Tribunal may direct that the transfer shall not take place for a period not exceeding three years, subject to the order.
221 vs 222
| Point | Section 221 | Section 222 |
|---|---|---|
| Subject | Company assets, funds or property | Shares or other securities |
| Risk addressed | Prejudicial disposal/removal | Transfer frustrating investigation action |
| Decision-maker | National Company Law Tribunal | National Company Law Tribunal |
| Duration | Period specified in order | Up to the statutory maximum |
| Effect | Restrains dealing with identified assets | Restrains transfer of identified securities |
Procedure and evidence
An applicant should identify the statutory route, threatened transaction, ownership, value, urgency and likely prejudice, supported by board records, bank trails, asset registers, contracts and communications. Respondents should examine jurisdiction, standing, evidence, scope, proportionality and operational effects.
What a company should do after an order
- Obtain and circulate the sealed order to authorised officers.
- Identify every asset, account or security within scope.
- Stop affected transactions and notify banks, depositories or counterparties where required.
- Preserve records and create an approval protocol for ambiguous transactions.
- Seek clarification, variation, appeal or legal advice through the proper forum.
- Document compliance until the order expires or is lifted.
Governance controls
Maintain current asset registers, related-party approvals, board minutes, banking authorities and transaction trails. Escalate unusual disposals during an inquiry. Directors must still preserve business operations and creditor interests, but cannot reinterpret a Tribunal restraint for convenience.
Common misconceptions
- Sections 221 and 222 are not the same power.
- A complaint does not itself freeze anything.
- The statutory creditor threshold is not proof of entitlement to an order.
- A freeze order is not a final finding of fraud.
- Ordinary-course transactions may still require careful reading of the order.
Frequently asked questions
Can the Central Government freeze assets directly under section 221?
Section 221 describes a Tribunal order on specified references or complaints; the exact statutory route must be followed.
Are shares company assets under section 222?
Section 222 specifically concerns transfer of shares or other securities and serves a different purpose from section 221.
Does an order prove fraud?
No. A protective restraint is not itself a final adjudication of fraud or liability.
What should directors do first?
Obtain the exact order, map its scope, stop affected transactions and seek specialist legal advice.
Official starting points
Editorial review record
| Review level | Reviewed by | Status | Date |
|---|---|---|---|
| 1 | TargoLegal Research and Editorial Desk | Completed | 22 July 2026 |
| 2 | Independent professional reviewer | Pending | — |
