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.
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.
Legal Commentary & Landmark Judgments: Section 221
Section 221 empowers the National Company Law Tribunal to freeze corporate assets, prohibiting disposal, transfer, or alienation of company property during pending inquiries or investigations.
Section 221 operates as a corporate Mareva injunction. It prevents fraudulent promoters under MCA or SFIO investigation from alienating factory lands, intellectual property, or bank balances before liability can be determined. Asset freezing orders bind third parties, banks, and registrars of properties, ensuring total preservation of the corporate res.