imposition of restrictions upon securities (section 222 of the companies act,2013)

222. Imposition of restrictions upon securities.— (1) Where it appears to the Tribunal, in connection with any investigation under section 216 or on a complaint made by any person in this behalf, that there is good reason to find out the relevant facts about any securities issued or to be issued by a company and the Tribunal is of the opinion that such facts cannot be found out unless certain restrictions, as it may deem fit, are imposed, the Tribunal may, by order, direct that the securities shall be subject to such restrictions as it may deem fit for such period not exceeding three years as may be specified in the order.

(2) Where securities in any company are issued or transferred or acted upon in contravention of an 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 six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees, or with both.

In short, if tribunal wants it can impose restriction on transfer or issue of shares, debentures or other securities during the period of investigation under section 216. 

If a person contravenes this section, then penalty is imposable.

Case study on freezing of assets & Section 222

Punjab National Bank Scam

A few years back, jewelers Nirav Modi and Mehul Choksi have allegedly defrauded Punjab National Bank with Rs 14000 crores. To this day, the bank is still in the hunt for their lost money. However, a proper law protocol was followed by the authority to recover the entire amount.

Rational of the Case

National Company Law Tribunal (NCLT) issued an immediate order to restrain both the culprits from selling their assets so that the proper recovery can be made. The corporate affairs ministry filed the petition against the culprits based on section 221 of Company Act 2013. The ministry also took advantage of section 222, which relates to the imposition of security restrictions to support the case. 

This is a perfect example of how exactly section 221 works in real-life scenarios. It is a transition of authority from Tribunal to legal bodies to take relevant action against the companies involved in mismanagement and scams.

Source:- <https://corpbiz.io/learning/freezing-of-the-company-assets-on-investigation-and-inquiry/#Section_222_of_Companies_Act_2013_%E2%80%9CImposition_of_restrictions_upon_securities_%E2%80%9D>