Chapter XIV - Inspection, Inquiry and Investigation
Section 222
Section 222: imposition of restrictions upon securities
Section 222 allows the National Company Law Tribunal to place restrictions on securities of a company when it needs to find out the relevant facts about those securities, and it punishes any issue, transfer or other dealing in breach of the Tribunal’s order.
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Need advice on Section 222?
This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(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.
Introduction
The power can be used in connection with an investigation under section 216 (investigation of the ownership of a company) or on a complaint made by any person. The Tribunal must be of the opinion that the facts cannot be found out unless restrictions are imposed.
Section 222 commenced on 1 June 2016 under S.O. 1934(E). The India Code consolidated text shows no amendment, and it matches the 2013 Gazette.
Key takeaways
Trigger
An investigation under section 216, or a complaint by any person, showing good reason to find out the facts about securities issued or to be issued by a company.
Maximum period
Restrictions can be imposed for the period specified in the order, not exceeding three years.
Company penalty
Issuing, transferring or acting on securities against the order makes the company liable to a fine of one lakh rupees up to twenty-five lakh rupees.
Officer penalty
Every officer in default faces imprisonment up to six months, or a fine of twenty-five thousand rupees up to five lakh rupees, or both.
When the Tribunal can restrict securities
Under sub-section (1), the Tribunal acts where it appears, in connection with an investigation under section 216 or on a complaint made by any person, 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 those facts cannot be found out unless restrictions are imposed.
The Tribunal may then, by order, direct that the securities are subject to such restrictions as it thinks fit. The order must specify the period, which cannot exceed three years.
Consequences of breaching the order
Sub-section (2) applies where securities are issued, transferred or acted upon in contravention of the order. The company is punishable with a fine of not less than one lakh rupees, which may extend to twenty-five lakh rupees.
Every officer of the company who is in default is punishable with imprisonment for a term which may extend to six months, or with a fine of not less than twenty-five thousand rupees which may extend to five lakh rupees, or with both.
Practical preparation
Record the order in the register of members and flag the affected securities; brief the registrar and share transfer agent and any depository participant contacts; stop transfers, allotments, voting or dividend actions that the order covers; diarise the end date stated in the order; and take advice before acting on any request that touches the restricted securities.
Procedure, forms, fees and timelines for applications under this provision are set out in rules made under the Act and in the Tribunal’s procedure; check the current text of those rules, and any exemption notification for your class of company, before relying on this guide.
Practical checklist
Do
- Read the order closely: the restrictions are whatever the Tribunal specifies, so the scope varies from case to case.
- Instruct everyone who processes transfers to stop dealings covered by the order immediately.
Avoid
- Do not register a transfer or issue new securities covered by the order, even on instructions from a shareholder.
- Do not assume the restriction lapses early; it runs for the period specified in the order.
Illustrative example
Hypothetical: a transfer request during a restriction order
A shareholder whose shares are covered by a section 222 order asks the company to register a transfer to a relative.
Check the order
The company secretary confirms that the shares fall within the order and that its period has not ended.
Decline
The company does not register the transfer and records why.
Take advice
If the shareholder wants the restriction varied, that is a matter for the Tribunal; the company does not act on its own view.
Outcome
- Refusing the transfer keeps the company and its officers outside the penalties in sub-section (2).
Glossary
- Securities
- As defined in section 2(81) of the Act, by reference to the Securities Contracts (Regulation) Act, 1956; it covers shares and debentures among other instruments.
- Section 216 investigation
- An investigation by inspectors into the membership and real ownership or control of a company.
- Officer in default
- The officers described in section 2(60) who are liable for a default by the company.
Frequently asked questions
Who can ask for restrictions under section 222?
The Tribunal acts in connection with an investigation under section 216 or on a complaint made by any person in this behalf.
How long can the restrictions last?
For the period specified in the order, which cannot exceed three years.
What happens if the company transfers restricted shares?
The company faces a fine of one lakh rupees up to twenty-five lakh rupees, and every officer in default faces imprisonment up to six months, a fine of twenty-five thousand rupees up to five lakh rupees, or both.
Need help applying this provision to your situation?
Contact BizeneedLast updated 12 October 2026