Section 221 of Companies Act 2013: Freezing of Assets of a Company on Inquiry and Investigation

Section 221 of the Companies Act 2013 empowers authorities to freeze the assets of a company during an inquiry or investigation. This provision is crucial in preventing the dissipation or misuse of assets when a company is suspected of engaging in unlawful activities. The term "freezing of assets" refers to temporarily restricting a company's ability to transfer, sell, or dispose of its properties during the investigation period.

This measure is typically enforced to protect the interests of creditors, shareholders, and the general public by ensuring that the company’s assets remain intact for any future legal proceedings or claims. When authorities suspect fraudulent activities or financial mismanagement, they can invoke Section 221 to safeguard company assets, ensuring they are available to satisfy potential liabilities or penalties.

The freezing of assets under Section 221 is not permanent but remains in place until the inquiry or investigation concludes. If the inquiry reveals no wrongdoing, the assets are unfrozen, allowing the company to resume its normal operations.