Section 224 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 224 lists what the Central Government may do once it has an inspector's report under section 223. It may prosecute for offences, petition the Tribunal for winding up or relief under section 241, bring recovery proceedings in the company's name in the public interest, and, where the report states that fraud took place, apply for disgorgement and personal liability without limit.
Four routes open from the report. The Government may prosecute any person who appears guilty of an offence. It may present a winding-up petition (just and equitable) and/or a section 241 application to the Tribunal. It may bring proceedings in the company's name to recover damages or misapplied property, with the company indemnifying the Government for costs. Where the report states fraud with undue benefit, it may seek disgorgement and unlimited personal liability of the persons concerned.
Route 1: prosecution, sub-section (1)
If it appears from the inspector's report "made under section 223" that any person has, in relation to the company or another body corporate or person whose affairs were investigated, "been guilty of any offence for which he is criminally liable", the Central Government "may prosecute such person for the offence".
The second half of sub-section (1) places a duty on insiders: "it shall be the duty of all officers and other employees of the company or body corporate to give the Central Government the necessary assistance in connection with the prosecution". So employees cannot decline to help on the ground that the company is itself under investigation.
Note that the route reaches persons connected with other bodies corporate too, which fits the wider investigation under section 219.
Route 2: winding up or section 241, sub-section (2)
Two conditions apply.
- The company or body corporate "is liable to be wound up under this Act or under the Insolvency and Bankruptcy Code, 2016". The words on the Code were inserted by Act 31 of 2016 with effect from 15 November 2016.
- It appears to the Central Government from the report that it is "expedient so to do by reason of any such circumstances as are referred to in section 213".
Unless the company is "already being wound up by the Tribunal", the Central Government may cause to be presented to the Tribunal, through a person it authorises:
| Option | What |
|---|---|
| (a) | A petition for winding up on the ground that it is just and equitable |
| (b) | An application under section 241 |
| (c) | Both |
Section 241 is the oppression and mismanagement remedy, discussed in Sections 241–244. Note the IBC context. Inability to pay debts is handled under the Insolvency and Bankruptcy Code, but the just and equitable ground is one of the grounds on which the Tribunal can still order winding up under the Companies Act. To see the Act's list of grounds, read Grounds for winding up by Tribunal under section 271.
If you are an investigated company or a stakeholder who wants to know which route the Government might choose on a given report, our legal dispute resolution team can assess the report with you.
Route 3: recovery proceedings in the company's name, sub-sections (3) and (4)
If it appears from the report that proceedings "ought, in the public interest, to be brought by the company or any body corporate whose affairs have been investigated", the Government may itself bring proceedings in that company's name, for:
- (a) recovery of damages for "any fraud, misfeasance or other misconduct in connection with the promotion or formation, or the management of the affairs" of the company or body corporate; or
- (b) recovery of "any property of such company or body corporate which has been misapplied or wrongfully retained".
The printed text of sub-section (3) says the Central Government "may itself bring proceedings for winding up in the name of such company or body corporate". The words "for winding up" appear in the official text as printed, although the preceding clauses speak of recovery of damages and property. Read the text of the section itself and take advice on the exact wording.
Sub-section (4) protects the Government: it "shall be indemnified by such company or body corporate against any costs or expenses incurred by it in, or in connection with, any proceedings brought by virtue of sub-section (3)".
Route 4: disgorgement and personal liability, sub-section (5)
Where the inspector's report "states that fraud has taken place in a company" and, because of it, "any director, key managerial personnel, other officer of the company or any other person or entity, has taken undue advantage or benefit, whether in the form of any asset, property or cash or in any other manner", the Central Government "may file an application before the Tribunal for appropriate orders".
The application may seek:
- disgorgement of the asset, property or cash; and
- an order holding such director, key managerial personnel, officer or other person liable personally without any limitation of liability.
Two things to observe. The trigger is the inspector's report stating that fraud has taken place. The Government does not need a court finding first. But the power is to apply to the Tribunal, and it is the Tribunal that makes the order. Fraud itself is defined and punished under section 447; see Section 447: Punishment for fraud.
How section 224 fits the chain
The chain runs: investigation, then the report under section 223, then action under section 224. The cost of the investigation is then settled under section 225 and may be reimbursed by convicted persons, by companies recovering sums, or by others. For another view of these routes, see action after inspector report: prosecution, winding up or recovery.
Proposed change
We checked the Corporate Laws (Amendment) Bill, 2026 for a clause amending section 224 and found none. The Bill is pending and is not law as on 30 September 2026.
Practical examples
Example 1: prosecution. The report shows a director filed a false statement of assets. The Government may prosecute him, and employees must give it necessary assistance.
Example 2: just and equitable winding up. The report reveals that a company was run as a quasi-partnership scheme that defrauded members. The Central Government may present a just and equitable winding-up petition, or a section 241 application, or both.
Example 3: disgorgement. The report states that a promoter took company cash for personal assets through a fraud. The Central Government may apply to the Tribunal for disgorgement of the cash and for personal liability without limit.
Need help after an inspector's report?
A report does not by itself decide anything, but it can start one of four routes. If a report names you or your company, we can help you understand the likely next steps and prepare a response in a legal dispute resolution engagement.
Key takeaways
- The Government may prosecute offenders identified in the report, and officers and employees must assist.
- It may seek just and equitable winding up, a section 241 order, or both, unless the company is already being wound up by the Tribunal.
- It may bring recovery proceedings in the company's name in the public interest, with the company indemnifying it.
- Where the report states fraud and undue benefit, it may seek disgorgement and unlimited personal liability.
- The Bill, 2026 has no clause amending section 224.
Read next
- Section 223: Inspector's report
- Sections 225–226: Investigation expenses and winding up
- Section 221: Freezing of assets
- Section 447: Punishment for fraud
Disclaimer: Based on the Companies Act, 2013 as amended up to 1 April 2021 (official consolidated text), read with later developments noted in the article; proposals in the Corporate Laws (Amendment) Bill, 2026 are pending and not law as on 30 September 2026. Verify current notifications and rules before acting.