Sections 225 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 225 says who ends up paying for an investigation ordered by the Central Government. The Government pays first, and is then reimbursed by specified persons. Section 226 says an investigation cannot be stopped or suspended merely because a section 241 application has been made, the company has passed a special resolution for voluntary winding up, or another winding-up proceeding is pending before the Tribunal.
Expenses of an investigation by an inspector appointed by the Central Government (other than section 214 inspection expenses) are paid first by the Government and reimbursed by convicted persons, by companies that recover sums, or, where no prosecution follows, by the company investigated and the applicants, to the extent the Government directs. Under section 226, an investigation may begin and continue despite a section 241 application, a voluntary winding-up resolution or a pending winding-up proceeding; only a winding-up order requires the inspector to inform the Tribunal.
Section 225: who pays
Sub-section (1) states the starting point. The expenses "of, and incidental to, an investigation by an inspector appointed by the Central Government under this Chapter other than expenses of inspection under section 214 shall be defrayed in the first instance by the Central Government". The Government then recovers them from the following persons "to the extent mentioned below".
| Clause | Who reimburses | Extent |
|---|---|---|
| (a) | A person convicted on a prosecution instituted under section 224, or ordered to pay damages or restore property in proceedings under section 224 | To the extent the court convicting him or ordering payment or restoration specifies in the same proceedings |
| (b) | A company or body corporate in whose name proceedings are brought under section 224 | To the extent of the amount or value of sums or property it recovers as a result |
| (c)(i) | Where no prosecution is instituted under section 224 as a result of the investigation: any company, body corporate, managing director or manager dealt with by the inspector's report | To such extent as the Central Government may direct |
| (c)(ii) | In the same situation: the applicants for the investigation, where the inspector was appointed under section 213 | To such extent as the Central Government may direct |
Three features stand out.
- Inspection expenses under section 214 are excluded. The cost of inspections is dealt with there. See Sections 214–215: costs of inspection and inspector eligibility.
- Clauses (a) and (b) follow the outcome. If the route in section 224 succeeds, the convicted or ordered person pays as the court specifies, or the company pays out of what it recovers.
- Clause (c) applies "unless, as a result of the investigation, a prosecution is instituted under section 224". Where there is no prosecution, the company, managing director or manager dealt with in the report, and the applicants in a section 213 case, may be asked to pay "to such extent as the Central Government may direct". The word "direct" means the Government decides the extent. The text sets no figure or cap.
Clause (c)(ii) matters to members who apply for an investigation under section 213. They should know that, if no prosecution follows, the Government may direct them to bear costs.
First charge: sub-section (2)
"Any amount for which a company or body corporate is liable under clause (b) of sub-section (1) shall be a first charge on the sums or property mentioned in that clause." In simple terms, what the company recovers is first applied to meet the investigation cost it owes under clause (b).
If you are an applicant considering a section 213 application, or a company told that it must bear costs, our legal consultation team can help you understand the exposure before you act.
Section 226: winding up does not stop an investigation
An investigation "may be initiated notwithstanding, and no such investigation shall be stopped or suspended by reason only of, the fact that":
| Clause | The circumstance |
|---|---|
| (a) | An application has been made under section 241 |
| (b) | The company has passed a special resolution for voluntary winding up |
| (c) | Any other proceeding for the winding up of the company is pending before the Tribunal |
The words "by reason only of" are important. A winding-up or section 241 proceeding alone is not a ground to stop the inspector. Other reasons may exist in a particular case, but the section denies these three as grounds on their own.
First proviso: winding-up order by the Tribunal
Where the Tribunal passes a winding-up order in a clause (c) proceeding, "the inspector shall inform the Tribunal about the pendency of the investigation proceedings before him and the Tribunal shall pass such order as it may deem fit". So the order does not automatically end the investigation. It triggers a duty to inform the Tribunal, which then decides what to do.
Second proviso: directors and employees stay bound
"Nothing in the winding up order shall absolve any director or other employee of the company from participating in the proceedings before the inspector or any liability as a result of the finding by the inspector." A winding-up order is not an exit from the investigation for the people who ran the company.
The insolvency context
Voluntary winding up of a company and inability to pay debts are now dealt with under the Insolvency and Bankruptcy Code, 2016. Clause (b) of section 226 still speaks of a special resolution for voluntary winding up, and clause (c) speaks of winding-up proceedings before the Tribunal. The grounds for winding up by the Tribunal that remain in the Act are listed in Section 271. Whatever the route, the principle in section 226 is that the company cannot avoid scrutiny by starting a winding-up process.
Proposed change
We checked the Corporate Laws (Amendment) Bill, 2026 for clauses amending sections 225 and 226 and found none. The Bill is pending and is not law as on 30 September 2026.
Practical examples
Example 1: costs follow a conviction. An investigation leads to a prosecution under section 224 and the accused is convicted. The court may order him to pay the expenses as it specifies, and the Government recovers that amount.
Example 2: no prosecution. The investigation ends without a prosecution. The Government may direct the company dealt with in the report, and, if the inspector was appointed on an application under section 213, the applicants, to pay such part of the expenses as it directs.
Example 3: a hurried winding-up resolution. On learning of an inspector's appointment, a company passes a special resolution for voluntary winding up. Under section 226 the investigation continues, and directors and employees must still participate.
Need help with investigation costs or a winding-up step?
If you are weighing an application for an investigation, or a company has been told to pay part of the cost, it is sensible to understand the position before responding. Our team can walk through the provisions and your documents in a legal consultation.
Key takeaways
- The Central Government pays investigation expenses first and is then reimbursed.
- Convicted persons pay as the court specifies; recovering companies pay out of sums recovered.
- Where no prosecution follows, the Government may direct the company investigated, and section 213 applicants, to pay to an extent it decides.
- The amount a company owes under clause (b) is a first charge on the sums or property recovered.
- A section 241 application, a voluntary winding-up resolution or a pending winding-up proceeding cannot by itself stop an investigation.
- The Bill, 2026 has no clause amending sections 225 or 226.
Read next
- Section 224: Action on inspector's report
- Section 223: Inspector's report
- Sections 214–215: Investigation costs and inspector eligibility
- Sections 241–244: Oppression and mismanagement
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.