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INTRODUCTION............................................................................................... 2
Establishment of Serious Fraud Investigation Office...................................... 2
Investigation into affairs of Company by Serious Fraud Investigation Office
............................................................................................................................... 3
Role of Serious Fraud Investigation Office (SFIO) in Protection of Investor's
Interest ................................................................................................................. 6
Criminal Liabilities of Company in cases of Fraud ......................................... 7
POWERS TO ARREST .................................................................................. 7
Actions to be taken after Arrest: .................................................................... 8
Maintenance of Register .................................................................................. 8
Order by Central Government: ..................................................................... 9
WEBLIOGRAPHY............................................................................................. 9
INTRODUCTION
The Serious Fraud Investigation Office (SFIO) is a statutory corporate fraud investigating
agency in India. Initially, it was set up by a resolution adopted by the Government of India on
2nd July 2003 and carried out investigations within the existing legal framework under section
235 to 247 of the erstwhile Companies Act, 1956. Later, Section 211 of the Companies Act,
2013, accorded the statutory status to the Serious Fraud Investigation Office (SFIO). It is under
the jurisdiction of the Ministry of Corporate Affairs, Government of India. The SFIO is
involved in major fraud probes and is the co-ordinating agency with the Income Tax
Department and the Central Bureau of Investigation.
There are chances to abuse of power like committing fraud, by few directors of the company.
As we know that there is close nexus between corporate governance and ethics but conflicts
between these two are also bound to occur. Corporate fraud, an inevitable incident occurring,
in recent, is an aggravated form of corruption in corporate world. It is difficult to prevent and
to catch such white collar crimes. Such incidents reduce the interest and trust in corporate
investments and in turn reduce the confidence on the government. The Companies Act
empowers the Central Government with the right to investigate the affairs of the company,
especially in cases of an alleged fraud or even in the oppression of the minority shareholders.
The Central Government is empowered to appoint inspectors to investigate either on its own if
it is of the opinion that such investigation is required on the report of the Registrar or Inspector
under section 208 or in public interest or on the request of the company on the basis of a special
resolution or on the Direction of the court/tribunal or from such members of the company
having requisite number of shares as specified in section 213 of the Companies Act, 2013.
The Central Government has also set up the Serious Fraud Investigation Office (SFIO) in the
ministry of corporate affairs, a specialized, multi-disciplinary organization to deal with serious
cases of corporate fraud. This was also a major recommendation made by the Naresh Chandra
Committee which was set up by the government on 21 August 2002 on corporate governance.
Headquarters of this office is located in New Delhi, with field offices located in major cities
throughout India. The SFIO is headed by a director not below the rank of a Joint Secretary to
the Government of India having knowledge and experience in dealing with the matters relating
to corporate affairs and also consist of experts from various disciplines. This will, certainly
protect the investor’s interest and will also bring back the confidence of investors in Indian
capital market.
Provided the special court shall not take cognizance of any offence except upon complaint in
writing made by –
POWERS TO ARREST
Companies (Arrest in connection with Investigation by Serious Fraud Investigation Office)
Rules, 2017 read with Section 212 of the Act
Most provisions of the Act came into force on April 1, 2014. While powers of arrest to the
SFIO, which comes under the corporate affairs ministry, the provision has been notified only
now. The ministry has notified the rules pertaining to arrests in connection with Investigation
by the SFIO and they came into effect from August 24, 2017.
The director as well as additional or assistant director level officials at the SFIO after carrying
investigation into the affairs of company (not being Government or Foreign Company)
Has reason to believe the person is guilty of any offence with regards to the case being
investigated, on the basis of material information in his possession.
Then Director, Additional Director or Assistant Director may arrest such person.
(Provided “In case of an arrest being made by additional director or assistant director, the prior
written approval of the director SFIO shall be obtained,” as per the Notification)
The SFIO director would be the competent authority for all decisions pertaining to arrest.
(Arrest in case of Government or Foreign Company);the person found guilty with regards to
case being investigated can be arrested only with “the prior approval of Central Government”
Maintenance of Register
According to the ministry,
ii. from the date of disposal of the matter before the final appellate court, in cases where the
said judgement or final order has been impugned, whichever is later.
The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to arrest shall be
applied mutatis mutandis to every arrest made under this (Companies) Act,” the ministry said
Thus Companies act, 2013 has given statutory recognition to serious fraud Investigation office
and investigation into affairs of company by SFIO under section 211 and 212 of the Act
respectively.
WEBLIOGRAPHY
1. https://taxguru.in/company-law/fraud-investigation-office-powers-companies-act-
2013.html
2. http://www.mca.gov.in/SearchableActs/Section212.htm
3. http://www.mca.gov.in/SearchableActs/Section211.htm
4. https://blogs.compliancecalendar.in/serious-fraud-investigation-office-and-its-
powers-under-companies-act-2013-section-211-section-212-by-cs-anjali-jgorsia-173
5. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2561827