SERIOUS FRAUD INVESTIGATION OFFICE AND INSPECTORS

Presently, the Serious Fraud Investigation Office (SFIO) is an organisation working under Ministry of Corporate Affairs. The office was established by the Government of India Resolution dated 2003 to investigate corporate frauds. The “About us” page of its website as on date read as under:

“The SFIO is a multi-disciplinary organization under Ministry of Corporate Affairs, consisting of experts in the field of accountancy, forensic auditing, law, information technology, investigation, company law, capital market and taxation for detecting and prosecuting or recommending for prosecution white-collar crimes/frauds. The SFIO will normally take up for investigation only such cases, which are characterized by:

• complexity and having inter-departmental and multi-disciplinary ramifications;
• substantial involvement of public interest to be judged by size, either in terms of monetary misappropriation or in terms of persons affected, and;
• the possibility of investigation leading to or contributing towards a clear improvement in systems, laws or procedures. The SFIO shall investigate serious cases of fraud received from Department of company Affairs.

Very soon, the SFIO may become an statutory authority under the Companies Act, 2013.

ESTABLISHMENT OF SERIOUS FRAUD INVESTIGATION OFFICE (SECTION 211):

The Central Government shall establish Serious Fraud investigation office to investigate frauds related to Companies.

 The office shall be headed by a Director and consist of experts of following fields:

(a)  Banking,

(b) Corporate Affairs,

(c)  Taxation,

(d)  Forensic auditing,

(e)  Capital Market,

(f)   Information Technology,

(g)  Law, or (here as ‘or’ and ‘and’ both)

(h)  Other fields.

The Director shall be an officer not below to the rank of a Joint Secretary.

INVESTIGATE INTO AFFAIRS OF A COMPANY (SECTION 212):

The provision of this section is in addition of the provision of Section 210.

The Central Government may by order assign investigation into the affairs of a company –

(a)  On receipt of a report of the Registrar or inspector under Section 208;

(b) On intimation of a Special Resolution passed by a company that its affairs are required to be investigated;

(c)  In the public interest, or

(d)  On request from any department of Central Government or State Government.

Once, a case has been assigned to the Serious Fraud Investigation Office, the case shall not investigated by any other department of Central Government or State Government and all existing investigation shall also be transferred to the Serious Fraud Investigation Office.

The Investigation Officer (IO) of the Serious Fraud Investigation Office has power of inspector under Section 217.

Provision of Section 210, 213 and 216 shall be applicable to the company, its officer and employees. It shall be their responsibility to provide all information, explanation, documents and assistance to the Investigation Officer as he may be required for conduct of the investigation.

The Offence contained under the Companies Act, which attract punishment for fraud under Section 447 of the Act, shall be cognizable and non – bailable.

The Special court shall not take cognizance of any office except only upon a complaint in writing made by –

(a)  The Director, Serious Fraud Investigation Office; or

(b) Any officer of the Central Government authorised by a general or special order in writing in this behalf.

The Director, Additional Director or Assistant Director of Serious Fraud Investigation Office are empowered to arrest a person. They shall inform the person so arrested the grounds for such arrest as soon as it may be.

Every person so arrested shall within twenty – four hours be taken to a Judicial Magistrate or Metropolitan Magistrate having jurisdiction.

On completion of investigation, the Serious Fraud Investigation office shall submit the investigation report to the Central Government. Where Central Government direct to submit an interim report, then such interim report shall also be submitted to the Central Government.

A copy of the investigation report may be obtained by any person concerned by making an application in this regard to the court.

On receipt of the investigation report, the central government may direct the serious Fraud Investigation to initiate prosecution against the company and its past or present officers or employees or any other person directly or indirectly connected with the affairs of the company.

The investigation report filed with the Special Court for framing of charge shall be deemed to be a report filed by a police officer under Section 173 of the Code of Criminal Procedure 1973.

All other investigating agencies, State Government, police authority or income tax authority and Serious Fraud Investigation Office shall share relevant or useful information with each other.

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