The term, “Arrest”, though considered alien to corporate jurisprudence, occurs five times in Section 212 of the Companies Act, 2013 and once in section heading of Section 301. Ministry of Corporate Affairs on 24th August 2017 notified sub – section 8 to sub – section 10 of Section 212 of the Companies Act, 2013 and the Companies (Arrests in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017.
We earlier discussed here Sections 211 and 212 of the Act which deals with Serious Fraud Investigation Office.
Cognizable Offences under the Act
According to sub – section (6) of section 212 of the Act, following offences which attract the punishment for fraud provided in section 447 of this Act shall be cognizable –
- sub-sections (5) and (6) of section 7,
- section 34,
- section 36,
- subsection (1) of section 38,
- sub-section (5) of section 46,
- sub-section (7) of section 56,
- subsection (10) of section 66,
- sub-section (5) of section 140,
- sub-section (4) of section 206,
- section 213,
- section 229,
- sub-section (1) of section 251,
- sub-section (3) of section 339,
- and section 448.
Cognizance of offences
According to Second Proviso to sub – section (6) of section 212 of the Act, the Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by—
(i) the Director, Serious Fraud Investigation Office; or
(ii) any officer of the Central Government authorised, by a general or special order in writing in this behalf by that Government.
Arrest by SFIO
According to sub – section (8) of Section 212, If Serious Fraud Investigation Office has on the basis of material in his possession reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of any offence punishable under sections referred to in sub-section (6), he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.
Director, Additional Director or Assistant Director of SFIO may be authorized in this behalf by the Central Government by general or special order.
Rule 2(1) of the Companies (Arrests in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017 {“the SFIO Arrest Rules”} authorize these officers under this sub – section (8) of Section 212. In case of an arrest being made by Additional Director or Assistant Director, the prior written approval of the Director SFIO shall be obtained.
Competent Authority
According to sub – rule (2) of rule 2 the SFIO Arrest Rules, the Director SFIO shall be the competent authority for all decisions pertaining to arrest.
Arrest of Certain Person
According to Rule 3 of the SFIO Arrest Rules, where an arrest of a person is to be made in connection with a Government company or a foreign company under investigation, such arrest shall be made with prior written approval of the Central Government.
Intimation of these arrest
According to Proviso to Rule 3 of the SFIO Arrest Rules, the intimation of such arrest shall also be given to the Managing Director or the person in-charge of the affairs of the Government Company and where the person arrested is the Managing Director or person in-charge of the Government Company, to the Secretary of the administrative ministry concerned, by the arresting officer.
Arrest Order
According to Rule 4 of the SFIO Arrest Rules, the Director, Additional Director or Assistant Director, while exercising powers under sub-section (8) of section 212 of the Act, shall sign the arrest order together with personal search memo in the Form appended to these rules and shall serve it on the arrestee and obtain written acknowledgement of service.
Produce before Magistrate
According to Sub – section (10) of Section 212, every person arrested under sub-section (8) shall within twenty-four hours, be taken to a Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction. The period of twenty-four hours shall exclude the time necessary for the journey from the place of arrest to the Magistrate’s court.
Copy to Director SFIO
According to sub – section (9) of Section 212 of the Act, the Director, Additional Director or Assistant Director of Serious Fraud Investigation Office shall, immediately after arrest of such person under sub-section (8), forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Serious Fraud Investigation Office in a sealed envelope, in such manner as may be prescribed and the Serious Fraud Investigation Office shall keep such order and material for such period as may be prescribed.
According to Rule 5 of SFIO Arrest Rules, the Director, Additional Director or Assistant Director shall forward a copy of the arrest order along with the material in his possession and all the other documents including personal search memo to the office of Director, SFIO in a sealed envelope with a forwarding letter after signing on each page of these documents, so as to reach the office of the Director, SFIO within twenty four hours through the quickest possible means.
Arrest Register
According to Rule 6 of SFIO Arrest Rules, an arrest register shall be maintained in the office of Director, SFIO and the Director or any officer nominated by Director shall ensure that entries with regard to particulars of the arrestee, date and time of arrest and other relevant information pertaining to the arrest are made in the arrest register in respect of all arrests made by the arresting officers.
According to Rules 7, the entry regarding arrest of the person and information given to such person shall be made in the arrest register immediately on receipt of the documents as specified under rule 5 in the arrest register maintained by the SFIO office.
Preserve the Record
According to Rule 8, the office of Director, SFIO shall preserve the copy of arrest order together with supporting materials for a period of five years
- a) from the date of judgment or final order of the Trial Court, in cases where the said judgment has not been impugned in the appellate court; or
- b) from the date of disposal of the matter before the final appellate court, in cases where the said judgment or final order has been impugned, whichever is later.
Application of Criminal Procedure Code
According to Rule 9, 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 Act.
AishMGhrana 