SERIOUS FRAUD INVESTIGATION OFFICE

[Mr. M. GOVINDARAJAN]

SFIO

Section 211 of Companies Act, 2013 provides for the establishment of Serious Fraud Investigation Office (‘SFIO’ for short) by the Central Government by Notification to investigate fraud relating to a company.  In the year 2003 itself the Central Government set up Serious Fraud Investigation Office in terms of the Government of India Resolution No. 45011/16/2003-Adm-I, dated the 2nd July, 2003 shall be deemed to be SFIO.

SFIO is headed by a Director as Head of Department in the rank of Joint Secretary to the Government of India. The Director is assisted by Additional Directors, Joint Directors, Deputy Directors, Senior Assistant Directors, Assistant Directors Prosecutors, and other secretarial staff.  The headquarters is at New Delhi. The Regional Officers are situated in Mumbai, New Delhi, Chennai, Hyderabad and Kolkata.    It is a multi-disciplinary organization under the Ministry of Corporate Affairs, consisting of experts in the field of accountancy, forensic auditing, banking, law, information technology, investigation, company law, capital market and taxation etc. for detecting and prosecuting or recommending for prosecution white collar crimes/frauds.

Investigation by SFIO

Section 212 of the Companies Act provides that if the Government is of the opinion that it is necessary to investigate into the affairs of a company, then the Government may assign the investigation to SFIO.  SFIO will cause investigation-

• On receipt of a report of the Registrar or Inspector under Section 208 of the Companies Act, 2013;
• On intimation of a special resolution passed by a company that its affairs are required to be investigated; or
• In the public interest;
• On request from any department of Central Government or a State Government.

SFIO will not investigate fraud or criminal charges against any type of individuals one.

Where any case has been assigned by the Central Government to the Serious Fraud Investigation Office for investigation under this Act, no other investigating agency of Central Government or any State Government shall proceed with investigation in such case in respect of any offence under this Act and in case any such investigation has already been initiated, it shall not be proceeded further with and the concerned agency shall transfer the relevant documents and records in respect of such offences under this Act to Serious Fraud Investigation Office.

SFIO   shall conduct the investigation in the manner and follow the procedure provided in the Companies Act, 2013    and submit its report to the Central Government within such period as may be specified in the order.  The affairs of the company to be investigated by an Investigating Officer shall have the power of the inspector under section 217.   The company and its officers and employees, who are or have been in employment of the company shall be responsible to provide all information, explanation, documents and assistance to the Investigating Officer as he may require for conduct of the investigation.

Investigation report

The Central Government if so directs, the Serious Fraud Investigation Office shall submit an interim report 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, after examination of the report (and after taking such legal advice, as it may think fit), direct the Serious Fraud Investigation Office to initiate prosecution against the company and its officers or employees, who are or have been in employment of the company or any other person directly or indirectly connected with the affairs of the company.

Investigations completed

Financial Year	Investigations completed
2017 -18	5
2018 – 19	12
2019 – 20	12
2020 – 21	7
2021 – 22	12

Arrest

If any officer not below the rank of Assistant Director of Serious Frauds Investigation Office authorized in this behalf by the Central Government by general or special order, 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 he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.  The authorized officer shall, immediately after arrest of such person forward a copy of the order, along with the material in his possession, 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.   Every person arrested shall within twenty-four hours, be taken to a special Court or Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction.

The offence covered under section 447 of this Act shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless-

• the Public Prosecutor has been given an opportunity to oppose the application for such release; and
• where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail.

Prosecution

The Central Government may direct the Serious Fraud Investigation Office to initiate prosecution against the company and its officers or employees, who are or have been in employment of the company or any other person directly or indirectly connected with the affairs of the company.

The Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by-

• the Director, Serious Fraud Investigation Office; or
• any officer of the Central Government authorized, by a general or special order in writing in this behalf by that Government.

Disgorgement

If the investigation report states that fraud has taken place in a company and due to such fraud 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 with regard to disgorgement of such asset, property or cash and also for holding such director, key managerial personnel, other officer or any other person liable personally without any limitation of liability.

Information by Department

In case Serious Fraud Investigation Office has been investigating any offence under this Act, any other investigating agency, State Government, police authority, income-tax authorities having any information or documents in respect of such offence shall provide all such information or documents available with it to the Serious Fraud Investigation Office. 

Sharing of information

The Serious Fraud Investigation Office shall share any information or documents available with it, with any investigating agency, State Government, police authority or income-tax authorities, which may be relevant or useful for such investigating agency, State Government, police authority or income-tax authorities in respect of any offence or matter being investigated or examined by it under any other law.