Investigation of Corporate Frauds by Serious Fraud Investigation Office

During the last three years, the Ministry of Corporate Affairs has ordered investigations under section 235 of the Companies Act, 1956 in 134 cases of corporate frauds through the Serious Fraud Investigation Office (SFIO) of the Ministry. Year-wise details are as under:

* (this includes 58 companies belonging to five groups which are being investigated for chit fund activities in West Bengal and other States)

Giving this information in written reply to a question in the Lok Sabha, Minister of Corporate Affairs, Shri Sachin Pilot, said that Serious Fraud Investigation Office (SFIO) was set up for undertaking investigations in corporate frauds under the provisions of the Companies Act, 1956. Further, Government has initiated a number of measures to prevent and deal with occurrence of frauds in companies, such as:

• Definition of “Fraud” as a substantive offence in the recently enacted Companies Act, 2013;
• Stricter norms of Corporate Governance and their implementation under the new Companies Act;
• Conferring statutory status to the SFIO;
• Amendments to securities laws through Securities Laws (Amendments) Ordinance amending the Securities and Exchange Board of India (SEBI) Act, the Securities Contracts (Regulation) Act (SCRA) and the Depositories Act enabling SEBI to deal effectively to violations of laws by companies and individuals including those running Ponzi schemes;
• Increasing application of technology for helping to detect potential frauds through data mining and Forensic Audit technique.