Sfio under companies act, 2013 final

1. PRAVEEN SINGH
SERIOUS FRAUD INVESTIGATION OFFICE
UNDER COMPANIES ACT, 2013

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SERIOUS FRAUD INVESTIGATION OFFICE UNDER COMPANIES ACT, 2013
BY PRAVEEN SINGH
INTRODUCTION:
The Serious Fraud Investigation Office (“SFIO”) is a fraud
investigating agency in India. The SFIO is a multi-disciplinary
organization and was set up by Govt. of India under Ministry of
Corporate Affairs, consisting of experts in the different fields for
detecting and prosecuting crimes/frauds pursuance to Government
of India Resolution No. 45011/16/2003-Adm-I, dated the July 2,
2003.
The Companies Act, 2013 provides statutory backing to the SFIO under Section 211 for
the purpose of investigating the affairs/frauds relating to a company.
Section 217 of the Companies Act, 2013 vests the Investigating Officer (“IO”) with various
powers like power to take assistance of any other officer or employees including the former
officers, employees and agents to check all the books, accounts and papers of a company whose
affairs are being investigated, or any other relevant material belonging to any other company,
department or individual. He can examine a person on oath besides imposing fine if his orders
are not complied with. This may also enable better coordination in respect of prosecution of
offences under the Indian Penal Code.
Upon receipt of orders of the Central Government, the IO will have to submit an interim report
and after the completion of the investigation, a final report is submitted. Thereafter, the Central
Government decides whether to proceed with prosecution and in which case the SFIO would
represent the case on behalf of the Central Government.
The Head Office of SFIO is in Delhi and five Regional offices are presently functional i.e., in
New Delhi, Chennai, Mumbai, Hyderabad and Kolkata.
RESPONSIBILITIES OF SFIO:
The SFIO will normally take up for investigation only such cases, which are characterized by:
i complexity and having inter-departmental and multi-disciplinary ramifications;
ii substantial involvement of public interest to be judged by size, either in terms of
monetary
iii misappropriation or in terms of persons affected, and;
iv 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 Ministry of Corporate Affairs.

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ESTABLISHMENT OF SFIO:
Section 211 of the Companies Act 2013 deals with the Establishment of Serious Fraud
Investigation Office. The Central Government shall establish an office to be called the Serious
Fraud Investigation Office to investigate frauds relating to a company:
The SFIO shall be headed by a Director and consist of such number of experts from the
following fields to be appointed by the Central Government:
(a) Banking,
(b) Corporate Affairs,
(c) Taxation,
(d) Forensic audit
(e) Capital Market,
(f) Information Technology,
(g) Law, or
(h) Other fields.
The Central Government shall appoint a Director in the Serious Fraud Investigation Office, who
shall be an officer not below the rank of a Joint Secretary to the Government of India having
knowledge and experience in dealing with matters relating to corporate affairs.
INVESTIGATION INTO THE AFFAIRS OF THE COMPANY BY SFIO:
Section 212 of the Companies Act 2013 deals with the Investigation into the affairs of a
company by SFIO. The Central Government may by order assign investigation into the affairs of
a company –
i On receipt of a report of the Registrar or inspector under Section 2081
;
ii On intimation of a Special Resolution passed by a company that its affairs are required to
be investigated;
iii In the public interest, or
iv On request from any Department of Central Government or State Government.
Section 212(2) of the Companies Act, 2013 provides that, if a case has been assigned to the
Serious Fraud Investigation Office for investigation, 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 of the Serious Fraud Investigation Office has power of inspector
under Section 217. The company and its officers and employees, who are or have been in
1. Section 208 of the Companies Act, 2013 provides for submission of inspection report in writing to the Central
government after inspection of the books of account by the Registrar or inspector;

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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.
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 offence 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.
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 24 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.
On receipt of the investigation report, the Central Government may direct the serious Fraud
Investigation Office 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.
SECTION 447: PUNISHMENT FOR FRAUD
Without prejudice to any liability including repayment of any
debt under this Act or any other law for the time being in force,
any person who is found to be guilty of fraud, shall be
punishable with imprisonment for a term which shall not be
less than six months but which may extend to ten years and
shall also be liable to fine which shall not be less than the
amount involved in the fraud, but which may extend to
three times the amount involved in the fraud:
Provided that where the fraud in question involves public interest, the term of imprisonment
shall not be less than three years.
For the purposes of this section:
“FRAUD” in relation to affairs of a company or anybody corporate, includes any act, omission,
concealment of any fact or abuse of position committed by any person or any other person with
the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure
the interests of, the company or its shareholders or its creditors or any other person, whether or
not there is any wrongful gain or wrongful loss;

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FEW OTHER NOTABLE CHANGES:
The Companies Act, 2013 contains stringent provisions to contain corporate frauds. A new
“investigation” procedure has been provided under Sections 210 to 229, as against Sections 235
to 251 of the Companies Act, 1956.
One of the major variations between both Acts is that through Section 221 of the new Act, the
Tribunal is empowered to freeze assets of a company under inquiry/investigation for a period
not exceeding 3 years. Such a power was not provided for under the old Act.
The new Act, through Section 228, makes the procedure prescribed for inspection, inquiry and
investigation of a company applicable mutatis mutandis to a foreign company while the old Act
does not deal with such a situation.
Another change brought in by the new Act is that the Inspector is made more independent.
While Section 240A of the old Act mandates the Inspector to approach the Magistrate of First
Class or Presidency Magistrate and seek an order permitting him to seize the books and papers
of a company. However, Section 220 of the new Act contemplates that if the Inspector has
reasonable grounds, he may seize the books and papers without obtaining any permission from
any authority.
Moreover, the Inspector has been granted freedom, to make copies of such books and papers, or
take extracts from them or place identification marks thereon, as he deems fit before returning
the same.
Section 229 of the new Act specifically enlists the situations under which a person shall be
punished for fraud for a period extending between 6 months to 10 years (Section 447). The same
does not find place in the old Act.
CONCLUSION:
Thus, the Companies Act, 2013 has given statutory recognition to Serious Fraud Investigation
Office by establishment of SFIO and Investigation into the affairs of the company by SFIO
under section 211 and 212 respectively. In the old Companies Act, 1956 there is no specific
provision for SFIO, but the investigation had been done by SFIO on the request of Ministry of
Corporate Affairs.
*****

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ABOUT AUTHOR:
Praveen Singh has done his graduation from University of Delhi and
currently he is an Associate in LEXport (Advocates & Legal
Consultants), he is pursuing company secretary course from Institute
of Company Secretaries of India and LLB from Shri Ji BABA College
of Law (Affiliated to Dr. B. R. Ambedkar University, Agra). If you
have any comments and or suggestions please free to reach out at:
Email: cspraveensingh111@gmail.com or,
Blog: Singhpraveencs@blogspot.in.