SFIO Under Sec.211 & 212 of The Companies Act, 2013

10/30/2016 SFIO under Sec.
211 & 212 of the Companies Act,2013

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SFIO under Sec.211 & 212 of the

Companies Act,2013
Introduction:
The Serious Fraud Investigation Office
(SFIO) is a fraud investigating agency in
India (http://en.wikipedia.org/wiki/India). It
is under the jurisdiction of the Government
of India. The SFIO is involved in major
fraud probes and is the coordinating
agency with the Income Tax and CBI. The
Serious Fraud Investigation Office is a multidisciplinary
organization having experts from
financial sector, capital market, accountancy, forensic audit, taxation, law,
information
technology, company law, customs and investigation. These experts have
been taken
from various organizations like banks, SEBI,CAG and concerned
organizations and
departments of the Government.
The Government approved setting up of this organization on 9 January 2003
on the
basis of the recommendations made by the Naresh Chandra Committee which
was set
up by the government on 21 August 2002 on corporate governance. Agency
headquarters is in the Indian capital, New Delhi, with field offices located in
major cities
throughout India . The SFIO draws most of its officers from the IAS, IPS and
IRS.
Responsibilities of SFIO:
(a) Detecting and prosecuting or recommending for prosecution whitecollar
crimes/corporate frauds
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Sec.211
&amp
212 of
the
Companies
Act,2013)
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212 of
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(b) The SFIO will normally take up for investigation only such cases, which are
characterized by:
complexity
and having interdepartmental
and multidisciplinary
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.
SFIO Under Companies Act,2013:
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,
Sec.211
&amp
212 of
the
Companies
Act,2013)
under
Sec.211
&amp
212 of
the
Companies
asp 3/11
(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 the
company by SFIO
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.
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.
Sec.211
&amp
212 of
the
Companies
Act,2013)
under
Sec.211
&amp
212 of
the
Companies
asp 4/11
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.
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 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 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.
Sec.211
&amp
212 of
the
Companies
Act,2013)
under
Sec.211
&amp
212 of
the
Companies
asp 5/11
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.
In case SFIO has been investigating any offence under this Act, any other
investigating
agency, State Government, police authority, incometax
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
The SFIO 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 incometax
authorities in respect of any offence or matter being investigated
or examined by it under any other law.
Eminent Investigation by SFIO:
Satyam Scam:
a. Serious Fraud Investigation Office has investigated the satyam scam and
concluded
that the Independent directors of Satyam were not involved in the multicrore
accounting
fraud in the IT company and were kept in the dark by the chairman.
b. The over 14,000page
report submitted to the government, marking the end of three
monthlong
investigation, the probe agency of the Corporate Affairs Ministry said four
independent directors of the company were questioned in connection with the
scam.
c. SFIO questioned the independent directors and found that they had no
knowledge
about the falsification of accounts that happened allegedly at the behest of the
chairman
and other top executives of the IT giant.
d. SFIO also questioned the then wholetime
director and senior executives but no clear
evidence linking him to the scam found.
Sec.211
&amp
212 of
the
Companies
Act,2013)
under
Sec.211
&amp
212 of
the
Companies
asp 6/11
e. The government had ordered SFIO probe into the scam soon after the
chairman
admitted to a Rs 7,800crore
fraud at the company, wherein he disclosed that he had
falsified profits for several years.
f. The role of independent directors had come under scanner when Satyam
said that its
board has unanimously approved a proposal to acquire two firms promoted by

the
chairman.
g. Satyam had to abandon the deal after investors opposed it strongly and
thereafter
Chairman disclosed that the company's profits were overstated .
h. However, some of the independent directors later said that the approval for
the deal
was not actually unanimous and it was subject to certain conditions.
i. Later, all the independent directors had resigned.
Deccan Chronicle Holding Ltd (DCHL) Case:
a. Serious Fraud Investigation Office (SFIO) has charged debtladen
newspaper
publisher Deccan Chronicle Holdings and its directors with violation of as
many as 20
sections of the Companies Act, some of which, if proved, could lead to
imprisonment.
b. Hyderabadbased
Deccan Chronicle Holdings (DCHL), which owns the English dailies
Deccan Chronicle and Asian Age, is under probe for alleged financial
irregularities and
failure to repay loan.
c. The Ministry of Corporate Affairs had sought a scrutiny of the company's
books for
possible violation of the Companies Act.
d. In a report to the ministry, the SFIO has pointed to violations of several
sections,
including sections 209 and 211 (deviation of accounting standards and
financial
statements), sections 269 and 309 (contravention of provisions governing
remuneration
to directors), section 295 (noncompliance
of corporate governance procedures for
entering into related party transactions), and section 628 (penalty for false
statements)
under Companies Act,1956.
Sec.211
&amp
212 of
the
Companies
Act,2013)
under
Sec.211
&amp
212 of
the
Companies
asp 7/11
e. The SFIO report has confirmed that the money was availed of by the
company's
management from various banks through sale of nonconvertible
debentures and other
commercial papers.
f. Later,DCHL declared itself sick and registered with the Board for Industrial
and
Financial Reconstruction (BIFR). Although the BIFR has accepted the
company's plea
under the Sick Industries Act, the move does not deter DCHL's lenders from
taking
action against the company under the Securitisation Act.
Cases Filed in SFIO:
There are totally 878 cases filed in SFIO. In that 796 cases are Company law
related and
82 cases are IPC related. Mumbai has the highest number of cases filed both
in
Company law and IPC related matters. Place wise Cases filed details are
summarized
below:
PLACE
CASES
Total
Co.Law IPC
Mumbai 432 42 474
Delhi 184 6 190
Lucknow,
Sultanpur
60 13 73
Indore 27 3 30
Chennai 23 2 25
Sec.211
&amp
212 of
the
Companies
Act,2013)
under
Sec.211
&amp
212 of
the
Companies
asp 8/11
Ahmedabad 21 2 23
Kolkata 15 1 16
Solan 12 5 17
Hyderabad 9 1 10
Bangalore 8 6 14
Goa 4 0 4
Varanasi 1 1 2
Grand
Total
796 82 878
Source: http://sfio.nic.in
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. After notification of the

said sections
by the government, SFIO will investigate the corporate frauds efficiently.
Sec.211
&amp
212 of
the
Companies
Act,2013)
under
Sec.211
&amp
212 of
the
Companies
asp 9/11
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10/30/2016 SFIO under Sec.

211 & 212 of the Companies Act,2013

SFIO under Sec.211 & 212 of the

(e) Capital Market,

(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

assistance to the Investigating Officer as he may require for conduct of the

board has unanimously approved a proposal to acquire two firms promoted by

SFIO on the request of Ministry of Corporate Affairs. After notification of the

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