Section 212 of the Companies Act, 2013 deals with the investigation into the affairs of the company by Serious Fraud Investigation Office (SFIO). It provides for the provisions relating to the setting up of a Special Investigation Office and the powers and duties of the same. SFIO is responsible for investigating financial frauds as well as potential violation of corporate law. It can investigate any company which seems to be involved in any form of business fraud, corporate fraud, money laundering or mismanagement. This section provides a comprehensive overview of the powers and duties of the SFIO and helps in understanding the framework of investigation.
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Origin of the Serious Fraud Investigation Office
The Serious Fraud Investigation Office (SFIO) was established in 2003 under the Companies Act, 1956. It is a multi-disciplinary organisation set up by the Government of India to investigate white-collar crimes impacting the Indian economy in a wide array of activities. It came into existence mainly in response to the numerous corporate frauds which were reported in the Indian capital markets in the 1990s. The investigations conducted by SFIO are primarily related to matters of serious financial irregularities and corporate frauds. The purpose of setting up SFIO was to instil a sense of corporate responsibility in the functioning of companies, as well as to investigate and prevent financial frauds from occurring.
Scope of Section 212 of Companies Act, 2013
Section 212 of the Companies Act, 2013 deals with the powers and duties of the Serious Fraud Investigation Office. It enables the Office to investigate any company which seems to have violated any provision of the Act or is believed to be involved in any form of fraud, conspiracy, money laundering or mismanagement. It also provides the power to the Central Government to order a SFIO investigation into any company at its own discretion. The SFIO is primarily constituted to investigate financial frauds but can extend its investigation to other corporate concerns as well.
Section 212 of the Companies Act, 2013 provides for the following,
- Setting up of a Serious Fraud Investigation Office
- Powers and duties of the Serious Fraud Investigation Office
- Powers and responsibilities: Central Govt. to order investigation
- Setting up of a Serious Fraud Investigation Office
Section 212(1) of the Companies Act, 2013 provides for the setting up of an independent Serious Fraud Investigation Office (SFIO). The SFIO is a multi-disciplinary organisation, comprising of members from the Indian Corporate Law Service, the Indian Economic Service and officers from the Investigation wings of the Central and State Governments. The Central Government is the administrative authority for SFIO and the Director General appointed by the Central Government shall have full control of the office and powers to exercise the functions of SFIO.
Powers and Duties of Serious Fraud Investigation Office
According to Section 212(2) of the Companies Act, 2013, SFIO has the power to investigate financial frauds and corporate concerns which include frauds in accordance with the provisions of the Act, money laundering, mismanagement, siphoning of funds and violation of corporate law. SFIO may initiate investigations or requisition investigations to be conducted by the appropriate investigating agency or the Central Government. The investigation shall be as per the provisions of Section 212 and shall be conducted under the direct supervision of an authorised responsible officer.
SFIO also has the power to call for information, documents, statements and to examine and cross examine persons related to the case under investigation. SFIO also has the power to seize and take control of the books of accounts and documents of the company under investigation. Further, SFIO has the power to pass orders and issue directions in respect of the matters under investigation.
Powers and Responsibilities: Central Government to order investigation
Section 212(3) of the Companies Act, 2013 provides that the Central Government has the power to order investigation in respect of any company which it deems necessary and also to order special investigations in respect of other concerns related to corporate law. The Central Government may appoint any authority, officer or agency to conduct the investigations and to report its findings to the Central Government.
Conclusion
The purpose of setting up SFIO was to investigate and prevent financial frauds from occurring in the Indian economy. Section 212 of the Companies Act, 2013 deals with the powers and duties of the Serious Fraud Investigation Office. It enables SFIO to investigate any company which seems to have violated any provision of the Act or is believed to be involved in any form of fraud, conspiracy, money laundering or mismanagement. SFIO has powers to call for information and documents, seize and take control of books of accounts and documents of the company, cross examine persons related to the case and to pass orders and issues directions in respect of the matters under investigation. In addition, the Central Government has the power to order special investigations in respect of other concerns related to corporate law. This section provides a comprehensive overview of the framework of investigation to be conducted by Serious Fraud Investigation Office in order to check the occurrences of financial frauds.
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