Functions and Powers:
Companies Act 2013 provides for establishment of a Serious Fraud Investigation Office (SFIO) to investigate into the affairs of the Company on an order by the Central Government and where any case has been assigned to the SFIO, no other investigating agency shall proceed with investigation in such case. The Investigating Officer of SFIO shall have all the powers of a civil court while trying a suit.
If the Director, Additional Director or Assistant Director of Serious Frauds Investigation Office authorised in this behalf by the Central Government 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 under sections referred later in this write up as “cascading effect of Section 447, he may arrest such person present him before the Judicial Magistrate or a Metropolitan Magistrate within 24 hours.
Therefore under the provisions of Companies Act 2013, SFIO has got statutory status as specified therein. Investigation report of SFIO filed with the Court for framing of charges shall be treated as a report filed by a Police Officer. SFIO shall have power to arrest in respect of certain offences of the Act which attract the punishment for fraud. Those offences shall be cognizable and the person accused of any such offence shall be released on bail subject to certain conditions provided in the relevant section of the Act. Stringent penalty provided for fraud related offences.
For this purpose the Central Government shall, by notification, establish an office to be called the Serious Fraud Investigation Office to investigate frauds relating to a Company.
However, it is also provided that until the Serious Fraud Investigation Office is established under subsection (1), the Serious Fraud Investigation Office set-up by the Central Government in terms of the Government of Indi Resolution No. 45011/16/2003-Adm-I, dated the 2nd July, 2003 shall be deemed to be the Serious Fraud Investigation Office for the purpose of this section.
It is also provided that when the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company by the Serious Fraud Investigation Office-
(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 the Central Government or a State Government, the Central Government may, by order, assign the investigation into the affairs of the said company to the Serious Fraud Investigation Office and its Director, may designate such number of inspectors, as he may consider necessary for the purpose of such investigation.
It is also provided that 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.
It has also been prescribed in the Companies Act that where the investigation into the affairs of a company has been assigned by the Central Government to Serious Fraud Investigation Office, it shall conduct the investigation in the manner and follow the procedure provided in this Chapter; and submit its report to the Central Government within such period as may be specified in the order. In such case the Director, Serious Fraud Investigation Office shall cause the affairs of the company to be investigated by an Investigating Officer who shall have the power of the inspector under section 217.
It is also mandated not only on part of the company but also its officers and employees, who are or have been in employment of the company to take responsibility to provide all information, explanation, documents and assistance to the Investigating Officer as he may require for conduct of the investigation.
Among many other provisions in the Companies Act 2013, provisions of Section 212(6) of the Companies Act 2013 are most important and serious in nature which really going to impact and affect corporate and professionals as language of that Section itself starts as irrespective of anything contained in the Code of Criminal Procedure, 1973, the offences covered under subsections (5) and (6) of section 7, section 34, section 36, subsection (1) of section 38, sub-sections (5) of section 46, sub-section (7) of section 56, subsection (10) of section 66, subsection (5) of section 140, sub-section (4) of section 206,section 213, section 229, sub-section (1) of section 251, subâ€section (3) of section 339 and section 448 which attract the punishment for fraud provided in section 447 of companies Act 2013shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless-
(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and
(ii) 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: however if any person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs.
It is also provided that the Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by-
(i) the Director, Serious Fraud Investigation Office; or
(ii) any officer of the Central Government authorized, by a general or special order in writing in this behalf by that Government.
The limitation on granting of bail specified above is in addition to the limitations under the Code of Criminal Procedure, 1973 or any other law for the time being in force on granting of bail. Therefore seriousness and intention of introduction of in-depth criminal provisions into these provisions of Companies Act, 2013 go to prove that law makers decides to bring thought process into the mind of corporates and other stake holders that Companies Act will no longer be looked into as civil and regulatory kind of law rather they wanted corporate and stake holders to treat and understand it as more of criminal nature of law when corporate, professionals and stake holders fail to follow and comply with the provisions of the Companies Act 2013 in its true spirit.
By: CS. S Dhanapal
B.Com, B.A.B.L, F.C.S
Sr. Partner, S Dhanapal & Associates, Chennai
Email_id: csdhanapal@gmail.com
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