INVESTIGATION INTO AFFAIRS OF COMPANY BY SFIO

INVESTIGATION INTO AFFAIRS OF COMPANY BY SERIOUS FRAUD INVESTIGATION OFFICE [SECTION 212]

Section 212 of Companies Act, 2013 provides for investigation into the affairs of the company by the Serious Fraud Investigation Office (SFIO). According to this section:

(i) Assigning of investigation to SFIO by CG: According to section 212(1), where the Central Government -

(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,

is of the opinion that it is necessary to investigate into the affairs of a company by the SFIO, the Central Government may, by order, assign the investigation into the affairs of the said company to the SFIO.

On receipt of such order, the Director, SFIO may designate such number of inspectors, as he may consider necessary for the purpose of such investigation.

(ii) No other investigating agency of CG/ or any SG shall proceed with investigation where case is assigned to SFIO: Where any case has been assigned by the Central Government to the SFIO 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. 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 SFIO [Sub section (2)].

(iii) Submission of Report to CG: Where the investigation into the affairs of a company have been assigned by the Central Government to SIFO, it shall conduct the investigation in the manner and follow the procedure provided in this Chapter (Chapter XIV- Inspection, Inquiry and Investigation) and submit its report to the Central Government within such period as may be specified in the order [Sub section (3)].

(iv) Investigation by an investigating officer: The Director, SFIO 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 [Sub section (4)].

(v) To provide all information, explanation, documents and assistance to the Investigating Officer: 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 [Sub section (5)].

(vi) Offences are cognizable and non-Bailable: As per sub-section (6), offences covered under section 447 of this Act shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless—

(a) the Public Prosecutor has been given an opportunity to oppose the application for such release; and

(b) 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, a person, who, is
(a) under the age of sixteen years or
 

(b) is a woman or

(c) is sick or infirm,

may be released on bail, if the Special Court so directs.

Provided further that the Special Court shall not take cognizance of any offence referred in point (vi) above except upon a complaint in writing made by—

(a) the Director, SFIO; or

(b) any officer of the Central Government authorized, by a general or special order in writing in this behalf by that Government.

(vii) Granting of Bail: The limitation on granting of bail specified in sub section (6) 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 [Sub section (7)].

(viii) Power to arrest: If any officer not below the rank of Assistant Director of SFIO authorized in this behalf by the Central Government by general or special order, 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 to in sub- section (6), he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest. [Sub section (8)].

(ix) Forward copy of order to SFIO: The officer authorized under sub-section (8) shall, immediately after arrest of such person under such sub-section(8), forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the SFIO in a sealed envelope, in such manner as may be prescribed and the SFIO shall keep such order and material for such period as may be prescribed. [Sub section (9)].

(x) Presented before Special Court/JM/MM: Every person arrested under sub-section (8) shall within twenty-four hours, be taken to a Special Court or Judicial Magistrate, or a Metropolitan Magistrate as the case may be, having jurisdiction.

The period of twenty-four hours shall exclude the time necessary for the journey from the place of arrest to the Special Court or Magistrate's court. [Sub section (10)].

(xi) Submission of Interim Report to CG: The SFIO shall submit an interim report to the Central Government, if the Central Government so directs [Sub section (11)].

(xii) Submission of investigation report to CG: The SFIO shall submit the investigation report to the Central Government on completion of the investigation [sub section (12)].

(xiii) Receiving of copy of the investigation report by making an application to the court: Notwithstanding anything contained in this Act or in any other law for the time being in force, a copy of the investigation report may be obtained by any person concerned by making an application in this regard to the court [Sub section (13)].

(xiv) CG may direct SFIO to initiate prosecution: On receipt of the investigation report, the Central Government may, after examination of the report (and after taking such legal advice, as it may think fit), direct the SFIO to initiate prosecution against the company and its officers or employees, who are or have been in employment of the company or any other person directly or indirectly connected with the affairs of the company [Sub section (14)].

(14A) Where report mentions fraud has taken place: Where the report under sub-section (11) or sub-section (12) states that fraud has taken place in a company and due to such fraud, any director, key managerial personnel, other officer of the company or any other person or entity, has taken undue advantage or benefit, whether in the form of any asset, property or cash or in any other manner, the Central Government may file an application before the Tribunal for appropriate orders with regard to disgorgement of such asset, property or cash and also for holding such director, key managerial personnel, other officer or any other person liable personally without any limitation of liability.

(xv) Filing of investigation Report with the special court: Notwithstanding anything contained in this Act or in any other law for the time being in force, the investigation report filed with the Special Court for framing of charges shall be deemed to be a report filed by a police officer under section 173 of the Code of Criminal Procedure, 1973 [Sub section (15)].

(xvi) Investigation/action conducted under Companies Act, 1956: Notwithstanding anything contained in this Act, any investigation or other action taken or initiated by SFIO under the provisions of the Companies Act, 1956 shall continue to be proceeded with under that Act as if this Act had not been passed [Sub section (16)].

(xvii) Providing of all information/documents to SFIO: In case SFIO has been investigating any offence under this Act, any other investigating agency, State Government, police authority, income-tax authorities having any information or documents in respect of such offence shall provide all such information or documents available with it to the SFIO [Sub section (17) (a)].

(xviii) Sharing of information by SFIO: 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 income-tax authorities in respect of any offence or matter being investigated or examined by it under any other law [Sub section (17) (b)].