{"id":55044,"date":"2023-04-13T15:07:09","date_gmt":"2023-04-13T09:37:09","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=55044"},"modified":"2024-04-30T16:26:25","modified_gmt":"2024-04-30T10:56:25","slug":"investigation-into-affairs-of-the-company-by-sfio-section-212-of-the-companies-act","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/investigation-into-affairs-of-the-company-by-sfio-section-212-of-the-companies-act\/","title":{"rendered":"Investigation into Affairs of the Company by SFIO &#8211; Section 212 of the Companies Act"},"content":{"rendered":"\n<p>The Serious Fraud Investigation Office\n(SFIO) is a body established by the Central Government under the Ministry of\nCorporate Affairs. This was created for a specific reason: to investigate the\ncompany&#8217;s serious matters, especially white-collar crimes and frauds. Moreover,\nthis organization consists of experts in taxation, company law, information\ntechnology, accountancy, investigation, law, <strong>forensic auditing<\/strong> and capital\nmarket. This makes it easier for the SFIO to track the fraud of the company. Section\n212 of the Companies Act 2013 lays down provisions for the investigation, power\nand duties of the SFIO. Furthermore, SFIO investigates the matters that are\ntransferred to them by the Central Government.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/investigation-into-affairs-of-the-company-by-sfio-section-212-of-the-companies-act\/#Purpose_of_Establishment_of_Serious_Fraud_Investigation_Office_SFIO\" >Purpose of Establishment of\nSerious Fraud Investigation Office (SFIO)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/investigation-into-affairs-of-the-company-by-sfio-section-212-of-the-companies-act\/#Role_of_Serious_Fraud_Investigation_Office_under_the_Companies_Act_2013\" >Role of Serious Fraud Investigation Office under the Companies Act,\n2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/investigation-into-affairs-of-the-company-by-sfio-section-212-of-the-companies-act\/#Overview_of_Section_212_of_the_Companies_Act_2013\" >Overview of Section 212 of the Companies Act, 2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/investigation-into-affairs-of-the-company-by-sfio-section-212-of-the-companies-act\/#Process_of_Investigation_by_the_SFIO_Section_212_1_%E2%80%93_Section_212_7_Of_the_Companies_Act\" >Process of Investigation\nby the SFIO: Section 212 (1) &#8211; Section 212 (7) Of the Companies Act<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/investigation-into-affairs-of-the-company-by-sfio-section-212-of-the-companies-act\/#Takeaway\" >Takeaway<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Purpose_of_Establishment_of_Serious_Fraud_Investigation_Office_SFIO\"><\/span>Purpose of Establishment of\nSerious Fraud Investigation Office (SFIO)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Serious Fraud Investigation Office\nwas established by the Central Government by passing a resolution on July 2,\n2022. Whereas it took eleven years to come into effect, the act came into\neffect on March 26, 2014. This is a multi-disciplinary organization consisting\nof experts in different fields. They only investigate into matters of fraud and\nwhite-collar crime in the company.<\/p>\n\n\n\n<p>The SFIO only investigates matters that\nare complex in nature and has the involvement of more than one department.\nMoreover, the cases must involve public interest either in terms of money or in\nterms of the number of people affected. This department will be responsible for\ninvestigating matters of serious fraud by the company received from the\nDepartment of Company Affairs. The purpose of this investigation is to improve\nthe system while improving the laws and procedures of the company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Role_of_Serious_Fraud_Investigation_Office_under_the_Companies_Act_2013\"><\/span>Role of Serious Fraud Investigation Office under the Companies Act,\n2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The SFIO does not have statutory\nrecognition in the Companies Act, 1956. Section 235 of the 1956 Act permitted a\ncompany member to request an investigation of the business&#8217;s operations. A\ncompany&#8217;s affairs may be investigated under Section 210 of the Act, which\ngenerally corresponds to Section 235 of the 1956 Act.<\/p>\n\n\n\n<p>According to Section 210(1) of the\nCompanies Act, 2013, the Central Government &#8220;may&#8221; order an\ninvestigation into the matters of a company if it believes that it is necessary\nbased on any of the following: (a) receiving a report from the Registrar or\ninspector under Section 208; (b) a special resolution passed by a company stating\nthat the affairs of the company must be investigated; or (c) in the public\ninterest. The term &#8220;may&#8221; is used to imply that the Central Government\nhas discretion and is not required to compel an inquiry.<\/p>\n\n\n\n<p>On the other hand, Section 210(2)\nstipulates that the Central Government &#8220;shall&#8221; order an investigation\ninto the company&#8217;s operations when a court or tribunal issues a ruling to this\neffect.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Overview_of_Section_212_of_the_Companies_Act_2013\"><\/span>Overview of Section 212 of the Companies Act, 2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section 212 of the Companies Act of\n2013 lists all the requirements of the Special Fraud Investigation Office,\nstarting from its establishment to the investigation and submission of reports.\nCentral Government is the body governing the SFIO, and this body works on the\norder of the Central Government. Moreover, the report of the investigation is\nalso submitted to the Central Government. The SFIO investigates matters of\nfraud or white-collar crimes in the company only on the order of the Central\nGovernment. Furthermore, the Director is the head of SFIO and is responsible\nfor forming a team for investigation as per the case requirement.<\/p>\n\n\n\n<p>At the time when Serious Fraud\nInvestigation Office is investigating the matter, no other government agency\ncan investigate the same matter. In case any agency is already investigating\nthe matter, they must stop the investigation and hand over the important\nreports and details to the SFIO. The power of arrest in such matters is given\nonly to the Assistant Director or officer above his rank. Also, the person\narrested on the basis of an investigation by the SFIO can get bail only on a\nfew specified grounds.<\/p>\n\n\n\n<p>After the investigation, the Special\nFraud Investigating Office has to submit an investigation report to the Central\nGovernment.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Process_of_Investigation_by_the_SFIO_Section_212_1_%E2%80%93_Section_212_7_Of_the_Companies_Act\"><\/span>Process of Investigation\nby the SFIO: Section 212 (1) &#8211; Section 212 (7) Of the Companies Act<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul>\n<li>Central Government can\ntransfer serious cases to the SFIO if deemed necessary:<\/li>\n\n\n\n<li>On the report of the\nRegistrar of Inspector<\/li>\n\n\n\n<li>If the company passes a\nspecial resolution on the issue that the practices of the company shall be\ninvestigated.<\/li>\n\n\n\n<li>If the company has harmed\nthe public interest.<\/li>\n\n\n\n<li>If a request for the\ninvestigation is made by any government department of the centre of the state.<\/li>\n<\/ul>\n\n\n\n<p>The company government will assign the case to the SFIO and order the organization to investigate into the required matter. Upon receiving the order from the Government, the Director (head of the organization) will check the issue and make a team of officers as required to investigate the matter.<\/p>\n\n\n\n<ul>\n<li>As per section 212(2), once the matter has been transferred to the SFIO, no other government agency can interfere in the process, and no additional investigation can be initiated for the same matter. If any agency is already investigating the matter, they shall stop the investigation and transfer all the necessary information along with the required documents to the SFIO.<\/li>\n\n\n\n<li>While assigning the case to the SFIO, the central Government specifies the time duration in which the investigation must be completed. Therefore, while conducting the investigation, the investigation agency must follow the manner and procedure as prescribed in the Companies Act, 2013. The report of the investigation has to be submitted to the Central Government within the specified time.<\/li>\n\n\n\n<li>The investigation will be conducted by the officer of the Special Fraud Investigation Office, who has been given the power of inspector by the Director. He has the power of inspector as defined under Section 217 of the Companies Act, 2013.<\/li>\n\n\n\n<li>During the investigation, the company and its employees must provide all the required details, including documents, information, and explanation, to the investigating officer and corporate with them as and when required.<\/li>\n\n\n\n<li>The person found accused of any offence during the investigation process will be released on bail only on two conditions:<\/li>\n\n\n\n<li>The court has given the opportunity to the public prosecutor to deny the allegations framed on the accused.<\/li>\n\n\n\n<li>While denying the allegations, if the court is satisfied by the arguments of the public prosecutor and thinks that the denial of allegations is on reasonable ground and the person is innocent, then the court can grant bail.<\/li>\n\n\n\n<li>A minor below the age of sixteen, a woman, or a sick person may be granted bail on the directions of the special court. In contrast, the special court will take cognizable of any office only on the complaint made in writing either by the Director of the Special Fraud Investigation Officer or by any officer of the Central Government who is authorized to do so by an order in this regard.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>The\nProcedure of Arrest by the<\/strong> <strong>SFIO: Section 212 (8)\n&#8211; Section 212 (10)<\/strong><\/h3>\n\n\n\n<ul>\n<li>An authorized officer of\nthe Serious Fraud Investigation Office not below the rank of Assistant Director\nmay arrest a person if he has believes that the person has committed the\noffence and has sufficient grounds to prove the same. Moreover, the grounds of\narrest shall be communicated to the arrested person as soon as possible.<\/li>\n\n\n\n<li>Immediately after the\narrest, the authorized officer under section 212 (8) has to forward the copy of\nthe order and other materials in his possession to the Serious Fraud Investigation\nOffice in a sealed packed envelope. The transfer to all the materials and order\nshall be made in the prescribed manner, and the SFIO will keep the order and\nmaterial time at the specified time.<\/li>\n\n\n\n<li>The person arrested shall\nbe taken to the judicial or metropolitan magistrate having jurisdiction in the\nmatter within 24 hours. It is to be noted that the 24 hours\u2019 time does not\ninclude the time required for travel from the place of arrest to the\nmagistrate\u2019s office.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Provisions\nrelated to Investigation Report: Section 212 (11) \u2013 Section 212 (17) of the\nCompanies Act, 2013<\/strong><\/h3>\n\n\n\n<ul>\n<li>On the direction of the\nCentral Government, the SFIO may submit the interim report to the Central\nGovernment.<\/li>\n\n\n\n<li>Once the investigation\nprocedure is complete, the Serious Fraud Investigation Office is also required\nto submit the investigation report to the Central Government.<\/li>\n\n\n\n<li>If any person wishes to\nsee the investigation report, then he can submit an application to the court\nand get a copy of the investigation report.<\/li>\n\n\n\n<li>After a proper examination\nof the investigation report, the Central Government may direct the SFIO to\nstart prosecution against the company or its employees or any other person related\nto the company either directly or indirectly.<\/li>\n<\/ul>\n\n\n\n<p>If\nit is stated in the investigation report that the company has committed any\nsevere fraud and if any direct, key managerial person or any other officer or\nemployee of the company is proven to take advantage of the situation in any\nmanner either by the way of asset, cash, etc. The central Government can make\nan application to the tribunal to either take away the asset earned by fraud or\nhold the person individually liable for his acts without any limitation of\nliability.<\/p>\n\n\n\n<ul>\n<li>The investigation report\nsubmitted to the special court for framing charges against the accused will be\ntreated as similar to a report submitted by the police officer under section 173\nof the Code of Criminal Procedure, 1973.<\/li>\n\n\n\n<li>Any actions taken by the\nSerious Fraud Investigation Office in the investigation report as per the\nprovisions of <strong>the\nCompanies Act, 1956<\/strong><sup><a class=\"text-primary\" href=\"https:\/\/www.mca.gov.in\/Ministry\/pdf\/Companies_Act_1956_13jun2011.pdf\"><strong>[1]<\/strong><\/a><\/sup> will proceed as per the same act assuming that\nthe Companies Act, 2013 does not exist.<\/li>\n\n\n\n<li>Any\nother investigating agency, State Government, police authority, or income-tax\nauthority with any information or documents regarding any offence under\ninvestigation by the Serious Fraud Investigation Office shall provide all such\ninformation or documents to the Serious Fraud Investigation Office;<\/li>\n<\/ul>\n\n\n\n<p>Any\ninformation or documents that the Serious Fraud Investigation Office has that\nmight be relevant or helpful to an investigating agency, state government,\npolice authority, or income tax authority in regard to an offence or other\nmatter that it is looking into or examining in accordance with another law must\nbe shared with that investigating agency, state government, police authority,\nor income tax authority.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Takeaway\"><\/span>Takeaway<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In order to stop financial fraud from happening in the Indian economy, SFIO was established. The Serious Fraud Investigation Office&#8217;s authority and responsibilities are covered under Section 212 of the Companies Act of 2013. It gives SFIO the authority to look into any business that infringes the law or has been involved in a conspiracy, fraud, money laundering, or poor management. The SFIO has the authority to request information and documents, seize and take custody of the company&#8217;s books of accounts and records, cross-examine witnesses in the case, and give instructions and directives regarding the subjects of the investigation. The Central Government also has the authority to request special inquiries into other company law-related issues. This section thoroughly summarises the investigational process that the Serious Fraud Investigation Office will use to monitor the incidence of financial fraud.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read Our Article<\/b>: <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/types-of-companies-under-companies-act-2013\/\">Types Of Companies Under Companies Act, 2013<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Serious Fraud Investigation Office (SFIO) is a body established by the Central Government under the Ministry of Corporate Affairs. This was created for a specific reason: to investigate the company&#8217;s serious matters, especially white-collar crimes and frauds. Moreover, this organization consists of experts in taxation, company law, information technology, accountancy, investigation, law, forensic auditing [&hellip;]<\/p>\n","protected":false},"author":59,"featured_media":55045,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[3428],"acf":{"service_id":"1"},"authorName":"Anushka Saxena","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2023\/02\/MicrosoftTeams-image-109.jpg","authorDescription":"Anushka Saxena is a final year law student from Indore Institute of Law. She is an hardworking, dedicated and fun-loving person. Her area of interest lies in corporate laws and IPR.","postViews":4151,"readingTime":7,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/55044"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=55044"}],"version-history":[{"count":4,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/55044\/revisions"}],"predecessor-version":[{"id":63895,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/55044\/revisions\/63895"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/55045"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=55044"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=55044"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=55044"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}