Corporate frauds and white collor crimes have significantly increased in India. They are still flourishing despite the accused being arrested and jailed because the laws of India are not stringent and deterrent enough to curb such offences. After few months of jail, the accused are released on bail and life goes on.
One government office that can make a great difference in this regard is the Serious Frauds Investigation Office (SFIO). SFIO has been seeking broader powers to carry out investigations in India and abroad. The new Indian Companies Act, 2013 (PDF) has conferred wide powers upon SFIO regarding many crucial issues pertaining to corporate frauds, economic offences and white collor crimes.
The Ministry of Corporate Affairs (MCA) has also issued some Rules under Chapter XIV of Indian Companies Act, 2013 pertaining to Inspection, Inquiry and Investigation by Indian authorities and SFIO. Stakeholders can provide their valuable comments to MCA/SFIO till 05-11-2013. The Suggestions Regarding Rules Pertaining to Inspection, Inquiry and Investigation (SFIO) by Perry4Law (PDF) has already been provided by us in this regard.
One of the most significant provisions prescribed by the Companies Act, 2013 and the Rules under Chapter XIV pertain to use of services of experts and professionals from diverse fields. This would help both the MCA and SFIO is proper investigation, inquiry and prosecution of corporate offenders.
The services of these experts would be obtained on contractual basis and service conditions for such experts would be governed by the applicable recruitment rules of the Central Government. MCA has said that the “Central Government may appoint persons having expertise in the fields of investigations, cyber forensic, financial accounting, management accounting, cost accounting and any other fields as may be necessary for the efficient discharge of Serious Fraud Investigation Office (SFIO)”.
An SFIO officer can arrest a person suspected of wrongdoing and a copy of the arrest memo, along with necessary material and document, should be sent to the office of the Director latest by the next working day through the quickest possible means including a special messenger or by way of secured electronic means, if required.
An Arrest register shall be maintained at every office of the SFIO for the purposes of this rule and the Arresting Officer shall ensure that necessary entries are made in the Arrest register. A similar Arrest Register would need to be maintained at the office of the SFIO Director as well.
For investigations, the SFIO would need to follow the procedure contained in the “Manual of Investigation” duly approved by the Central Government. Till now there is no such Manual of Investigation and Perry4Law recommend that the same must be drafted as soon as possible. The Act also provides for an SFIO probe to be conducted on the basis of complaint filed by a certain group of persons or a company, after payment of a security amount of up to Rs 25,000 for payment of the costs and expenses of investigation. This security would be refunded to the applicant if the investigation results in prosecution.
Perry4Law also strongly recommend that the Central Government must issue a “Notification” regarding SFIO as soon as possible so that it can start functioning immediately as per the requirements of Companies Act, 2013.