What Is the Serious Fraud Investigation Office?

The Serious Fraud Investigation Office is the statutory fraud investigator inside the Companies Act, 2013. Section 211 establishes it and staffs it. Section 212 is where its teeth are: once the Central Government assigns a case, no other agency may proceed with it, a specified rank can arrest, and bail for the offences it prosecutes is barred except on conditions.

How is the Serious Fraud Investigation Office constituted?

Section 211(1) states that the Central Government shall, by notification, establish an office to be called the Serious Fraud Investigation Office to investigate frauds relating to a company. The Serious Fraud Investigation Office existed before the Act did, and the proviso handles the gap: until the office is established under sub-section (1), the office set-up by the Central Government in terms of the Government of India 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. The 2003 Resolution is named in the Act by number and date.

Sub-section (2) says the office shall be headed by a Director and consist of such number of experts appointed by the Central Government from amongst persons of ability, integrity and experience in a list of fields. Seven are named: banking, corporate affairs, taxation, forensic audit, capital market, information technology and law, with an eighth entry for such other fields as may be prescribed.

Sub-section (3) fixes the Director's rank. He is appointed by notification and must be an officer not below the rank of a Joint Secretary to the Government of India having knowledge and experience in dealing with matters relating to corporate affairs. Sub-sections (4) and (5) leave the other appointments and the terms and conditions of service to the Central Government and to the rules.

When is a case assigned to the SFIO?

Section 212(1) works without prejudice to the provisions of section 210, so the Serious Fraud Investigation Office route sits alongside the ordinary investigation into a company's affairs rather than replacing it. The Central Government may assign a case where it is of the opinion that an investigation by the office is necessary on any of four grounds:

• (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 first three mirror section 210(1). Clause (d) is the extra one, and it is what lets another arm of government hand a company matter to the office. The assignment is made by order, and the office's Director, may designate such number of inspectors, as he may consider necessary for the purpose of such investigation.

What does assignment do to other agencies?

Under sub-section (2), where a case has been assigned to the Serious Fraud Investigation Office, 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 where such an investigation has already been initiated, it shall not be proceeded further with and the concerned agency shall transfer the relevant documents and records to the office.

The exclusivity is bounded by the words in respect of any offence under this Act. It clears the field of parallel Companies Act investigations into the same case, and sub-section (17) then builds a two-way information channel with everyone else: any other investigating agency, State Government, police authority or income-tax authority holding information or documents on an offence the office is investigating shall provide all such information or documents, and the office shall share any information or documents available with it where relevant to a matter being examined under any other law.

Sub-section (3) requires the office to conduct the investigation in the manner and follow the procedure provided in this Chapter and to report within such period as may be specified in the order. Sub-section (4) puts an Investigating Officer on the file who shall have the power of the inspector under section 217, which is the same civil-court toolkit an ordinary inspector carries. Sub-section (5) makes the company, its officers and its employees, present and former, responsible to provide all information, explanation, documents and assistance to that officer.

What are the bail and arrest provisions in section 212?

Sub-section (6) states that notwithstanding the Code of Criminal Procedure, 1973 (2 of 1974), an offence covered under section 447 of the Act shall be cognizable, and no person accused of it shall be released on bail or on his own bond unless the Public Prosecutor has been given an opportunity to oppose the application and, where he opposes it, 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.

Two points on the text. The bracketed words offence covered under section 447 were substituted by Act 21 of 2015, section 17, with effect from 29 May 2015, for certain words, brackets and figures. The rest of the sub-section still reads no person accused of any offence under those sections, in the plural, which is the pre-substitution wording left standing around a limb that now names a single section. Read the opening limb for the scope, and cite the plural words as printed.

The proviso lets a person, who, is under the age of sixteen years or is a woman or is sick or infirm be released on bail if the Special Court so directs. The further proviso restricts who can set the prosecution going: the Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by the Director, Serious Fraud Investigation Office, or any officer of the Central Government authorised, by a general or special order in writing in this behalf by that Government. Sub-section (7) confirms the bail limitation is in addition to the limitations under the Code and any other law.

The arrest power is in sub-section (8), and Act 22 of 2019, section 31, with effect from 15 August 2019 rewrote who holds it. The sub-section now opens If any officer not below the rank of Assistant Director, substituted for the earlier words "If the Director, Additional Director or Assistant Director". That officer must be authorised in this behalf by the Central Government by general or special order, must have on the basis of material in his possession reason to believe that a person has been guilty of an offence punishable under the sections referred to in sub-section (6), and the reason for such belief must be recorded in writing. On arrest he shall, as soon as may be, inform him of the grounds for such arrest.

The same 2019 amendment rewrote three more phrases in the arrest sequence. Sub-section (9) now opens The officer authorized under sub-section (8) shall, immediately after arrest of such person under such sub-section, in place of a phrase that named the three offices, and requires the order and material to go to the office in a sealed envelope. In sub-section (10) the words Special Court or Judicial Magistrate were substituted for "Judicial Magistrate", and in its proviso the destination for the journey exclusion was substituted for "Magistrate's Court". The Special Court was written into the arrest route in 2019, not in 2013.

What happens to the SFIO's report?

Sub-section (11) lets the Central Government direct an interim report. Sub-section (12) requires the office, on completion of the investigation, to submit the investigation report to the Central Government. Sub-section (13) then makes a copy obtainable by any person concerned by making an application in this regard to the court, notwithstanding anything in the Act or any other law. That is a different route from the one for an ordinary inspector's report under section 223, and section 223(5) says so directly: Nothing in this section shall apply to the report referred to in section 212.

Under sub-section (14) the Central Government may, after examination of the report (and after taking such legal advice, as it may think fit), direct the office to initiate prosecution against the company, its officers or employees, present or former, or any other person directly or indirectly connected with the affairs of the company.

Sub-section (14A) was inserted by Act 22 of 2019, section 31, with effect from 15 August 2019, and it adds a money remedy. Where the interim or final report states that fraud has taken place and that a director, key managerial personnel, other officer, 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 apply to the Tribunal for orders on disgorgement of such asset, property or cash and for holding such director, key managerial personnel, other officer or any other person liable personally without any limitation of liability. Section 224(5) carries the same remedy off the back of an inspector's report.

Two closing provisions. Sub-section (15) makes the investigation report filed with the Special Court for framing of charges deemed to be a report filed by a police officer under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974). Sub-section (16) leaves anything the office began under the Companies Act, 1956 (1 of 1956) to be proceeded with under that Act as if this Act had not been passed, which is the same savings logic as section 465 repeal and savings.

Reading a Serious Fraud Investigation Office matter therefore means checking the assignment order first, because that is what triggers exclusivity under sub-section (2), then which offence the bail bar is being applied to, then whether the arresting officer's rank and written reasons satisfy sub-section (8). The office investigates frauds relating to a company, and the definition and punishment of the offence itself sit in section 447, not in section 212.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.