LEGAL UPDATES



Serious Fraud Investigation Office (SFIO) allowed to make arrests Download as PDF

01-09-2017

The Ministry of Corporate Affairs (“MCA”) has notified sub-sections (8), (9) and (10) of Section 212 of the Companies Act, 2013 (the “Act”), which relate to investigation into affairs of a company by SFIO. With this, the MCA has given SFIO the power to arrest Key Managerial Personnel (“KMP”) during investigation of corporate fraud matters. The MCA also notified the Companies (Arrests in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017 (the “Rules”) on the same date.

The Director, Additional Director or Assistant Director of SFIO can now arrest any KMP who he has reason to believe to be guilty of corporate fraud. However, the due procedure under the Rules and the relevant provisions of the Criminal Procedure Code, 1973 (“Cr.P.C.”) have to be followed. The SFIO must also obtain prior approval of the Central Government where any arrest has to be made in matter pertaining to a foreign company or a government company. Further, even though SFIO has exclusive powers to investigate fraud under the Act, other agencies such as the Central Bureau of Investigation may also get involved in investigation if it includes instances such as bribery, money laundering, which often go hand-in-hand with the offence of corporate fraud.

This is a huge step forward in strengthening corporate laws in India and to aid investor confidence in the market. Though it is hoped that SFIO will use its power to arrest judiciously. The prior approval mechanism built into the law for arrests with respect to foreign companies and government companies and the safeguard mechanisms built into the Cr.P.C. will also afford a check against SFIO arrests.

For more details, please contact [email protected]


Last Updated on 25th January 2019

© 2019 J. Sagar Associates All Rights Reserved.