The Hindu Business Line : Legal fraternity not impressed

Mumbai, Jan. 13 The Government’s ordering of an investigation by the Serious Frauds Investigation Office (SFIO) into the Satyam accounting fraud has been received with a tinge of cynicism by the legal fraternity and other investigative offices dealing with criminal cases.

The SFIO, which was set up under the Ministry of Company Affairs, is not a statutory organisation (that is, one appointment by Parliament) and has no powers to initiate investigations suo motu, or to take appropriate penal action, said an official associated with one of the enforcement agencies in the country.

The SFIO is composed of officials from SEBI, Income Tax, Central Bureau of Investigation, and the MCA itself, said the legal expert. “It is important to note that each of these constituent organisations has statutory powers, unlike the SFIO, and can bring about a faster resolution of cases entailing conviction and penalty. In an SFIO investigation, the entire process is fraught with delay and may not be commensurate with the requirement of timely action in a case.”

The SFIO launches investigations based on prima facie evidence gathered by the Registrar of Companies as a result of enquiry under Section 209A of the Companies’ Act. It is an appendage of MCA whose functions go no further than submission of its investigative reports to the RoC, he said.

Its report can be taken note of only on the basis of a written complaint by the RoC, or by a shareholder of the company or by a person authorised by the Central Government. The RoC then has to file a complaint at a court, where hearings may go on and on, the case taking as long as a decade to come to a definitive conclusion, said a legal expert.

Long drawn affair

In the Satyam case, however, the SFIO has been given three months to submit its report. Still, the proceedings post the submission could be a long drawn out affair, he said.

The SFIO was established in 2003 in the aftermath of the Ketan Parekh scam. It was intended to do an all-round investigation into selected cases involving corporate fraud of certain significance and magnitude.