The Hindu Business Line : Panel mooted to study strengthening of SFIO

THE Ministry of Company Affairs proposes to set up a high-level committee to examine various aspects for strengthening the Serious Frauds Investigation Office (SFIO) including whether the investigating body should be given more teeth.

A senior Ministry official told Business Line that the committee would examine the progress made by SFIO and also see whether it needs to be further empowered on the lines of other investigating agencies.

The SFIO has been seeking more powers on the ground that frauds investigated by it were criminal offences, and company law was a regulatory law, where criminal angle was defused, the official said.

SFIO was set up in 2003 as a specialised multi-disciplinary organisation to deal with cases of serious corporate frauds.

It has experts from the financial sector, capital market, accountancy, forensic audit, taxation, law, information technology, company law, customs and investigation. These experts have been taken from various organisations such as banks, Securities & Exchange Board of India, Comptroller and Auditor General and concerned organisations and departments of the Government.

The office, currently, has been carrying out investigations into affairs of almost 20 cases referred to it by the Union Government under Sections 235 and 237 of the Companies Act. Some of the important cases with the SFIO are those against the Usha group and its directors, DSQ Software Ltd, and the Ketan Parekh group.

It has already submitted its reports to the Ministry in the cases of Daewoo Motors India Ltd, Design Auto Systems Ltd, Bonanza Biotech Ltd and Vatsa Corporation Ltd. The official said that superior courts have taken cognisance of SFIO recommendations and action has also been initiated against some.

The J.J. Irani Committee on Company Law has also recommended that the SFIO be strengthened while retaining its multi-disciplinary character. In addition to investigation, there is also a need to take up prosecution of the corporate concerned and officers in default in the appropriate forum, the committee added.

Recently, the Ministry had allowed SFIO to file complaints under the Indian Penal Code (IPC). This enabled the SFIO to move swiftly for successful prosecution of guilty. Armed with this power, in addition to initiating prosecutions for violations under the Companies Act, the SFIO could now file private complaints under the IPC.

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