Richa Mishra

New Delhi, June 21

GIVING more teeth to the Serious Frauds Investigation Office (SFIO), the Ministry of Company Affairs has allowed it to file complaints under the Indian Penal Code (IPC). This should enable the SFIO to move swiftly for successful prosecution of guilty, official sources said.

According to the sources, in addition to initiating prosecutions for violations under the Companies Act, the SFIO can now file private complaints under the IPC.

Explaining the rationale behind the move, the sources said that the investigation reports in certain cases like that of Vatsa Corporation and Daewoo Motors India revealed that prosecution under IPC was required.

To file such cases, the SFIO required an authorisation notification from the Company Affairs Ministry. The Ministry, in consultation with the Law Ministry, recently issued a notification to this effect.

So far, SFIO was filing prosecution for violations under the Companies Act.

Under this Act, 21 prosecutions have already been filed against Daewoo Motors India and 55 against Vatsa Corporation and its officers in 2005.

The J.J. Irani Committee on Company Law has also recommended that the SFIO be strengthened further 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.

Certain ambiguities in the law need to be removed to allow the SFIO to take up prosecution under the IPC, it said.

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

The office 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.

These are in addition to six cases referred to it earlier.

Some of the important cases with the SFIO are those against the Usha group and its directors, DSQ Software Ltd, Mardia Chemicals Ltd, the Ketan Parekh group, Adam Comsof Ltd, Soundcraft Industries Ltd, and Kolar Biotech Ltd.

The office 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.

(This article was published in the Business Line print edition dated June 22, 2005)
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