NVESTIGATION INTO FRAUD

INVESTIGATION INTO FRAUD BY COMMITTED BY COMPANIES BY SERIOUS

FRAUD INVESTIGATION OFFICE (SFIO) UNDER THE COMPANIES ACT, 2013

Whenever a person either individually or upon collusion in any manner, acts, refrains from

acting, suppresses any facts or causes abuses of position with the intent to cheat, gain undue

advantage from or injure the interest of the company, its shareholders, creditors or any other

person will be said to have committed fraud under the Companies Act, 2013, irrespective of any

wrongful gain in respect of property to which the person gaining is not legally entitled or

wrongful loss in respect of property to which the person loosing is legally entitled and the same

shall be considered as a cognizable and non-bailable offence punishable with imprisonment for a

term ranging between six months and ten years and also fined with an amount not less than the

amount defrauded and extending to three times such amount under Section 477 of the Act, 2013.

On receipt of report of the Registrar of Companies or Inspector appointed by the Central

Government to investigate into the affairs of the company, on intimation of special resolution

passed by a company declaring investigation of its affairs, in the interest of public or o request of

any department of the Central Government or a State Government, the Central Government may

under Section 212 of the Companies Act, 2013, by Order direct the Serious Fraud Investigation

Office (SFIO) to conduct investigation into the affairs of the company.

The Director, Additional Director or Assistant Director of SFIO may arrest a person whom he

believes to have committed the offence of fraud under the Act, 2013, supported by relevant

material in his possession along with informing such person about reasons for his arrest forthwith

and presenting him before the nearest Judicial or Metropolitan Magistrate within twenty-four

hours, excluding the time taken for travel from the place of arrest to the Magistrate’s Court.

Thereafter, the Director, Additional Director or Assistant Director of SFIO shall send a copy of

the order of arrest along with material in his possession to the SFIO.

A person accused of an offense u/s 477 of the Act, 2013, may be released on bail or on his own

bond provided:

i. The Public Prosecutor has been given an opportunity to oppose the application for

such release;

ii. On such opposition the Court is of belief that the accused is not guilty of such offence

and is not going to commit the same when on bail.

Also, a person who is under sixteen years of age, or is sick, infirm or is a woman may be

released upon directions given thereof by special Courts.

The SFIO shall submit the report of such investigation to the Central Government, a report of

which may be obtained by any interested person upon making an application in that regard to the

Court. On receipt of such report and upon examination of the same it may direct the SFIO to