The Rights of the Deceased: Moral Rights Incidental to Copyright Law
- Vanshika Agrawal
- 2024-04-25
Fraud-Corporate frauds and financial scams have significant catastrophic effects on multiple stakeholders, the public at large and the economy. Often companies try to paint a ‘rosy’ picture that the company’s financial health is all rainbows and unicorns, to portray themselves
as a successful company. They undertake multiple fraudulent and unethical routes to window dress their accounts to paint false picture to the shareholders. Therefore, it becomes important to re-evaluate, re-think and implement stringent provisions to tackle Fraudulent practices.
The ever increasing white collar crimes in India calls for exemplary punishments and effective enforcement in law. Satyam scam in 2009 was one of the largest accounting crime in India and the Serious Fraud Investigation Office (the “SFIO”) investigated and interrogated directors and other stakeholders[1]. SFIO submitted a 14,000-page report to the government which opined that the fraud was done allegedly by the chairman and other top executives of the company, marking the end of a three-month-long investigation[2]. The chairman, Mr. Ramalinga Raju and his brothers were imprison for 7 years and fine for R. 5.5 Crores[3]. The pertinent role played by SFIO in this historic scam and multiple other frauds became crucial over the years.
Contents hide
1 Culmination and History:1.1 Powers and Functions:
1.4 High Level Committee for preparing an Investigation Manual for SFIO:
1.4.1 With Corporate frauds blooming at an alarming rate, neglect and
The SFIO is a statutory corporate fraud investigating agency, under the jurisdiction of the Ministry of Corporate Affairs (the “MCA”) which is mainly supervised by officers from Indian Administrative Service, Indian Revenue Service, Indian Police Service, and
Indian Corporate Law Serviceand other Central Services. It was set up by a resolution adopted by the Government of India on 2 July 2003[4]. The Vajpayee Government decided to set up SFIO on the recommendation of Naresh Chandra Committee on corporate governance, who were constitutedin the backdrop of stock market scams[5].
It carried out investigations within the legal framework of Companies Act 1956, under section 235 to 247. With Companies Act 2013 (the “2013 Act”), it has been accord statutory status under Section 211 of the 2013 Act. SFIO conductsmulti-disciplinary investigations of major corporate frauds with the aid of the experts from various domains including, financial sector, forensic audit, taxation, law, capital market, accountancy, information technology, customs and other relevant fields. Usually, these experts are from multiple organizations including Comptroller and Auditor General Offices, Securities and Exchange Board of India, banks, and
other concerned organizations and departments of the Government. With its Agency headquarters in the Indian capital, New Delhi, it has four regional offices in Mumbai, Kolkata, Chennai and Hyderabad[6].
The director who is not below the rank of a joint Secretary to the government of India with necessary expertise in company frauds aids in the functioning of the agency. After a case is being allot to SFIO, it enjoys
exclusive authority to investigate an offence committed under the 2013 Act. It has a Computer Forensic and Data Mining Laboratory (CFDML) since 2013, to provide support and service to the officers of SFIO in their investigations.Its powers were widened with Ministry of Corporate Affairs notification in August 2017, through which it was bestowed with the power to arrest[7].
The power is limited as arrest can be made only by the Directors, Additional Directors and Assistant directors, during the investigation of an offence of ‘serious fraud’[8]. They must have reasonable belief that an offence under Section 212 of the 2013 Act was commit and a write approval of the Director of SFIO becomes mandatory. When they seek to arrest a person during the investigation on a foreign company or a government company, an approval of the Central Government is required[9]. If Head of state of affairs or Managing Director is intend to be arrest, the secretary of that administrative ministry must be intimated. Once the investigation by SFIO is complete, it submits an investigation report to the Central Government and the State could direct the agency to commence prosecution against the company, employees or officers or
any person connected with the affairs of the company.
Even with so many powers enjoyed under the Act, SFIO still faces multiple challenges and hurdles while performing their functions. Minister of State for Corporate Affairs, PP Chaudhary, informed the Rajya Sabha on 7th August 2018, that SFIO had started investigation probe against 21 new cases involving 225 entities[10]. In the same report it was provided that from 2015, the agency has prosecuted on 94 complaints which were disposed of by various courts on levying a total fine of Rs 5,9 lakhs[11].
If we were to find the average of these fines that were levied on each complaint, it would total to a meagre amount of Rs 6276 per case. A layman would know that any corporate fraud involves claims of crores, if not million of rupees. Therefore, such ineffective outcomes of the investigation raise the concern
if the functions of SFIO are a colossal waste of time and
public money. Since its inception in 2003, SFIO has investigated on 312 cases till 2916-2017[12].
But there are no data available as to the amount of prosecution that has
resulted in conviction and lack of transparency creates further problems. Till 2015, according to MCA, only 6 successful conviction including the Reebok Case and Satyam Case, were fructified out of the 162 completed investigations[13]. In an average the strike rate adds upto 3.7% and
Though it submits a detail and final investigation report on completion of the investigation, it is the Central Government who
after examination of the report directs the SFIO to initiate prosecution against a company. Contrastingly in U.K., the Serious Fraud Office (“SFO”) is an ‘independent’ department which investigates and prosecutes serious and complex fraud and corruption cases[14]. By being the principal enforcer, its role in encouraging good corporate governance in that country has become pertinent.
also reduce the burden ofthe court, up to certain extent. Though one reason is the direct control of MCA on the agency, the other is the lack of manpower. According to MCA, only 59 officers were sanction to full-fill the demand of 133 vacant posts. The lack of pre-emptive measures, lack personnel, inadequate resources and
dependency on the government has created multiple hurdles for the Agency.
Ministry of Corporate Affairs (MCA) had constituted 12 member Committee under the Chairmanship of Mr. Injeti Srinivas, Secretary MCA on 06th March, 2020, to prepare an Investigation Manual for SFIO[15]. The terms of references for the committee included the need
to raise awareness of relevant process and Acts to ensure that the Investigation Officers to uphold
the highest standards of professional conduct;to form an ‘all-encompassing Manual’ for ensuring effective investigation in tune with the Act; it also has to assess and make recommendation based on past experience and cases; to provide insight to the reviews of existing process; to conduct comparative analysis on the methodologies of other fraud investigation agencies in other countries; establish a Standard Operating Procedure (SoP); to define the powers and authorities and the scope of the same of the officers under the Act and to specify the applicability of CPC and CrPc in the function of SFIO[16]. Hopefully with the report of the committee the functions of SFIO could be accelerate.
ineffective functions of this crucial organisation will have a catastrophic toll on the Indian economy. Though the agency has been successful in the Satyam Scam, Deccan Chronicle Holding Ltd (DCHL)
loan default, Saradha Chit Fund scam and many others, its role
has been deficient in the recent times and a call to revive its functions is significant.
[1]Satyam SFIO Case: Ramalinga Raju Gets Six-Month Sentence, Outlook India, (11th January, 2021) https://www.outlookindia.com/newswire/story/satyam-sfio-case-ramalinga-raju-gets-six-month-sentence/871524
[2]Id.
[3]K. INGRAM, SATYAM SCANDAL: A BLESSING IN DISGUISE? (2015 Recorder Press).
[4]Serious Fraud Investigation Office Government Of India, SFIO, (11th January, 2021) https://sfio.nic.in/
[5]Tabrez Ahmad&Radheshyam Prasad, Role of SFIO in Protection of Investor’s Interest: An overview, 1(3) AD VALOREM 59 (2014).
[6] Serious Fraud Investigation Office Government Of India, SFIO, (11th January, 2021) https://sfio.nic.in/
[7]Now, SFIO has powers to arrest, Hindu Business Line, (11th January, 2021), https://www.thehindubusinessline.com/news/national/now-sfio-has-powers-to-arrest/article9832248.ece; Notificationdated 24 August, 2017 bearing no. S.O.2751(E),(11th January, 2021) http://www.mca.gov.in/
Ministry/pdf/Commencementnotification_25082017.pdf
[8]Id.
[9]Tabrez Ahmad &Radheshyam Prasad, Role of SFIO in Protection of Investor’s Interest: An overview, 1(3) AD VALOREM 59 (2014).
[10]110 companies probed for fraudulent activities in last 3 years: Govt in LS, Hindustan Times, (11th January, 2021) https://www.hindustantimes.com/india-news/110-companies-probed-for-fraudulent-activities-in-last-3-years-govt-in-ls/story-8b3mRXqY7PPeqfSd87pZFN.html
[11]SFIO investigating 21 cases in 2017-18, Press Information BureauGovernment of IndiaMinistry of Corporate Affairs,(11th January, 2021) https://pib.gov.in/newsite/PrintRelease.aspx?relid=181631
[12]Data available only till 2016-17. Investigations completed, SFIO, (11th January, 2021) https://sfio.nic.in/investigation-completed
[13]Since inception, 6 probes by SFIO led to convictions, The Indian Express, (11th January, 2021) https://indianexpress.com/article/business/business-others/since-inception-6-probes-by-sfio-led-to-convictions/
[14]Home, SFO, (11th January, 2021) https://www.sfo.gov.uk/
[15]High level committee set up to prepare investigation manual for SFIO, Business line, (11th January, 2021) , https://www.thehindubusinessline.com/news/high-level-committee-set-up-to-prepare-investigation-manual-for-sfio/article31009115.ece
[16]Constitution of High Level Committeefor preparation of Investigation Manualfor Serious Fraud Investigation Office (SFIO), Amita Desai & Co., Company Secretaries,(11th January, 2021)
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