The battle against financial fraud and malpractices has significantly intensified over recent years. Globally, governments are establishing stricter regulatory frameworks and compliance standards to combat fraud in commercial transactions. A manifestation of such heightened awareness and regulatory action in India is evident under the provisions in relation to the Serious Fraud Investigation Office (SFIO) introduced under the Companies Act, 2013 (the Act) and Rules thereunder. These provisions bring with them implications for companies, which need to be fully understood and preventative steps taken to avoid any suspicion of fraud and consequent arrests. In the following paragraphs, we have analysed key aspects of the newly introduced Rules and the steps that must be taken by corporates to avoid any adversity under the same.

Under the provisions of the Act, the SFIO has been established by the Central Government as a multi-disciplinary office consisting of experts from diverse fields. The SFIO has been empowered to investigate serious cases of ‘fraud’, as defined under the Act. Furthermore, under the recently notified Companies (Arrests in Connection with Investigation by Serious Fraud Investigation Office) Rules, 2017 (the SFIO Rules or Rules), the SFIO has been empowered to arrest any person if believed to be guilty of fraud. The legislative intent behind these provisions and the wide-ranging powers granted to the SFIO is certainly clear. The power of investigation coupled with the power to arrest any person ‘believed to be guilty of fraud’ indeed equips the SFIO with potent powers to combat the menace of corporate fraud, which is deeply entrenched into and plagues our economy.

Continue Reading SFIO – Putting Corporate Fraudsters Behind Bars