Serious Fraud Investigation Office

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In the judgment of Union of India and Another vs. Deloitte Haskins and Sells LLP & Another[1], the Supreme Court has enunciated and cleared the law pertaining to the removal and resignation of a statutory auditor vis-à-vis the proceedings initiated under Section 140(5) of the Companies Act, 2013 (“Act”). The Supreme Court upheld the constitutional validity of Section 140(5) of the Act and interpreted it as “neither discriminatory, arbitrary and/or violative of Articles 14, 19(1)(g) of the Constitution of India”. The Supreme Court clarified that the resignation of an auditor after filing an application under Section 140(5) of the Act does not automatically terminate the proceedings initiated under this Section.Continue Reading Supreme Court Sets the Bar Too High for the Statutory Auditors

 

Serious Fraud Investigation Office – Keeping a close watch on frauds in India Inc

The Serious Fraud Investigation Office (‘SFIO’) is an organisation established under the aegis of the Ministry of Corporate Affairs (‘MCA’) – for investigation and prosecution of white-collar crimes. The SFIO was constituted in July 2003 following the recommendations of the Naresh Chandra Committee. In 2002, the Naresh Chandra Committee had recommended setting up a ‘Corporate Serious Fraud Office’, to uncover corporate fraud, and supervise prosecutions under various economic legislations.
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Corporate Frauds – Emerging Legal Architecture & Judicial Trends

Corporate scandals and frauds in India are as old as the hills. The 1950s witnessed the infamous LIC/ Mundhra scam, which was the first major financial fraud of the independent India. Frauds continued with an alarming regularity thereafter in every decade – the infamous Harshad Mehta, Ketan Parekh, Sahara, and Satyam scams are just a few of them. These frauds were investigated by the law enforcement agencies under the relevant provisions of the Indian Penal Code, 1860 (IPC). The Companies Act, 1956 did not have any separate definition of ‘fraud’. Legally, it was not necessary to have a separate one as Lord Macaulay’s IPC adequately dealt with all such crimes. The Companies Bill, 2008 was the original legislative proposal to replace the Companies Act, 1956 basis Dr. J.J. Irani Committee Report (Irani Report). The Irani report did not have any recommendation for a provision like Section 447 dealing with frauds. It seems the intervening major corporate scandals of 2007-08 led the Parliamentary Standing Committee to recommend two new legislative changes:
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