Section 212 of Companies Act, 2013 – Investigation into affairs of company by Serious Fraud Investigation Office

SECTION 212. INVESTIGATION INTO AFFAIRS OF COMPANY BY
SERIOUS FRAUD INVESTIGATION OFFICE

[Effective from 1st April, 2014, except sub- section (8) to (10) which is effective from 24^th August, 2017, and referencing of sub-section (5) of section 140 made in sub-section (6) which is not yet effective]

(1) Without prejudice to the provisions of section 210, where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company by the Serious Fraud Investigation Office—

(a)   on receipt of a report of the Registrar or inspector under section 208;

(b)   on intimation of a special resolution passed by a company that its affairs are required to be investigated;

(c)   in the public interest; or

(d)   on request from any Department of the Central Government or a State Government,

the Central Government may, by order, assign the investigation into the affairs of the said company to the Serious Fraud Investigation Office and its Director, may designate such number of inspectors, as he may consider necessary for the purpose of such investigation.

(2) Where any case has been assigned by the Central Government to the Serious Fraud Investigation Office for investigation under this Act, no other investigating agency of Central Government or any State Government shall proceed with investigation in such case in respect of any offence under this Act and in case any such investigation has already been initiated, it shall not be proceeded further with and the concerned agency shall transfer the relevant documents and records in respect of such offences under this Act to Serious Fraud Investigation Office.

(3) Where the investigation into the affairs of a company has been assigned by the Central Government to Serious Fraud Investigation Office, it shall conduct the investigation in the manner and follow the procedure provided in this Chapter; and submit its report to the Central Government within such period as may be specified in the order.

(4) The Director, Serious Fraud Investigation Office shall cause the affairs of the company to be investigated by an Investigating Officer who shall have the power of the inspector under section 217.

(5) The company and its officers and employees, who are or have been in employment of the company shall be responsible to provide all information, explanation, documents and assistance to the Investigating Officer as he may require for conduct of the investigation.

(6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), [1][ offence covered under section 447] of this Act shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless—

(i)   the Public Prosecutor has been given an opportunity to oppose the application for such release; and

(ii)   where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail:

Provided that a person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs:

Provided further that the Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by—

(i)   the Director, Serious Fraud Investigation Office; or

(ii)   any officer of the Central Government authorised, by a general or special order in writing in this behalf by that Government.

(7) The limitation on granting of bail specified in sub-section (6) is in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force on granting of bail.

[(8) If the [2] [If any officer not below the rank of Assistant Director] of Serious Frauds Investigation Office authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of any offence punishable under sections referred to in sub-section (6), he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.

(9) [3] [The officer authorised under sub-section (8) shall, immediately after arrest of such person under such sub-section] , forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Serious Fraud Investigation Office in a sealed envelope, in such manner as may be prescribed and the Serious Fraud Investigation Office shall keep such order and material for such period as may be prescribed.

(10) Every person arrested under sub-section (8) shall within twenty-four hours, be taken to a [4] [Special Court or Judicial Magistrate] or a Metropolitan Magistrate, as the case may be, having jurisdiction:

Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of arrest to the [5] [Special Court or Magistrate’s court]][2]

(11) The Central Government if so directs, the Serious Fraud Investigation Office shall submit an interim report to the Central Government.

(12) On completion of the investigation, the Serious Fraud Investigation Office shall submit the investigation report to the Central Government.

(13) Notwithstanding anything contained in this Act or in any other law for the time being in force, a copy of the investigation report may be obtained by any person concerned by making an application in this regard to the court.

(14) On receipt of the investigation report, the Central Government may, after examination of the report (and after taking such legal advice, as it may think fit), direct the Serious Fraud Investigation Office to initiate prosecution against the company and its officers or employees, who are or have been in employment of the company or any other person directly or indirectly connected with the affairs of the company.

[6] [(14A) Where the report under sub-section (11) or sub-section (12) states that fraud has taken place in a company and due to such fraud any director, key managerial personnel, other officer of the company or any other person or entity, has taken undue advantage or benefit, whether in the form of any asset, property or cash or in any other manner, the Central Government may file an application before the Tribunal for appropriate orders with regard to disgorgement of such asset, property or cash and also for holding such director, key managerial personnel, other officer or any other person liable personally without any limitation of liability.]

(15) Notwithstanding anything contained in this Act or in any other law for the time being in force, the investigation report filed with the Special Court for framing of charges shall be deemed to be a report filed by a police officer under section 173 of the *Code of Criminal Procedure, 1973 (2 of 1974).

(16) Notwithstanding anything contained in this Act, any investigation or other action taken or initiated by Serious Fraud Investigation Office under the provisions of the Companies Act, 1956 (1 of 1956) shall continue to be proceeded with under that Act as if this Act had not been passed.

(17) (a) In case Serious Fraud Investigation Office has been investigating any offence under this Act, any other investigating agency, State Government, police authority, income-tax authorities having any information or documents in respect of such offence shall provide all such information or documents available with it to the Serious Fraud Investigation Office;

(b) The Serious Fraud Investigation Office shall share any information or documents available with it, with any investigating agency, State Government, police authority or income-tax authorities, which may be relevant or useful for such investigating agency, State Government, police authority or income-tax authorities in respect of any offence or matter being investigated or examined by it under any other law.

[1] Substituted by the Companies (Amendment) Act, 2015 vide Notification No. S.O. 1440(E) dated 29th May 2015. Prior to substitution it read as under:

“the offences covered under sub-sections (5) and (6) of section 7, section 34, section 36, sub-section (1) of section 38, sub-sections (5) of section 46, sub-section (7) of section 56, sub-section (10) of section 66, sub-section (5) of section 140, sub-section (4) of section 206, section 213, section 229, sub-section (1) of section 251, sub-section (3) of section 339 and section 448 which attract the punishment for fraud provided in section 447”

[2] Notified vide Notification No. F. N0. 1/12/2013 CL-V dated 24th August, 2017 which shall be effective from 24th August, 2017.

 [Applicable Rules

Companies (Arrests in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017 

[Effective from 24^th August, 2017]

Rule 2. (1) Where the Director, Additional Director or Assistant Director of the Serious Fraud Investigation Office (herein after referred to as SFIO) investigating into the affairs of a company other than a Government company or foreign company has, on the basis of material in his possession, reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of any offence punishable under section 212 of the Act, he may arrest such person;

Provided that in case of an arrest being made by Additional Director or Assistant Director, the prior written approval of the Director SFIO shall be obtained.

(2) The Director SFIO shall be the competent authority for all decisions pertaining to arrest.

Rule 3. Where an arrest of a person is to be made in connection with a Government company or a foreign company under investigation, such arrest shall be made with prior written approval of the Central Government.

Provided that the intimation of such arrest shall also be given to the Managing Director or the person in-charge of the affairs of the Government Company and where the person arrested is the Managing Director or person in-charge of the Government Company, to the Secretary of the administrative ministry concerned, by the arresting officer.

Rule 4. The Director, Additional Director or Assistant Director, while exercising powers under sub-section (8) of section 212 of the Act, shall sign the arrest order together with personal search memo in the Form appended to these rules and shall serve it on the arrestee and obtain written acknowledgement of service.

Rule 5. The Director, Additional Director or Assistant Director shall forward a copy of the arrest order along with the material in his possession and all the other documents including personal search memo to the office of Director, SFIO in a sealed envelope with a forwarding letter after signing on each page of these documents, so as to reach the office of the Director, SFIO within twenty four hours through the quickest possible means.

Rule 6. An arrest register shall be maintained in the office of Director, SFIO and the Director or any officer nominated by Director shall ensure that entries with regard to particulars of the arrestee, date and time of arrest and other relevant information pertaining to the arrest are made in the arrest register in respect of all arrests made by the arresting officers.

Rule 7. The entry regarding arrest of the person and information given to such person shall be made in the arrest register immediately on receipt of the documents as specified under rule 5 in the arrest register maintained by the SFIO office.

Rule 8. The office of Director, SFIO shall preserve the copy of arrest order together with supporting materials for a period of five years

a) from the date of judgment or final order of the Trial Court, in cases where the said judgment has not been impugned in the appellate court; or

b) from the date of disposal of the matter before the final appellate court, in cases where the said judgment or final order has been impugned, whichever is later.

Rule 9. The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to arrest shall be applied mutatis mutandis to every arrest made under this Act

FORM

ARREST ORDER

(see rule 4 and 5 of the Companies (Arrests in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017)

        Whereas, I……………………………………………..Director/Additional Director/Assistant Director authorised in this behalf by the Central Government, have reason to believe that ……………………………..[name of the person arrested] resident of………………………………… has been guilty of an offence punishable under the provisions of the Companies Act, 2013 (18 of 2013).

Now, THEREFORE, in exercise of the powers conferred on me under section 212 of the Companies Act, 2013 (18 of 2013), I hereby arrest the said………………………………….[name of the person arrested] at…………….hours on ……………………and he has been informed of the grounds for such arrest.

PARTICULARS OF ARREST MADE
1	SFIO Office at
2	MCA order for investigation No. and Date
3	Title of the case
4	Name with alias of the arrestee, if any
5	Date of Birth/known age
6	Sex
7	Parentage of the Arrestee
8	Distinguishing marks of identification, if any
9	Permanent address of the Arrestee
10	Present address of the Arrestee
11	Place of arrest
12	Date and time of arrest
13	Name, Address and Telephone No. of person whom intimation of arrest is to be conveyed
14	Name and Designation of the Officer making the arrest
15	Grounds of arrest along with sections under which arrested.
(Signature of arrestee)/(thumb impression)   Witnessed by:
1.   2.		Arrested by   (Signature of arresting officer with name and designation)

To,

………………………………..

………………………………..

[Name and complete address of the Person arrested]

PERSONAL SEARCH MEMO
1	SFIO Office at
2	RoC Office at
3	Ministry of Corporate Affairs order for investigation No. and Date
4	Title of the case
In the presence of the following witnesses, the personal search of Sh. (Name with Alias of the Arrestee) S/o (Parentage of the Arrestee) R/o (Address of the Arrestee) was conducted as per law (as per the provision of section 51 of Cr.P.C) and following articles have been taken into possession, through this memo.   1………………………….. 2………………………….. 3………………………….. (Signature of Arrestee)
Witnessed by:
1.   2.				Seized by (———–) (Signature of arresting Officer with name, designation and date)][1]

 

 Applicable Orders

Constitution of two Review Committee (s) for reviewing the 10 year old and above cases of different regions and in office of SFIO for withdrawal of prosecutions – regarding

Notification No. No. 16/37/2017 dated  25.07.2017

Pursuant to a reference received from the Hon’ble Minister of Law & Justice and Electronics & IT, Sh. Ravi Shankar Prasad regarding reducing the arrears and backlog of cases in courts and the need to review all pending court cases, a Special Arrears Clearance Drive is initiated in the Ministry.

2. Keeping in view the above, Ministry has decided to constitute two Committees at Head Quarter which will review the cases under their jurisdiction. The Committees would review and recommend the details of cases in which prosecutions are required to be withdrawn including the reports submitted by the Regional Director (s):-

Committee A

The reviewing Committee will consist of the following :-

(i) Director General of Corporate Affairs – Chairman of Review Committee;

(ii) Joint Director (Insolvency Section) -Convener cum Member

(iii) Joint Director (Policy Section) -Member

This Committee will review the cases of following Regional Director (s).

(i) Regional Director (Southern Region)

(ii) Regional Director (North West Region)

(iii) Regional Director (Northern Region)

(iv) Regional Director (South East Region)

Committee B

The reviewing Committee will consist of the following :-

(i) Director General of Corporate Affairs – Chairman;

(ii) Joint Director (Shri D. Bandopadhyay) -Convener cum Member; and

(iii) Nominee Joint Director of 0/ o SFIO –Member

This Committee will review the cases of following Regional Director (s)/ SFIO.

(i) Regional Director (Eastern Region)

(ii) Regional Director (North East Region)

(iii) Regional Director (Western Region)

(iv) Serious Fraud Investigation Office

3. In this regard, Regional Committee (s) are already formed. Copy of the Orders forming such Regional Committee (s) is attached.

4. The following guidelines may be followed while performing the duties assigned to the Committees:-

(i) The Committee may invite any official person (s) having acknowledged expertise in the matters for discussion.

(ii) The Committee are free to meet on Saturday & Sunday to expedite and complete their task.

(iii) The Committee are free to visit any office under their jurisdiction to complete their work.

5. The Committee will furnish consolidated as per part (2) above within one month to the Ministry.

6. This has approval of the Competent Authority.

End: As Above.

 

 

[1] Inserted by the Companies (Arrests in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017 vide Notification no. G.S.R..1062(E) dated 24^th August 2017. 

[2] Substituted for the words “Director, Additional Director or Assistant Director” by the Companies (Amendment) Act, 2019 vide notification No. File No. 1/5/2019-CL-I dated 14th August, 2019.

[3] Substituted for the words “The Director, Additional Director or Assistant Director of Serious Fraud Investigation Office shall, immediately after arrest of such person under sub-section (8)” by the Companies (Amendment) Act, 2019 vide notification No. File No. 1/5/2019-CL-I dated 14th August, 2019.

[4] Substituted for the words “Judicial Magistrate” by the Companies (Amendment) Act, 2019 vide notification No. File No. 1/5/2019-CL-I dated 14th August, 2019.

 [5] Substituted for the words “Magistrate’s court” by the Companies (Amendment) Act, 2019 vide notification No. File No. 1/5/2019-CL-I dated 14th August, 2019

[6] Inserted by Companies (Amendment) Act, 2019 vide notification No. File No. 1/5/2019-CL-I dated 14th August, 2019.