Companies Act Section 212 — Investigation into affairs of Company by Serious Fraud Investigation Office
CHAPTER XIV INSPECTION, INQUIRY AND INVESTIGATION
Commercial / Corporate
Summary
Sub-section (1) allows the Central Government to assign an investigation into a company's affairs to the Serious Fraud Investigation Office (SFIO). This can happen on receipt of a report from the Registrar or an inspector, on intimation of a special resolution passed by the company itself, in the public interest, or on request from any Central or State Government department. Once assigned, the SFIO's Director may designate as many inspectors as considered necessary for the investigation.
Sub-section (2) states that once the Central Government assigns a case to the SFIO, no other investigating agency of the Central or State Government can proceed with investigating that case for any offence under this Act. If such an investigation has already started, it must stop, and the concerned agency must transfer the relevant documents and records to the SFIO.
Sub-section (3) requires the SFIO to conduct the investigation in the manner and follow the procedure provided in this Chapter, and to submit its report to the Central Government within the period specified in the order assigning the investigation.
Sub-section (4) provides that the Director of the SFIO shall cause the company's affairs to be investigated by an Investigating Officer, who has the powers of an inspector under section 217.
Sub-section (5) makes the company and its officers and employees, including those who are or have been in its employment, responsible for providing all information, explanations, documents, and assistance to the Investigating Officer as required for the investigation.
Sub-section (6) states that, notwithstanding the Code of Criminal Procedure, 1973, an offence covered under section 447 of this Act is cognizable, and no person accused of such an offence shall be released on bail or on their own bond unless the Public Prosecutor has been given an opportunity to oppose the application for release, and where the Public Prosecutor opposes it, the court is satisfied that there are reasonable grounds for believing the person is not guilty and is not likely to commit any offence while on bail. However, a person under sixteen years of age, a woman, or a sick or infirm person may be released on bail if the Special Court so directs. Further, the Special Court shall not take cognizance of any offence under this sub-section except on a written complaint made by the Director of the SFIO or any officer of the Central Government authorised in writing for this purpose.
Sub-section (7) clarifies that the limitation on granting bail specified in sub-section (6) is in addition to the limitations under the Code of Criminal Procedure, 1973, or any other law in force on granting bail.
Sub-section (8) allows an officer of the SFIO, not below the rank of Assistant Director and authorised by the Central Government, who has reason to believe (with the reason recorded in writing) that a person has committed an offence punishable under the sections referred to in sub-section (6), to arrest that person and inform them of the grounds for arrest as soon as possible.
Sub-section (9) requires the officer authorised under sub-section (8) to forward a copy of the order, along with the material in their possession, to the SFIO in a sealed envelope, in the prescribed manner, and the SFIO shall keep such order and material for the prescribed period.
Sub-section (10) states that every person arrested under sub-section (8) must be taken within twenty-four hours to a Special Court or Judicial Magistrate or a Metropolitan Magistrate having jurisdiction. The twenty-four hour period excludes the time necessary for the journey from the place of arrest to the Special Court or Magistrate's court.
Sub-section (11) provides that if the Central Government so directs, the SFIO shall submit an interim report to the Central Government.
Sub-section (12) requires the SFIO to submit the investigation report to the Central Government on completion of the investigation.
Sub-section (13) allows any person concerned to obtain a copy of the investigation report by making an application to the court, notwithstanding anything in this Act or any other law in force.
Sub-section (14) permits the Central Government, on receipt of the investigation report, after examining it and taking legal advice as it thinks fit, to direct the SFIO to initiate prosecution against the company and its officers or employees, or any other person directly or indirectly connected with the company's affairs.
Sub-section (14A) states that where the report under sub-section (11) or (12) indicates that fraud has taken place in a company and due to such fraud any director, key managerial personnel, other officer, or any other person or entity has taken undue advantage or benefit in any form, the Central Government may file an application before the Tribunal for orders regarding disgorgement of such asset, property, or cash, and for holding such person liable personally without any limitation of liability.
Sub-section (15) provides that 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, notwithstanding anything in this Act or any other law in force.
Sub-section (16) states that any investigation or other action taken or initiated by the SFIO under the Companies Act, 1956, shall continue under that Act as if this Act had not been passed.
Under clause (a) of sub-section (17), if the SFIO is investigating any offence under this Act, any other investigating agency, State Government, police authority, or income-tax authorities having information or documents about such offence must provide all such information or documents to the SFIO. Under clause (b) of sub-section (17), the SFIO shall share any information or documents available with it with any investigating agency, State Government, police authority, or income-tax authorities, where such information may be relevant or useful for their investigation or examination of any offence or matter under any other law.
Official Text
(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) 2[If any officer not below the rank of Assistant Director] of Serious Fraud 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 authorized 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].
(11) The Central Government if so directs, the Serious Fraud Investigation Office shall submit an interim report to the Central Government. 2. Subs. by Act 22 of 2019, s. 31, for “If the Director, Additional Director or Assistant Director” (w.e.f. 15-8-2019).
(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. 1[
(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.