Section 212 of CA, 2013- Investigation into affairs of company by Serious Fraud Investigation Office
Updated: Oct 7
Section 212 specifies the process for the SFIO's investigation. There are 17 clauses and their supporting sentences in this section.
Without limiting the requirements of Section 210, Section 212(1) states that the Central Government may, by order, designate the SFIO to conduct an investigation into the operations of a company where it "is of the opinion" that doing so is essential due to the reasons listed in Section 212(1). In the event that a case has been "assigned" to the SFIO by the Central Government, no other investigating agency may continue an inquiry into any offense under the 2013 Act.
Further, 212(2) states that no other investigating agency of the Central Government or any State Government shall proceed with the investigation in such case in respect of any offense under this Act. If any such investigation has already been initiated, it shall not be continued, and the concerned agency shall transfer the responsibility for the investigation to the new agency.
Under Section 212(3), if the Central Government delegated to the SFIO the investigation into the affairs of a corporation, the SFIO shall complete the inquiry and submit its findings within the time indicated in the Central Government order. However, there is no time restriction specified in the 2013 Act for the SFIO to complete the inquiry and submit the investigation report.
According to clause 212(4), the Director of the Serious Fraud Investigation Office will have an investigating officer with the authority of an inspector under section 217 look into the company's business.
Further, clause 212(5) states that the company, its officers, and any employees who are or have been employed by the company are responsible for giving the investigating officer any and all information, justifications, documents, and help he may need to carry out the investigation.
Two prerequisites for bail are set forth in Section 212(6) for offenses under Section 447 of the 2013 Act. The following are the two prerequisites that must be met before bail will be granted:
If the public prosecutor has the chance to object to the accused's release and does so, (a) the court must be satisfied that there are reasonable grounds to believe that the accused is not guilty of the alleged crime and is not likely to commit another crime while out on bail. These pre-conditions for release on bail are in addition to those outlined in Sections 437 and 439 of the CrPC.
Provided, however, that a person under the age of sixteen, a woman, or a sick or infirm person may be freed on a bond if the Special Court so orders:
Furthermore, the Special Court shall not take cognizance of any offense referred to in this subsection unless a written complaint is filed by—
(i) the Director of the Serious Fraud Investigations Bureau; or
(ii) any officer of the Central Government authorized by a general or particular order in writing issued by that Government in this regard.
Clause 212(7) indicates that the limitation on providing bail indicated in sub-section (6) is in addition to the limitations on granting bail provided in the Code of Criminal Procedure, 1973 or any other law in existence at the time.
If the SFIO has "reason to believe" that someone has committed an offense punishable under any of the sections mentioned in Section 212, it is authorized to make an arrest under Section 212(8) read in conjunction with the Companies (Arrests in Connection with Investigation by Serious Fraud Investigation Office) Rules, 2017. (6). The investigating officer should put this "cause to believe" in writing. Arrests made by the SFIO are subject to the same rules regarding arrest under the CrPC.
The Serious Fraud Investigation Office shall keep such order and material for such period as may be prescribed, according to 212(9), which states that the officer authorized under subsection (8) shall immediately after arresting the person under that sub-section send 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.
According to 212(10), every individual detained under subsection (8) must be taken, as appropriate, to a Special Court or Judicial Magistrate or a Metropolitan Magistrate within twenty-four hours. With the exception that the time needed to travel from the scene of the arrest to the Special Court or Magistrate's court shall not be counted toward the twenty-four-hour period.
According to 212(11), the Serious Fraud Investigation Office must deliver an interim report to the Central Government if instructed to do so by the Central Government.
In addition, 212(12) implies The Serious Fraud Investigation Office must submit the inquiry report to the Central Government after the investigation is complete.
Any interested party may get a copy of the investigative report by making a court application, despite anything stated in this Act or in any other law now in effect, according to 212(13).
Section 212(14) indicates that after receiving the investigation report, the Central Government may direct the SFIO to start prosecution against the corporation and its officers or employees.
However, Section 212(14) does not indicate which report must be received before the Central Government can start prosecution. The Bombay High Court answered this question in the case of N. Sampath Ganesh v. Union of India, holding that a prosecution can be commenced based on an interim report or an inquiry report as long as it is sufficient to sustain a charge.
The investigation report filed with the Special Court for the purpose of framing charges is regarded to be a report made by a police officer under Section 173 of the CrPC (often referred to as the "charge-sheet").
212(15) stipulates that the investigation report filed with the Special Court for framing of charges shall be taken to be a report filed by a police officer under section 173 of the Code of Criminal Procedure, 1973, notwithstanding anything contained in this Act or any other law now in force.
Furthermore, 212(16) provides that, notwithstanding anything in this Act, any investigation or other action commenced or initiated by the Serious Fraud Investigation Office under the provisions of the Companies Act, 1956 shall be continued under that Act as if this Act had not been passed.
The final clause, 212(17), has the following two subpoints:
(a) If the Serious Fraud Investigation Office has been looking into a violation of this Act, any other investigating agency, State Government, police authority, or income-tax authority that has information or documentation regarding the violation must give the Serious Fraud Investigation Office any and all information or documentation that it has access to;
(b) The Serious Fraud Investigation Office will provide any investigating agency, state government, police authority, or income tax authorities with any information or documents it has that may be pertinent or helpful to them in relation to an offense or a matter that they are looking into or examining in accordance with another law.
This section is covered by Rules 2, 3, 4, 5, 6, 7, and 8 of the Companies (Arrests in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017.