In case of government or a foreign company under investigation, the letter clarifies, the arrest can be made by the SFIO only with prior written approval of the central government.
Amid rising Non-Performing Assets (NPAs) and bank frauds, the Centre has asked the chief secretaries of states and Union Territories (UTs) to “provide adequate police assistance” to serious fraud investigation officers for “the purpose of inspection, inquiry or investigations”.
The Home Ministry directive comes days after the government sanctioned wider powers to Serious Fraud Investigation Office (SFIO) to act against shell companies being used for illegal activities, including money laundering and tax evasion, officials said.
Recently, the SFIO has initiated a probe into the Infrastructure Leasing & Financial Services Limited (IL&FS) that is faced with a consolidated debt of Rs 91,000 crore and is saddled with a severe liquidity crunch.
In a home ministry communique, joint secretary S K Shahi has said that the fraud investigation body “is a statutory body under Section 211 of the Companies Act that investigates matter relating to serious fraud in a company”. He added that the power to arrest a person “under section 212 (8) of the Act by an authorised officer of SFIO have been given from August 24, 2017”.
The letter further says that “the Section 217(9) of the Act prescribes that the officers of the central government, state government, police and state authorities shall provide assistance to the inspector for the purpose of inspection, inquiry or investigations. The authorised officers of SFIO are also inspectors under the Act”. In case of government or a foreign company under investigation, the letter clarifies, the arrest can be made by the SFIO only with prior written approval of the central government.
“The state and UT governments are requested to issue instructions to all concerned authorities for providing adequate police assistance, as an when required, to the authorised officers of the SFIO for arresting a person under Section 218 of the Act, as well as for performance of other duties relating to search and seizure under the Act,” the home ministry communique further said.
In the last three financial years, SFIO, according to officials, had conducted 366 investigations. “As per Rule 9 of the Companies Rule, 2017, 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 (Companies) Act,” the MHA communication stated.
Explaining the mandate of SFIO, an official said, “Investigation into the affairs of a company can be initiated by the central government and entrusted to the SFIO on receipt of a report of the registrar or inspector, on intimation of a special resolution passed by a company that its affairs are required to be investigated, in public interest and on request from any department of the central government or a state government.”