Section 212 of the Companies Act, 2013: Investigation by the Serious Fraud Investigation Office

Meaning and scope of Section 212

Section 212 is a special investigation provision in Chapter XIV of the Companies Act, 2013. It operates without prejudice to Section 210, which separately empowers the Central Government to order investigation into the affairs of a company. An investigation assigned under Section 212 is conducted by SFIO through designated investigating officers in accordance with the procedure in the Chapter.

When can the Central Government assign an investigation to SFIO?

Under Section 212(1), the Central Government may assign an investigation to SFIO when it considers such investigation necessary on any of the statutory grounds: receipt of a report of the Registrar or inspector under Section 208; intimation of a special resolution by the company seeking investigation; public interest; or a request from a Department of the Central Government or a State Government.

After assignment, the Director, SFIO may designate the number of inspectors considered necessary for the investigation.

Effect of assignment to SFIO - Section 212(2) to (4)

Once a case is assigned by the Central Government to SFIO under the Act, another investigating agency of the Central Government or a State Government cannot continue an investigation in respect of an offence under the Companies Act covered by that case. If such an investigation has already begun, the concerned agency must transfer the relevant documents and records to SFIO.

SFIO must conduct the investigation in the manner prescribed by Chapter XIV and submit its report within the period specified in the Government's order. The Director causes the investigation to be carried out by an Investigating Officer, who has the powers of an inspector under Section 217.

Duty of the company, officers and employees - Section 212(5)

The company and its present or former officers and employees are required to provide the Investigating Officer with the information, explanations, documents and assistance required for the investigation. This duty is integral to the statutory investigation process.

Cognizability and special bail conditions - Section 212(6) and (7)

Section 212(6) applies its special regime to an offence covered under Section 447, which deals with punishment for fraud. Such an offence is cognizable. The provision imposes additional conditions for release on bail: the Public Prosecutor must have an opportunity to oppose the application and, where opposed, the court must be satisfied that there are reasonable grounds for believing that the accused is not guilty and is not likely to commit an offence while on bail.

The proviso permits the Special Court to release a person who is under sixteen years of age, a woman, or sick or infirm. Cognizance of the offence referred to in Section 212(6) requires a written complaint by the Director, SFIO or an officer of the Central Government duly authorised in writing. Section 212(7) makes clear that these bail restrictions are additional to restrictions under the applicable criminal-procedure law or other law.

Power of arrest - Section 212(8) to (10)

An SFIO officer not below the rank of Assistant Director, when authorised by the Central Government, may arrest a person if, on the basis of material in the officer's possession, there is reason to believe that the person is guilty of an offence referred to in Section 212(6). The reasons for the belief must be recorded in writing, and the arrested person must be informed of the grounds of arrest as soon as may be.

The authorised officer must forward the prescribed arrest material to SFIO in the prescribed manner. A person arrested under Section 212(8) must be taken within twenty-four hours to the Special Court, Judicial Magistrate or Metropolitan Magistrate having jurisdiction, excluding necessary journey time.

Interim and final investigation reports - Section 212(11) to (13)

SFIO must submit an interim report if the Central Government so directs. On completion of investigation, SFIO submits its investigation report to the Central Government. Section 212(13) also permits a person concerned to apply to the court for a copy of the investigation report.

Prosecution, disgorgement and status of the report - Section 212(14), (14A) and (15)

After examining the investigation report and taking legal advice if considered appropriate, the Central Government may direct SFIO to initiate prosecution against the company, its present or former officers or employees, or another person directly or indirectly connected with the company's affairs.

Where an interim or final report states that fraud has occurred and a director, key managerial personnel, officer, other person or entity has obtained an undue advantage or benefit, Section 212(14A) permits the Central Government to apply to the Tribunal for appropriate disgorgement orders and for personal liability without limitation of liability.

Under Section 212(15), an investigation report filed with the Special Court for framing charges is deemed to be a police report under the criminal-procedure provision specified in the Act. For proceedings after 1 July 2024, the procedural effect should also be considered in light of the BNSS and its savings provisions.

Legacy investigations and information sharing - Section 212(16) and (17)

Section 212(16) preserves investigations or other action initiated by SFIO under the Companies Act, 1956. Section 212(17) creates reciprocal information-sharing duties between SFIO and other investigating agencies, State Governments, police authorities and income-tax authorities where the information or documents are relevant to an offence or matter under investigation.