Companies Act Section 211

Companies Act, Section 211: Establishment of the Serious Fraud Investigation Office (SFIO)

Section 211 of the Companies Act, 2013 provides for the formal establishment of a specialized investigative body known as the Serious Fraud Investigation Office (SFIO). This office is designed to serve as the central agency responsible for investigating complex corporate frauds that may involve multiple laws, regulatory frameworks, or large-scale financial and operational misconduct. The section outlines the legal basis, composition, structure, and administrative framework of the SFIO.

1. Legal Mandate for Establishing the Serious Fraud Investigation Office

In accordance with subsection (1) of Section 211, the Central Government is mandated to formally establish, by way of a notification, an office to be called the Serious Fraud Investigation Office (SFIO).

The primary function of the SFIO is to investigate serious frauds related to companies. These are typically frauds that are large in scale, complex in nature, or involve significant public or stakeholder interest.
The legal creation of this office under the Companies Act gives it statutory backing, thereby enabling it to operate with authority and jurisdiction across India.
Provisional Recognition of Existing SFIO

The section includes a proviso to clarify that until such time the SFIO is formally established through the current Act:

The existing Serious Fraud Investigation Office, which was set up by the Central Government through a Government Resolution dated 2nd July, 2003 (vide Government of India Resolution No. 45011/16/2003-Adm-I), shall be deemed to be the SFIO for the purposes of this section.
This ensures continuity of investigations and uninterrupted operations of the SFIO, even in the interim period before its reconstitution under the new legal framework.
2. Composition and Expertise of the SFIO Team

Under subsection (2), the composition of the Serious Fraud Investigation Office is defined with emphasis on multi-disciplinary expertise.

The SFIO shall be headed by a Director, and its team shall include a number of experts from various specialized fields, who are to be appointed by the Central Government.
These professionals must be persons of ability, integrity, and experience.
The fields from which experts may be drawn include:

Banking to assess financial transactions and banking irregularities.
Corporate Affairs for understanding company structures, compliance, and governance.
Taxation to trace tax evasion and irregularities involving tax laws.
Forensic Audit for the technical analysis of books and financial statements.
Capital Market to examine stock market transactions and potential manipulations.
Information Technology to handle digital records, cyber forensics, and data analysis.
Law to interpret legal violations and build prosecutable cases.
Any other field as may be prescribed by the Central Government.
This multi-disciplinary composition reflects the complex and interrelated nature of corporate fraud investigations, which often span financial, legal, technological, and governance domains.

3. Appointment of the Director of SFIO

The Central Government shall appoint, through a notification, a Director for the Serious Fraud Investigation Office.
The appointed Director must be an officer not below the rank of a Joint Secretary to the Government of India.
The Director must also possess knowledge and experience in corporate affairs, ensuring that the office is led by someone with sufficient expertise and seniority to handle intricate investigations and oversee a high-profile investigative team.
4. Appointment of Experts, Officers, and Employees

The Central Government has the authority to appoint such additional experts, officers, and employees in the SFIO as may be deemed necessary for the efficient discharge of its functions.
This provides flexibility for scaling operations based on case complexity, volume of work, or emerging areas of corporate fraud.
5. Terms and Conditions of Service

The terms and conditions of service for the Director, as well as for other experts, officers, and employees of the SFIO, shall be prescribed by the Central Government through rules or notifications.
This ensures that the organizational structure and functioning of the SFIO is governed by a transparent administrative framework and aligns with public service standards.