Last week, corporate affairs minister Premchand Gupta assured Parliament that the Serious Fraud Investigation Office (SFIO) would complete its probe into the Satyam Computer Services fraud within a ?reasonable time?, asserting that SFIO inspectors exercise statutory powers. But the fact is, almost six years after it was set up, the SFIO continues to function without legislative backing.
The only statutory powers that SFIO enjoys are under the Companies Act, 1956, through a 2003 government resolution to investigate white-collar crime. When set up on October of that year, the SFIO was slated to receive a legislative framework along the lines of UK?s Serious Fraud Office. But the way things stand, even if the SFIO lifts the veil over the Satyam-Maytas scandal, all it can do is file a complaint with the local police.
The Companies Bill of 2008, which Gupta stressed would take care of the shortcomings in the country?s regulatory framework and corporate governance norms, is silent about giving SFIO the teeth it needs. In fact, empowering the SFIO through legislation was a key recommendation of the committee set up by the corporate affairs ministry after the Enron scandal to prevent such frauds in India.
?There is a problem of coordination for the SFIO, which can be prevented if it gets legal backing. If the coordination problem still persists, it can be looked into by a committee, headed by the Cabinet secretary,? former Cabinet secretary Naresh Chandra, who headed the ministry?s earlier panel, told FE.
Former company affairs secretary Vinod Dhall, who was involved in establishing the SFIO, agrees. ?The idea behind setting up the SFIO was to investigate complex and serious cases like the Satyam scam. So, it should be able to complete the investigation and prosecute on its own. Statutory empowerment of the SFIO needs to be considered by the government to ensure this can be done,? Dhall said.
To investigate all aspects of a fraud, the SFIO needs to work in sync with other government agencies, independently summon and interrogate people, conduct raids and direct the prosecution in courts. Compare this to what?s happening in the Satyam case: despite a mandate from the Centre, the SFIO has had to wait its turn to interrogate the Raju brothers and seize their documents.
Worse, the minister in charge retains the discretion to accept or reject the SFIO?s final report. In contrast, the UK?s SFO investigates and prosecutes serious frauds and is an independent department of the British government.