Corporate affairs ministry raises doubts on SFIOs competence

Written by Neha Pal | Neha Pal | New Delhi | Updated: Sep 29 2011, 07:59am hrs
Doubts are being raised as to whether the Serious Fraud Investigation Office (SFIO), set up with much fanfare in 2003, is living up to its mandate. There have been instances when the ministry of corporate affairs (MCA) rejected SFIO reports on high-profile cases on the grounds that its findings werent foolproof. What more, the ministry has also asked the agency to outsource part of its work to private detectives so as to meet deadlines.

A few weeks ago, the ministry rejected the SFIO report on Maytas Properties and called for a fresh investigation by the agency. The MCA is also not too happy with the way the SFIO handled the Subhiksha case. It is felt the agency, from the very beginning, had left many loopholes in its investigation, which enabled Subhiksha to get a stay order on the probe.

The report submitted by SFIO in case of Maytas Properties has been found to be incomplete. There are many important aspects (of the case) that have not been covered by the agency, an MCA official told FE on condition of anonymity.

Maytas Properties was promoted by the family members of Satyam founder B Ramalinga Raju. The SFIO was asked to inspect the account books of the company in 2009. The agency submitted a report in January 2010, which was found to be incomplete and replete with loopholes. The SFIO was not able to gather important evidence, like misstatement of accounts by the firm and the role of auditors in the fraud.

Even in case of the R14,000-crore Satyam scandal, SFIO has not given a complete report as it could not detect how siphoning of funds from the company was actually done and the whole report looked incomplete, the MCA official added.

The ministry is also worried that the corporate fraud investigating agency is lacking in competence due to the absence of the required staff strength to carry on its operations effectively. As staff crunch was delaying completion of probes, the MCA asked the SFIO to outsource part of its work to private sleuths to overcome the problem, the MCA official said.

The agency is normally given six months to complete investigations after which the MCA takes a call and directs it to file case report in courts. But the SFIO has repeatedly sought extensions, partly because of staff shortage.

According to Uttam Prakash Agarwal, former president of the accounting regulator, Institute of Chartered Accountants of India: The SFIO lacks the required infrastructure and work-

force as investigation of corporate frauds needs more of forensic investigation to lawfully establish evidence and facts to be presented before the court.