Serious Frauds Office to get legal back-up

New Delhi, Nov 18 | Updated: Nov 19 2005, 06:06am hrs
The government is considering framing a separate law to deal with corporate offences which presumably involve criminal culpability. The ministry of company affairs (MCA) will soon constitute an expert group headed by the Reserve Bank of Indias (RBI) deputy governor to study the pros and cons of giving additional powers to the Serious Frauds Investigation Office (SFIO) under the new law.

Ministry officials told FE that the panel would comprise delegates from Central Board of Direct Taxes, the CBI, the ministry of law, department of economic affairs and the banking division of the finance ministry. The move, the officials said, was in keeping with the Cabinet decision in 2002 (when SFIO was set up) that further empowerment of the office would be considered later.

At present, SFIO has no power to suo motu initiate probe into any suspected cause of corporate fraud. It conducts probe only after the cases are referred to it by the MCA. While the SFIO can launch prosecution under the Companies Act, 1956, the law is unclear as to whether it can do the same under the Indian Penal Code. In fact, the office has already framed charges against a few corporates under the IPC and filed prosecution cases in courts. It, however, remains to been seen if the courts would accept such filing of charges by the SFIO.

The sources said the MCA had already discussed a consultation paper on further empowerment of SFIO, along the lines of the Serious Frauds Office of the UK. The UK counterpart of Indias fledgling SFIO has powers to commence probes on its own and file chargesheets in courts.

Addressing the Economic Editiors Conference here, company affairs minister Prem Chand Gupta said, the SFIO had been functioning well and had completed probe in eight cases out of the 30 referred to it. Investigations have been completed in the cases involving Xerox Corporation, Vatsa and Design Auto. Probes into the 16 cases pertaining to debarred stock broker Ketan Parekh are nearing completion. New cases referred to the office include that involving Mukta Arts.