Ministry of Corporate Affairs notifies Companies (Arrests in Connection with Investigation by Serious Fraud Investigation Office) Rules, 2017

Ministry of Corporate Affairs notifies Companies (Arrests in Connection with Investigation by Serious Fraud Investigation Office) Rules, 2017

September 8, 2017 Corporate 0

In a commencement notification (attached) dated 24th August, 2017, the Ministry of Corporate Affairs (‘MCA’) has notified the following sections of the Companies Act, 2013 (‘Act’):

As per the recently notified section of 212 (8) of the Act, the Director, Additional Director or Assistant Director of SFIO (‘Officers’) can arrest a person if they have reasons to believe that the person is guilty of any offence punishable under the Criminal Procedure Code, 1973.

Section 212(9) states that the concerned officers of SFIO have to forward a copy of the order along with the material in his possession to the SFIO in a sealed envelope immediately after arrest of the person.

Section 212 (10) requires the person arrested under Section 212 (8) to be produced before a Judicial Magistrate or a Metropolitan Magistrate within a period of twenty-four hours.

The MCA by way of another notification (attached) dated 24th August, 2017, has notified the Companies (Arrests in Connection with Investigation by Serious Fraud Investigation Office) Rules, 2017 (‘Rules’).

Background

As per Section 211 of the Act, the Central Government has been empowered to establish the Serious Fraud Investigation Office (‘SFIO’) in order to investigate into frauds relating to a company. The SFIO comprises of experts of ability, integrity and experience in the field of banking, corporate affairs, taxation, forensic audit, etc. and should be headed by a Director.

Section 212 of the Act states the investigation procedure of the SFIO into the affairs of a company.

The Rules have been made in consonance with Section 212 of the Act and provides the procedure to be followed by SFIO for arrests to be made with respect to frauds in a company.

Highlights of the Rules

  • A person can be arrested under Section 212 (8) only if the concerned officer of SFIO has reasons to believe basis material information in his possession that the said person is guilty.
  • Arrest conducted by Additional/Assistant Director should be backed up with prior approval of the Director of SFIO.
  • The concerned officer of the SFIO is required to serve signed arrest order along with the personal search memo (attached for reference).

For further read please refer to the hyperlink below.

Source: Ministry of Corporate Affairs

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