CORPORATE FRAUD AND

ROLE OF SERIOUS FRAUD INVESTIGATION OFFICE(SFIO)

Monica P R Bcom LLB (hons) [excepted may 2028]

Tamilnadu Dr. Ambedkar law University
school of excellence in law
Perungudi campus, Chennai -600113
 TABLE OF CONTENT

S.NO CONTENT P.NO

1. 1-3
Abstract/ Introduction
3
2. Objectives
4
3. Review of literature
4-5
4. Research gap
5
5. Hypothesis
6. Research methodology 6

7. Historical view 6-7

8. Scope of SFIO 7-9

9. Powers of SFIO 9-10

10. Investigation, punishment and report under 11-12

companies Act 2013
11. 12-14
Early warning system and public awareness
12. 14-16
Precedent
13. 16-17
Limitation and challenges
14. 17
Conclusion
15. 18
REFERENCE
 CORPORATE FRAUD AND
ROLE OF SERIOUS FRAUD INVESTIGATION OFFICE(SFIO)

ABSTRACT:
This study explores the role of the Serious Fraud Investigation Office (SFIO) in
tackling corporate fraud under the Companies Act, 2013. It reviews SFIO’s
evolution since 2003 and its multidisciplinary approach to investigating complex
financial crimes. Using a mixed-methodology, the research assesses SFIO’s
success in major prosecutions, coordination with agencies like SEBI and CBI, and
its capacity to tackle tech-driven frauds.While SFIO has shown success in cases
like the Satyam scandal, challenges such as limited autonomy, resource constraints,
and procedural delays persist. The study recommends reforms to enhance SFIO’s
efficiency and boosting public awareness. These reforms are vital for strengthening
corporate governance and sustaining investor confidence in India’s growing
economy.
Keywords: Serious Fraud Investigation Office, Corporate Fraud, Companies Act
2013, White-collar Crime, Fraud Investigation, India
INTODUCTION:
The integrity of the corporate sector is vital to a stable and trustworthy market
economy. However, the growing complexity and frequency of financial crimes
collectively termed corporate fraud pose a serious threat to this foundation. These
white-collar offenses not only undermine investor confidence but also risk
destabilizing the broader economy. In response, India’s legal framework has
evolved significantly, particularly with the enactment of the Companies Act, 2013,
which introduced a stringent definition of fraud and established robust penalties to
deter misconduct.

A pivotal development under this Act was the formal establishment of the Serious
Fraud Investigation Office (SFIO), a statutory agency tasked with probing serious
and complex corporate frauds. Initially constituted by a government resolution on
2 July 2003, SFIO operated under the provisions of the Companies Act, 1956 1. It
was later granted statutory status through Section 211 of the Companies Act 2013 2,
reflecting the government’s commitment to strengthening corporate governance
and enforcement mechanisms. The rise in high-profile scams and financial
irregularities especially those involving non-banking financial companies and
stock market manipulations prompted lawmakers to take decisive action. The
Naresh Chandra Committee 3on corporate governance, set up in August 2002,
recommended the creation of a specialized investigative body. Acting on this, the
Vajpayee government announced the formation of SFIO on 9 January 2003.

SFIO operates under the Ministry of Corporate Affairs and is distinct from routine
investigations into company affairs. Its mandate is to detect, investigate, and
prosecute or recommend prosecution for white-collar crimes. The agency is
multidisciplinary, comprising experts in law, accountancy, forensic auditing,
banking, taxation, IT, and capital markets. This diverse expertise enables SFIO to
tackle the intricate nature of corporate fraud, which often involves falsification of
financial records, misuse of assets, and abuse of managerial authority for wrongful
gain.

The Companies Act, 2013, brought fraud provisions into force on 12 September
2013, followed by fraud reporting requirements effective from 1 April 2014. These
measures reflect a broader effort to elevate corporate governance standards and
ensure accountability. In recent years, the Ministry of Corporate Affairs has taken
steps to enhance SFIO’s operational efficiency. A panel chaired by Corporate
Affairs

1
Resolution No. 45011/16/2003-Adm-I
2
Section 211, The Companies Act, 2013.
3
Secretary Injeti Srinivas was tasked with developing a comprehensive manual to
guide investigations and improve enforcement against white-collar crimes.

Despite its strengths, SFIO faces several challenges. Its jurisdiction is limited to
company-related frauds under the Companies Act, which may restrict its reach in
cases involving overlapping regulatory domains. Additionally, the complexity of
financial crimes demands not only technical expertise but also swift coordination
with other enforcement agencies and judicial bodies.

This study aims to critically examine the legal powers and functional scope of
SFIO, while also identifying structural and procedural limitations that may affect
its effectiveness. By analyzing its operational framework, the paper seeks to offer a
nuanced understanding of SFIO’s role in safeguarding India’s corporate ecosystem
and promoting transparency and accountability in business practices.

OJECTIVE OF STUDY:

1. Examine how successfully SFIO has investigated and prosecuted major

corporate fraud cases since its inception.
2. Investigate how well SFIO collaborates with other regulators and law
enforcement agencies, and the impact of jurisdictional overlaps.
3. Analyze whether the Companies Act, 2013, and related laws provide
sufficient powers and tools to SFIO to tackle evolving fraud schemes.
4. Consider public and corporate awareness of SFIO’s role and mechanisms for
reporting suspected fraud.
5. Explore the legal, procedural, and resource-based limitations that hamper
SFIO’s ability to act swiftly and independently.
REVIEW OF LITERATION:

1. Role of Serious Fraud Investigation Office In Corporate Fraud, Missba

Farook Zariwala,4; This study examines SFIO’s investigative role under the
Companies Act, 2013, focusing on its powers, procedures under Section
212, and reporting mechanisms. It highlights delays due to undefined
timelines and challenges in recruiting skilled experts for complex fraud
cases.
2. "Corporate Fraud Prevention and Detection: Revisiting the
Literature" by Deepa Mangala and Pooja Kumari; explores strategies for
detecting and preventing corporate fraud. It highlights the importance of
recognizing red flags as early indicators of misconduct. It underscores the
proactive role of senior management in enforcing anti-fraud frameworks.
3. " Corporate Frauds: Emerging Issues And Preventive Strategies Ms.
Shweta Wadhwani Dr. Hema Meno (Manupatra Publication);
Comprehensive study on regulators for corporate frauds under Companies
Act, Analysis of both SFIO and National Company Law Tribunal (NCLT)
roles and provided detailed examination of regulatory mechanisms and
enforcement.

RESEARCH GAP:

The existing studies provide valuable insights into the SFIO’s statutory mandate
under the Companies Act, 2013, and its procedural framework under Section 212,
they largely emphasize its structural composition and broad investigative powers.
However, there is limited scholarly evaluation of the practical efficacy of SFIO
investigations particularly in terms of enforcement outcomes, inter-agency
coordination, and case resolution timelines. Moreover, although literature
4
ISSN (O): 2583-0066
highlights the importance of fraud detection mechanisms and the role of senior
management, there is a noticeable gap in connecting these preventive strategies
with the SFIO’s investigative feedback loop. The comparative regulatory analysis
involving SFIO and NCLT also lacks a focused assessment of jurisdictional
overlaps and procedural bottlenecks. This study seeks to bridge these gaps by
critically analyzing SFIO’s operational challenges, legal constraints, and its role in
shaping a responsive and transparent corporate enforcement regime in India.

HYPOTHESIS:

1. H1: The current legal powers granted to SFIO under the Companies Act,
2013 are insufficient to effectively investigate and prosecute complex,
technology-enabled corporate frauds.
2. H2: Higher public and corporate awareness about SFIO's role leads to
increased voluntary reporting of suspected corporate fraud cases.

RESEARCH METHODOLOGY:

The present study is descriptive in nature and adopts a doctrinal mode of

research, relying exclusively on secondary data sources. It aims to critically
examine the legal powers, investigative functions, and operational challenges
of the Serious Fraud Investigation Office (SFIO) under the Companies Act,
2013, with particular emphasis on Section 212. Data for the study has been
collected through an extensive literature review, including academic journals,
research papers, books, government reports, and authoritative articles for a
better output of the study.
HISTORICAL VIEW: The Pre-SFIO Era (under the Companies Act, 1956)
Before the establishment of SFIO in 2003, corporate fraud investigations were
governed by Sections 235 to 247 of the Companies Act, 1956. Although the Act
did not explicitly mention SFIO, the Central Government held powers to
investigate company affairs5, related entities6, and ownership structures7.
Investigations could be initiated based on Registrar reports or Company Law
Board recommendations, but only in the public or shareholders’ interest not due to
dissatisfaction alone.
Inspectors appointed by the government had authority to examine officers,
employees, and agents under oath, and submit interim or final reports.
Investigations could extend to related companies with prior government approval.
In certain cases, such as a special resolution by the company or a court order, the
appointment of inspectors was mandatory. Applications from companies with
share capital supported by at least 200 members or one-tenth of voting rights could
also trigger investigations. M.S. Shoes Fraud Case:8 MS Shoes, founded in 1986,
collapsed in 1995 after owner Pawan Sachdeva manipulated share prices, causing
major investor losses. Investigated by CBI under the Companies Act and
Prevention of Corruption Act, the case was dropped due to lack of evidence but
reopened in 2003. The company was declared sick by BIFR in 2005.Harshad
Mehta Scam9: Harshad Mehta misused ready-forward deals and fake Bank
Receipts to divert funds between banks, leading to massive financial fraud. He
faced 72 criminal charges, 600 civil suits, and was banned by SEBI. He died in
2001 with cases still pending.
WHO CAN APPLY? AND THE SCOPE OF SFIO:
The question arise that can anyone initiate an investigation? The answer is no It is
crucial to mention at the very outset that an investigation can only be initiated on a
well-founded opinion of the Central Government.
According to Section 210(1)10 of the Companies Act. 2013 ("the Act" for short),
the Central Government may order an investigation into the affairs of a company
under the following circumstances:
1. On receipt of a report from the registrar or an inspector

5
Section 235 and 237, Companies Act, 1956.
6
Section 239, Companies Act, 1956.
7
Section 247, Companies Act, 1956.
8
Ms. Shoes East Ltd. vs M/S. Subhash B. Dalal on 6 December, 2010, RFA No. 424/2001.
9
Harshad s. Mehta v Central Bureau of Investigation Crl.M(M)2508/92.
10
Section 210: Investigation into the affairs of Company.
Such a report shall be made based on the inspection of the books of accounts of the
company.
2. When a company passes a special resolution requesting an investigation
3. If it is deemed necessary in the public interest.
As laid down in N.R. Muthry v. Industrial Development Corporation of Orissa
Limited ((1977) 47 Comp Cas 389 (Ori)) it was held that in the case of a
company intended to operate in modern welfare state, the concept of public interest
takes the company outside the conventional sphere of being a concern in which the
shareholders alone are concerned it emphasises the idea of the company
functioning for the public good or general welfare state of the community, at any
rate not in manner detrimental to the public good.
4. A request from any department of the central or state government.11
When the investigation is assigned to SFIO, it shall have exclusive jurisdiction,
and no other investigating agency may proceed with a parallel inquiry. Any
existing investigation must be transferred to the SFIO.
The SFIO is headed by a Director of at least Joint Secretary rank, with expertise in
corporate affairs. Its team comprises specialists from diverse fields including
investigation, cyber forensics, and various branches of accounting to ensure
effective fraud detection and analysis.
The investigation cases taken up by the SFIO are characterized by the following
attributes:
a) Complexity and having inter- departmental and multi-disciplinary ramifications.
b) Substantial involvement of public interest in terms of monetary
misappropriation or in terms of number of persons affected and
c) The possibility of investigations leading to or contributing towards a clear
improvement in systems, law of procedure.
Such a structure is vital, as company investigations demand both investigative
skills and knowledge of corporate operations. Under the Companies Act, 2013,
employees must provide all necessary information and support to the Investigation
Officer during the inquiry.

11
Section 212(5), Companies Act, 2013
The inspectors assigned with the duty of investigation can also investigate the
affairs of a company in the following cases:
a. Any corporation which has been subsidiary or holding company or subsidiary of
its holding company at any relevant period of time.
b. Any corporation which has been managed by a managing director of the
company in question or who is the managing director or manager of the company
in question at any pertinent period of time.
c. Any corporation who’s Board of Directors consist of the nominees of the
company in question or is habituated to conduct its activities according to, or on
the directions of the company in question.
d. Any person who has been the Managing Director, manager or employee of the
company in question.12
THE POWERS OF SFIO:
The SFIO isn’t just any other investigation agency. The act empowers it to arrest,
summon, interrogate and prosecute the accused. they are:
I. Power to call for information
Section 212(5) of the Act obligates the company, its officers, and
employees (both current and former) to provide all necessary documents,
explanations, and assistance to the investigating officers.
It is always advisable to cooperate with inspectors by promptly providing
them with the requisite documents whenever requested. One should avoid
withholding information or delaying the submission of documents that are
in his custody.
II. Power to arrest
In the Bhushan Steel case,13 SFIO exercised its arrest powers under Section
212(8) of the Companies Act, 2013. As per the 2017 MCA notification,
only the Director, Additional Director, and Assistant Director may arrest
individuals with prior written approval. Arrests in foreign or government
companies require Central Government consent, and relevant officials must
be informed.

12
Section 219,Companies Act,2013: Power of Inspector to conduct investigation into the affairs of the
company.
13
(SFIO) v. Bhushan Steel Ltd. & Ors.. 770/2019
 Arrest orders and supporting documents must be sealed, and SFIO must
submit its report to the Central Government, which may direct prosecution.
The arrested person must be presented before a magistrate within 24 hours
(excluding travel), and offences are cognizable.

III. Power to inspect the affairs of the related companies

SFIO in cases of large-scale financial irregularities in IL&FS, Bhushan
Steel and Bhushan Power and Amrapali Group Real Estate went ahead and
investigated their multiple subsidiaries and group companies to track fund
diversion and identify interconnected fraud schemes.
This provision empowers the SFIO to go a step further by carrying out
investigations into the affairs of
 Subsidiaries, holding companies, or related corporate entities
 Companies are managed by the same directors or managers.
 Companies are influenced by the investigated company or its
directors.
 Current or former managing directors, managers, or employees.
The inspector will investigate and report on these entities only if the
findings are relevant to the primary case.

IV. Power to take notes of evidence

During investigations, employees are extensively questioned. To streamline
the process, the Companies Act empowers SFIO to record statements of
individuals examined. These notes must be read aloud and signed by the
person, and may subsequently be used as evidence against them.

V. Power to Extract Evidence Abroad:

SFIO can seek evidence from foreign jurisdictions if it reasonably believes
relevant material exists outside India. In such cases, it must apply to an
Indian court for a letter of request, directing a foreign court (e.g., in Dubai)
to examine witnesses or obtain documents. This process was followed in
high-profile cases like Vijay Mallya and Nirav Modi.

VI. Power of Search and Seizure:

During investigations, SFIO may search and seize documents to prevent
tampering. Before seizure, companies must be allowed to take copies of
relevant extracts. Seized materials are returned post-investigation. 14
14
https://lawsikho.com/blog/sfio-investigations-role-of-company-secretary
INVESTIGATION under Companies Act, 2013:

A. SFIO’s Exclusive Jurisdiction and Investigative Powers

 Once a case is assigned to SFIO by the Central Government under the

Companies Act, 2013, no other central or state authority may continue
investigating the same offence.
 Any ongoing investigation must be halted, and all relevant records handed
over to SFIO.15
 Companies and their officers are legally bound to cooperate and provide
necessary documents, data, and clarifications.
 SFIO conducts investigations as per Chapter XIV 16 of the Companies Act
and submits its report within the time specified by the Government.

Offences SFIO Is Empowered to Investigate (Section 212(6)): It specifies that

the following offences of the Companies Act, 2013 can be covered by SFIO and
will fall under the ambit of fraud of corporate nature:

 Section 7(5) & (6): False information or suppression of facts during

company incorporation
 Section 34: Misstatements in prospectus
 Section 36: Fraudulent inducement to invest
 Section 38(1): Personation in acquiring securities
 Section 46(5): Fraudulent issue of duplicate share certificates
 Section 56(7): Fraudulent transfer of shares by depository or participant
 Section 66(10): Concealment or misrepresentation of creditor claims
 Section 140(5): Auditor’s fraudulent conduct
 Section 206(4): Unlawful business activities and neglect of investor
grievances
 Section 213: Employee disclosures of company’s fraudulent activities
 Section 229: Furnishing false statements, mutilation and destruction of
documents.
 Section 251(1): Fraudulent application for removal of name.
 Section 339(3): Liability of fraudulently conducting the business.
 Section 448: Providing false statement by a company.

Punishment for Non-Cooperation and Fraud (Sections 229 & 447, Companies
Act, 2013):
15
Section 212(2),Companies Act,2013
16
Inspection, Inquiry and investigation, Sections 206-229, Companies Act, 2013.
Anybody corporate that commits any of the offences listed above shall be liable to
be investigated by the SFIO and will attract the punishment of fraud u/s Sections
229 and 447 of the Companies Act, 2013 prescribe strict penalties for non-
cooperation during investigation.
Under Section 229, any person who falsifies, conceals, or destroys documents,
makes false entries, or provides misleading explanations during inspection or
inquiry is punishable under Section 447. This includes imprisonment ranging from
6 months to 10 years and fines up to three times the fraud amount if it exceeds ₹10
lakh or 1% of turnover. If public interest is involved, a minimum of 3 years’
imprisonment applies. For lesser frauds without public interest, punishment may
include imprisonment up to 5 years, a fine up to ₹1.5 crore, or both.

INVESTIGATION REPORT:

During an SFIO investigation, an interim report outlining preliminary findings is

submitted to the Central Government within a specified period. 17 After completion,
a detailed final report is filed to the central government 18, accessible to concerned
parties via court application. The Government may then direct SFIO to initiate
prosecution of the company and its officials or employees and/or any other person
who is directly or indirectly connected to the affairs of the concerned company.
The investigation report filed with the Special Court for the framing of charges will
be deemed to be filed by the Police under Section 173 of the Code of Criminal
Procedure, 197319, and not by SFIO. Other agencies must transfer relevant
documents to SFIO for effective investigation. Notably, investigation proceedings
are quasi-judicial and distinct from judicial proceedings.20

EARLY WARNING SYSTEM:

To combat white-collar crimes, SFIO is developing an Early Warning System

(EWS) to detect corporate frauds at an early stage. Initiated after the 2009 Satyam
scam, the system uses data from MCA 21, regulatory bodies, and public sources—
including social media—to flag suspicious activities. A consulting agency has been
set up by the SFIO and is engaged in designing the conceptual framework of the
17
Section 212(11), Companies Act, 2013.
18
Section 212(12), Companies Act, 2013.
19
Report of police officer on completion of investigation.
20
Coimbatore Spinning & Weaving Co. Ltd v. M.S Srinivasan (1959) 29 Comp. Cases 97 (Mad)
system. It’s an alert system designed to detect corporate frauds early, helping
prevent their occurrence and minimizing losses to investors and the broader
economy. The proposition of developing a EWS first floated after the Satyam scam
in 2009. The new framework would use MCA database as essential information
alongside information accessible from other administrative associations and outer
sources including online networking. It would help in shielding financial
specialists from getting misused by the mendacious organizations or people.
Additionally, it would help in distinguishing organizations for additional
examination, investigation or scrutinized examination by Registrar of Companies
(ROCs), other workplaces of Ministry of Corporate Affairs, or by the SFIO. The
EWS aims to protect investors, identify high-risk companies for further scrutiny by
SFIO or the Ministry of Corporate Affairs, and prevent economic disruptions
through proactive monitoring.
The main motive behind the establishment of EWS system is the abolition of shell
companies. Shell companies do not have active or traceable business operations or
any assets on their own name and are primarily set up for illegitimate purposes. 21

Awareness and Reporting Improvements

 Educational Campaigns: Organize regular seminars, workshops, and

webinars for corporate professionals, students, auditors, and investors to
explain SFIO's role, its powers, and the importance of timely reporting.
 Official SFIO Helplines & Digital Portals: Strengthen and promote online
and telephone grievance portals allowing quick, confidential reporting of
suspected frauds directly to SFIO.
 Mandatory Corporate Disclosure: Encourage or require companies to
publicize SFIO’s contact details and reporting mechanisms in annual reports,
compliance bulletins, and on company websites.
 Collaboration with Industry Bodies: Partner with trade associations,
Chambers of Commerce, and professional institutes (ICAI, ICSI) to integrate
SFIO awareness in their training modules and outreach programs.

Sharman, J. (2010). Shopping for Anonymous Shell Companies: An Audit Study of Anonymity and
21

Crime in the International Financial System. The Journal of Economic Perspectives, 24(4), 127-140.
Retrieved from http://www.jstor.org/stable/20799176.
  Media Outreach: Leverage traditional and digital media for periodic
announcements, case-study publications, and interviews with SFIO officials
to build public trust and awareness22.
 Whistleblower Incentives and Protection: Publicize whistleblower protection
schemes, offer incentives for legitimate disclosures, and guarantee the safety
of identity and employment for informants.
 Publicizing Success Stories: Share anonymized case studies or periodic
impact reports on SFIO’s website and through press releases to demonstrate
its impact and create confidence in its capacity for effective action.
 Feedback and Transparency Mechanisms: Establish user-friendly feedback
systems and regularly update the public on policy changes, reporting
outcomes, and case progress for accountability and transparency.

PRECEDENTS ON SFIO:

Although the following case has been dealt after the establishment of the SFIO,
still since it is an investigation agency, no particular mention has been made about
SFIO for the sake of confidentiality.

Satyam Computers Scam;23 This scam, exposed in January 2009, was

one of India’s largest corporate frauds. This scandal of worth Rs.7,200 crores
caused loss of Rs. 14,162 crores (approx.) to its speculators in 2009, has occurred
with the assistance of review firm PricewaterhouseCoopers which is enormous
blow for corporate administration in India. The job and risk of Independent chief
were likewise held suspicious. Satyam Computer Services Ltd provided diverse IT
services and was listed on the NYSE and Euronext, with a global presence
spanning 67 countries across six continents. SFIO investigated the Satyam scam in
a record three months, finding that independent directors were misled and unaware
of the financial fraud orchestrated by top executives. The probe, covering several
development centers across India, exposed deep flaws in oversight and auditing
systems.

22
SFIO: Guarding India's Corporate Soul, Aayan Birla 2/7/2025
23
Fraud Investigation in India A Cyril Amarchand Mangaldas Thought Leadership Publication
Deccan Chronicle Holding Ltd24 based in Hyderabad and publisher of
Deccan Chronicle and Asian Age, was investigated by SFIO for loan defaults and
financial irregularities between 2009–2011. The company failed to repay loans
worth ₹1,230 crores and violated provisions of the Companies Act, 1956. SFIO
found that funds were raised through non-convertible debentures and other
financial instruments via various banks. Despite being declared a sick company by
the Board of Financial Reconstruction (BIFR), lenders proceeded against DCHL
under the SARFAESI Act. The case highlighted lapses in financial discipline and
regulatory compliance.

The Saradha Chit Fund scam25 in West Bengal was investigated by SFIO
following public outrage and a 2013 directive from the Corporate Affairs Ministry.
Over 60 companies, mainly from eastern India, were accused of defrauding
investors through fake chit fund schemes. SFIO’s interim findings revealed
financial mismanagement and fund diversion by promoters exploiting regulatory
loopholes. The case highlighted the rise of complex financial products marketed
online and SFIO’s limited powers to adjudicate, as it only investigates multi-
disciplinary corporate frauds and submits its report to the Central Government for
further action.

Sunair Hotels Ltd. & Ors. vs Ministry of Corporate Affairs & Anr .26,
Delhi High Court upheld the validity of SFIO’s investigation into Sunair Hotels
following an order from the Ministry of Corporate Affairs, rejecting the
petitioners’ challenges to the investigation report’s findings and procedural
fairness. Both the Single Bench and Division Bench validated MCA’s and SFIO’s
recommendations for prosecution, confirming SFIO’s legal mandate and
investigative credibility.

Adarsh Group Companies Case (SFIO v. Aditya Sarda & Ors., 27 Supreme
Court addressed multiple bail applications and procedural aspects in the large-scale
SFIO probe against the Adarsh Group, involving over 125 companies. The case
highlights the procedural powers of SFIO under Section 212 of the Companies Act,
2013, and the interaction of bail jurisprudence with ongoing SFIO investigations.

24
“Serious Fraud Investigation Office: The White Collar Crime Controller” Shruti Kulshreshtha1
Symbiosis Law School, Hyderabad, ISSN 2581-5504
25
Ibid,.
26
2025 (2) TMI 638 - DELHI HIGH COURT
27
SLP (CRL.) No.13956 of 2023)
Deloitte Haskins & Sells LLP vs Union of India and Ors. 28The National
Company Law Appellate Tribunal (NCLAT) held that SFIO’s report is considered
a “police report” under Section 173 of the CrPC, with legal implications for the
admissibility and use of SFIO findings in prosecution under company fraud cases.

SFIO v. Rahul Modi29 Supreme Court clarified there is no mandatory statutory

time-limit for the completion of SFIO investigations, holding that deadlines in
Government orders are directory, not absolute. This case sets a precedent for
procedural aspects of SFIO investigations.

SFIO v. Nitin Johari30

Facts: The SC examined a bail petition based on an investigation that the SFIO had
conducted pursuant to Section 447 of the Companies Act.
Judgment: The Court cancelled the bail granted by the Delhi High Court, observing
that the twin pre-conditions for bail under Section 212(6) were not satisfied.
The issue is constitutional validity of Section 212(6) but with an issue of bail under
serious frauds.

LIMITATIONS AND CHALLENGES

 Limited Autonomy: SFIO cannot start investigations independently; it

requires a formal referral from the Central Government, which can delay the
process and restrict proactive investigations.
 Resource Constraints: The office faces shortages of specialized personnel
and modern forensic technology, making it difficult to address increasingly
sophisticated, tech-driven frauds.
 Jurisdictional Overlap: SFIO often has to work alongside agencies like
CBI, Enforcement Directorate, and SEBI, leading to issues of coordination,
duplication of effort, and sometimes delays in investigation and prosecution.
 Procedural Delays: Absence of strict statutory deadlines for completing
investigations means probes can extend for long periods, reducing
deterrence and delaying justice.
 Scope of Authority: SFIO’s exclusive jurisdiction applies only after a case
has been officially assigned, which can result in evidence loss or tampering
before investigation formally begins.

28
W.P.(C) 1065/2021 & CM APPL., High Court of Delhi, 2025
29
AIRONLINE 2019 SC 196
30
9 SCC 165, Supreme Court of India, September 12, 2019.
  Technological Gaps: Rapid developments in digital finance, cyber-fraud,
and cross-border transactions require advanced digital forensics and data
analytics—areas where SFIO is still developing capacity.
 Lack of Preventive Powers: SFIO’s mandate is mostly investigatory and
reactive; it does not have explicit surveillance or early-warning powers that
could be used to proactively prevent fraud.

CONCULSION:

The Serious Fraud Investigation Office (SFIO) stands as a pivotal institution in

India’s fight against corporate fraud under the Companies Act, 2013. With its
multi-disciplinary expertise and statutory powers under Sections 211 and 212,
SFIO has proven capable of handling complex financial crimes, as seen in cases
like the Satyam scandal. Its ability to conduct forensic audits, examine witnesses,
and recommend prosecution underscores its importance in maintaining corporate
integrity. However, challenges persist—SFIO’s reliance on government referrals,
limited resources, technological gaps, and procedural delays hinder its proactive
enforcement. Jurisdictional overlaps and low public awareness further weaken its
reach, raising concerns about undetected frauds and underutilized investigative
capacity. Academic and government reports consistently highlight this duality:
while SFIO has improved governance standards, systemic inefficiencies remain.

To enhance SFIO’s effectiveness, reforms must focus on granting greater

autonomy, setting statutory timelines, upgrading technological tools, and fostering
better coordination among agencies. Public awareness initiatives and recent steps
like the Injeti Srinivas Committee’s manual and increased budget allocations are
promising, but broader structural changes are essential. As corporate fraud evolves
in the digital age—spanning cybercrime, data manipulation, and cross-border
offenses—SFIO must continuously adapt to serve not just as an investigator but as
a deterrent. Its role is critical in preserving investor confidence and ensuring
India’s corporate governance aligns with global standards. Ultimately, SFIO’s
ability to evolve and overcome institutional constraints will determine its success
in protecting the nation’s economic integrity. Through this study the development
of early warning system dealt for the effective enforcement of SFIO and apart from
that there should be an improvement of public as well as corporate personnel
awareness about what is SFIO’ s role and mechanism on reporting the suspected
fraud under companies Act 2013.

REFERENCE:

1,Ramaiya, A. Guide to the Companies Act. LexisNexis, Latest Edition.

2.Singh, Avtar. Company Law. Eastern Book Company, Latest Edition.

3.Taxmann's Companies Act with Rules and Forms. Taxmann Publications, Latest
Edition.

4. Palan, Yash. "Role of Serious Fraud Investigation Office in Striving White

Collar Crimes and Its Developments." International Journal of Law Reform and
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15. https://timesofindia.indiatimes.com/city/hyderabad/sfio-launches-probe-into-
transstroy-india-over-companies-act-violations/articleshow/124005068.cms