The Telegraph
Since 1st March, 1999
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Lame duck cop put on fraud chase

New Delhi, May 22: The BJP-led government has decided against giving any teeth to the Serious Frauds Investigation Office (SFIO) it plans to set up by next month.

The SFIO, which is being set up to probe cases of fraud by top companies and possible stock market scams, will not enjoy any statutory powers. Moreover, it will at all stages be supervised by a cabal of officers comprising the company affairs secretary, Sebi chairman, heads of the Central Boards of Direct Taxes and Indirect Taxes, revenue intelligence and enforcement directorate.

Probes will thus be vetted by this committee, impairing the independence of the body, said top level finance ministry sources, turning the SFIO into just another arm of the finance ministry. The SFIO was promised to be set up in this year’s budget as a high powered, multi-disciplinary investigative body.

Though originally it was supposed to be a body with statutory powers akin to those of the Central Bureau of Investigations, the government has decided not to give it any powers beyond those in sections 235 and 237 of the Companies Act.

These two clauses basically give the Registrar of Companies and the Company Law Board powers to appoint an investigator to probe any offence that comes to their notice.

It does not give the kind of wide-ranging policing powers of arrest and seizure which the CBI enjoys or the enforcement directorate used to enjoy before the new Foreign Exchange Management Act was passed replacing the earlier Fera.

Officers probing corporate frauds will have to take the help of the local police force if they wish to go in for any preventive arrests or seizures of documents using provisions of the cumbersome criminal procedure code.

The SFIO will, however, be able to take up cases on its own, or, suo motu in legal parlance, by an interpretation of the two clauses of the Companies Act. Even these supposedly independent decision to investigate will actually be vetted by the committee headed by the Company Affairs secretary.

In contrast to the powers that are being given to the body, both the Joint Parliamentary Committee which investigated the stock market scam as well as BJP ministers had recommended that the SFIO should be backed by statutes and armed with sufficient powers.

Ministry sources said only senior officers will be entrusted with investigations. They will not have any inspector or constable level assistance in the probe agency, which will have senior officer-investigators and secretarial assistants.

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