Corporate Governance Failures and Fraud Investigation: A Comparative Study of India's Serious Fraud Investigation Office and International Corporate Fraud Investigation Agencies

Abstract

Corporate fraud in India has repeatedly exposed the weakness of the governance structures meant to prevent it, as the Satyam and IL&FS collapses show. India’s institutional answer is the Serious Fraud Investigation Office (SFIO), which has wide investigative and coercive powers under the Companies Act, 2013 but depends on the Central Government for the decision to prosecute. This study asks whether that dependence, rather than any shortage of investigative power, is the SFIO’s central institutional weakness. The study is doctrinal and comparative. It traces the SFIO’s origin in the recommendations of the Naresh Chandra Committee, analyses its statutory framework and arrest powers, and compares it with the UK Serious Fraud Office, the US Securities and Exchange Commission and Department of Justice, and Australia’s ASIC. It then surveys the Indian case law testing the SFIO’s powers and formulates a five-element institutional effectiveness framework covering investigative independence, coercive powers, prosecutorial integration, resource capacity and accountability. The study finds that the SFIO’s powers are broadly comparable to those of its international counterparts, that most litigation concerns the procedure of its actions rather than the substance of its findings, and that its clear weakness lies in prosecutorial integration. It recommends, among other reforms, an independent civil enforcement track for the SFIO modelled on the Australian experience.