For the first time, the Serious Frauds Investigation Office (SFIO) tasted success in the well-publicised arrest of former managing director of Bhushan Steel, Neeraj Singhal for siphoning off Rs 2,000 crore through a web of 80 companies. After having come into being in July 2003 during Atal Bihari Vajpayee’s regime to tackle corporate white-collar crimes, Singhal was the first to be arrested by the agency. Compiling irrefutable evidence to justify the arrest is crucial especially on charges of ‘on-paper companies’ used to plough fake investments, loans or advances while the real intent was to bleed Bhushan Steel and Power over the years and turn it sick. Incidentally, Bhushan Steel was sold to the Tatas as part of the NCLT process. While the Tatas valued the debt ridden company at Rs 36,400 crore, creditors’ exposure stood at a massive Rs 56,018 crore.
Though SFIO had investigated hundreds of cases, the success rate leading to arrests could be measly. While prosecution proceedings were initiated in 1,237 cases till March 15 this year, less than a dozen seem to have been concluded to date. Cases initiated in designated courts total 1,138 while 20 high-profile cases were pursued in the NCLT. Cases before ICAI and ICSI, the professional bodies of company secretaries and chartered accounts total 79. Like CBI and Enforcement Directorate, SFIO seems to have reported very moderate success in taking investigations to the logical conclusion. SFIO, that became operational following recommendations of the Naresh Chandra Committee, may have very little to show. Official data, however, indicates that probe has been completed in 312 cases. Interestingly enough, in less than a dozen convictions secured so far, SFIO’s biggest success came in Ramalinga Raju’s Satyam or Reebok cases that shook India’s corporate world. Though modelled on the UK’s Serious Frauds Office and US’ Corporate Fraud Task Force, India’s SFIO performance pales vis-à-vis its international peers. One big issue highlighted by SFIO to justify its below the mark performance was lack of trained competent hands to handle complex corporate crimes.
After demonetising high-value currency notes and subsequent mining of huge financial data, workload on all the three agencies, including SFIO, ED and CBI have reportedly jumped manifold. Requisite infrastructure and back up logistics seem to be lacking for these agencies probing high profile economic crimes. Secondly, multi-agency probes have often ended up in overlap of jurisdiction. Though healthy competition amongst different agencies was desirable, larger cooperation, judicious utilisation of limited human and monetary resources apart from focused operations would increase the output. The changing nature of economic crimes push for innovation and re-inventing the operations of agencies probing corporate crimes. The Neeraj Singhal arrest alone may mean little but it is certainly a creditable start – a positive first step in rounding up high profile corporate officials who have perpetuated frauds without hesitation.