The Serious Fraud Investigation Office (SFIO)’s probe into the alleged scam at multi-level online marketing entity SpeakAsia has hit a legal hurdle on whether the agency has powers to investigate a company registered outside India.
Regarding probe into SpeakAsia, which is registered in Singapore, the SFIO is now awaiting advice from the corporate affairs as well as the law ministries. Officials close to the development said the SFIO had sought clarification on whether it has the powers to probe irregularities of a company, which was registered overseas, but had operations in India as well.
The agency is awaiting clarity before proceeding further on the case, they added.
In the wake of an alleged scam at SpeakAsia, which came to light early last year, the Ministry of Corporate Affairs (MCA) had ordered an SFIO investigation into the issue.
The SFIO, under the MCA, was set up for investigations into corporate frauds under the provisions of the Companies Act, 1956.
Going by its website, SpeakAsia is not registered as a company in India, as it is not a permanent establishment here. Its members, who register with SpeakAsia after paying an annual fee, are required to conduct online surveys for various clients.
According to experts, under the existing Companies Act, there is no clarity on whether Indian authorities have powers to probe an overseas entity having operations in the country.
However, this issue has been addressed in the new Companies Bill, 2011, which is expected to be taken up during the next Parliament session.
In the new Companies Bill, clause 228 provide powers for authorities to look into affairs of overseas companies having operations in India.
As per the Bill, "This is a new clause and seeks to provide that the provisions relating inspection or investigation under Chapter XIV shall also apply mutatis mutandis to inspection or investigation of foreign companies".
Chapter XIV is related to inspection, inquiry and investigation of companies.
Earlier this month, SFIO in a reply to a Right to Information (RTI) query said the SpeakAsia case is pending investigation and has been referred to the Ministry of Corporate Affairs/Ministry of Law and Justice on a legal issue. However, specific details were not disclosed.
Meanwhile, Moily recently said the final draft of the Companies Bill 2011 is now before the Cabinet and is likely to be discussed in the next Parliament session.
