Introduction:
Corporate fraud is one of the common economic crimes that take place in companies and can lead to huge financial losses for investors, stakeholders, and even for the company itself. As much as it is devastating, it is also increasing in many countries. Therefore, it is important to understand the various sections of the Companies Act 2013, which relate to corporate fraud and the punishments associated with it.
About the Companies Act, 2013:
The Companies Act, 2013 is an act of the Parliament of India on Indian corporate law which regulates the formation, financing, functioning and winding up of companies incorporated in India. This Act replaced the Companies Act, 1956. The Act relaxes the restrictions on foreign investment, which has attracted more foreign companies to do business in India. With the Companies Act, 2013 came in provisions to protect investors and creditors from corporate fraud by adding sections to prevent and punish corporate fraud.
Corporate Fraud:
Corporate fraud is an act that misleads people by false representation of facts or wrongful concealment of facts, which results in an unethical or illegal gain. It is a serious offence and it affects business entities, investors, shareholders and creditors. Corporate fraud can be committed in various ways such as accounting fraud, insider trading, stock manipulation, bribery, forgery, kickbacks and other schemes that involve dishonesty and deceit.
Sections of Companies Act 2013 Related to Corporate Fraud:
1. Section 447: Punishment for Fraud
This section of the Companies Act 2013 provides the legal framework related to the punishment of a person who has committed fraud against a company. It states that any person who is found to be guilty of fraud shall be punished with imprisonment for a period of up to 10 years and/or with a fine which shall not be less than the amount of fraud involved, but which may extend to three times the amount of fraud involved.
2. Section 447A: Punishment for False Statement
This section of the Companies Act 2013 states that if any person makes a false statement in any return, report or other document to be furnished to the registrar, he shall be punishable with imprisonment which may extend upto three years or with a fine which may extend to five thousand rupees or with both.
3. Sections 448, 449, 450: Punishment for forgery
These sections of the Companies Act 2013 deal with forgery offences against the company. Any person who is found guilty of forgery, either of the company’s documents or of any other documents falsifying the likeness of the company’s documents, shall be punished with imprisonment which may extend upto 7 years, along with a fine of five thousand rupees or thrice the amount of fraud involved, whichever is higher.
4. Section 517: Punishment for Non-Compliance of Orders of Central Government
This Section of the Companies Act 2013 provides the legal sanction and punishment for non-compliance of the orders of the Central Government in respect of fraud and misfeasance committed by any company. It states that any company or any officer of the company who is found guilty of non-compliance of the Central Government’s orders shall be liable to a fine which may extend to one lakh rupees and in case of continuing default, a further fine which may extend to five thousand rupees for each day during which such default continues.
5. Sections 542 to 548: Penalty for Non-Compliance of various Provisions of Companies Act
These sections of the Companies Act 2013 provide legal sanction and punishment for non-compliance of various provisions of the Companies Act by a company or its officers. Any officer who is found guilty of non-compliance of any of the provisions mentioned in the Companies Act shall be liable to a fine which may extend to five thousand rupees and, in the case of continuing defaults, to further fine which may extend to hundred rupees for each day during which such default continues.
Conclusion:
Corporate fraud is a serious offence and it is increasing day by day. In order to protect the interests of investors, creditors and stakeholders, the Companies Act, 2013 provides various sections to prevent and punish corporate fraud. The sections mentioned in this article provide the legal framework and associated punishments related to corporate fraud. It is important to ensure that all sections of the Companies Act, 2013 are properly complied with in order to protect the interests of investors and stakeholders from corporate fraud.
(Author can be reached at email address casharma.sharad2000@gmail.com or on Mobile No. 9990365673)
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