Introduction
The Companies Act, 2013 is the primary legislation governing corporate entities in India. The Act provides a stringent regulatory framework to combat fraud and other illegal activities by companies operating in India. Sections 128-129 of the Act deal with the punishment for fraud in companies and the manner in which investigations of such fraud are conducted. This article will analyze in detail both of these provisions and the procedures for detecting and punishing fraud as a result.
Analysis of Section 128 and 129 of Companies Act 2013
Section 128 of the Companies Act, 2013 deals with the punishment for fraud in case of any company in India. It states that any person found guilty of fraud in relation to any company can be punished with a fine which may extend to 5 crore or twice the amount of the fraud, whichever is higher and/or imprisonment which may extend to 10 years. This section also provides for the granting of relief to the perpetrators of fraud if proven that their actions were not the cause of any harm to the company.
Section 129 of the Companies Act, 2013 deals with the procedures that have to be followed in cases of fraud. Where an offence under section 128 has been alleged, then an Investigating Authority can be appointed by the Central Government to conduct an investigation and submit a report. This authority is headed by a Director-Level officer of the Ministry of Corporate Affairs and can consist of other members as required. The Investigating Authority is to act independently and not be guided by the views of other officials. The report is to be submitted to the Central Government and its contents kept confidential.
Obligations of Companies
The Companies Act, 2013 has some key obligations for companies with respect to fraud prevention. According to section 217 of the Act, several measures are to be taken to combat fraud. This includes the setting up of a Whistle Blower policy, the separation of financial and operational roles, the implementation of a fraud risk management system, and the establishment of procedures for detecting and reporting any instances of misconduct or fraud.
The Companies Act also requires companies to maintain an audit of financial statements carried out by an independent auditor or auditors. This audit is to be conducted as part of the corporate governance framework and must be done at least once a year. The auditor is to review and assess the accuracy, reliability and integrity of the financial statements. This is in order to identify any suspicious transactions, potential fraud and non-compliance with laws and regulations. If any irregularities are identified, the auditor is to report it to the Board and take appropriate corrective steps.
Conclusion
Sections 128 and 129 of the Companies Act, 2013 provide for the punishment of fraud committed by companies in India and also describe the procedures to be followed when investigating fraud. Companies have a number of obligations under the act with respect to fraud prevention and detection. It is important that companies implement the provisions of the act and take necessary steps to protect themselves from fraud and unethical corporate practices. By doing so, companies can reduce the risk of fraud and ensure that all stakeholders are protected.
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