The Companies Bill 2012 has an innocuously titled chapter titled
“Miscellaneous” which provides stringent and perhaps unprecedented punishment.
“Miscellaneous” which provides stringent and perhaps unprecedented punishment.
The Chapter provides for imprisonment and fine for several
types of situations. A minimum imprisonment (six
months/three years) is also provided.
types of situations. A minimum imprisonment (six
months/three years) is also provided.
Clause 447, for example, says that any person found guilty of fraud
shall be punishable with imprisonment of at least six months but which may
extend to 10 years and fine. The fine shall be at least the amount involved but may
extend to 3 times such amount. If the fraud involves the public interest, the
minimum imprisonment would be 3 years.
shall be punishable with imprisonment of at least six months but which may
extend to 10 years and fine. The fine shall be at least the amount involved but may
extend to 3 times such amount. If the fraud involves the public interest, the
minimum imprisonment would be 3 years.
The term fraud is widely and inclusively defined. It has to be in
relation to a company/body corporate, public or private, listed or unlisted. There
should be an intent to deceive, to gain undue advantage from or to injure the
interests of specified persons. There are no requirements of minimum amount,
materiality, etc. for such act/omission, etc. to be treated as fraud. The
affected person may be the Company, the shareholders, the creditors or
any other person. The fraud may be committed by any person. The
person need not have gained any amount and the affected person need not have
lost any amount.
relation to a company/body corporate, public or private, listed or unlisted. There
should be an intent to deceive, to gain undue advantage from or to injure the
interests of specified persons. There are no requirements of minimum amount,
materiality, etc. for such act/omission, etc. to be treated as fraud. The
affected person may be the Company, the shareholders, the creditors or
any other person. The fraud may be committed by any person. The
person need not have gained any amount and the affected person need not have
lost any amount.
There are other provisions in the Bill that refer to this clause and
deem certain actions to be “fraud” punishable under clause 447. For example,
furnishing of false information or suppression of material information in
documents filed with the Registrar in relation to registration of a Company
amounts to fraud and punishable under clause 447. So is the making certain
untrue/misleading information in any prospectus.
deem certain actions to be “fraud” punishable under clause 447. For example,
furnishing of false information or suppression of material information in
documents filed with the Registrar in relation to registration of a Company
amounts to fraud and punishable under clause 447. So is the making certain
untrue/misleading information in any prospectus.
Clause 448 refers to intentional making of materially false statement or
omitting material facts. These may be in documents such as report, certificate,
financial statement, prospectus, or other document required by or for the
purposes of the Act or rules. These too will be punishable as fraud under
Clause 447.
omitting material facts. These may be in documents such as report, certificate,
financial statement, prospectus, or other document required by or for the
purposes of the Act or rules. These too will be punishable as fraud under
Clause 447.
Clause 449 states that intentional giving of false evidence while being
examined on oath or in a solemn affirmation attracts minimum imprisonment of 3
years and which may extend to 7 years.
examined on oath or in a solemn affirmation attracts minimum imprisonment of 3
years and which may extend to 7 years.
In view of specific provisions in clause 441, the offences listed above are
not
compoundable.
not
compoundable.
While frauds, misstatements, etc. have been of serious concern recently,
one wonders whether such stringent, minimum and mandatory punishment for such a
broad group of cases is justified and whether it has been adequately debated.
one wonders whether such stringent, minimum and mandatory punishment for such a
broad group of cases is justified and whether it has been adequately debated.