Fraud

What is Fraud?

According to the Companies Act 2013, “Fraud in relation to affairs of a company or any body corporate includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of the company.” Those found sinful of crime on any level can confront severe outcomes. Fraudulent action can accomplish one individual, numerous individuals or a business company as an aggregate. Categories of fraud comprise tax fraud, credit card fraud, wire fraud, securities fraud, and bankruptcy fraud.

Explanation: 

Frauds are performed using the methods of erroneous articulation, i.e. Substitution, Omission, Distortion, and Addition. Whether is it deliberate denial of crucial information or delivering of inaccurate announcements to another group for the particular objective of unlawful gaining or denying the right to a victim. 

Fraud can ve classified as an action against any personal or corporate entity that is done with intent and knowledge of the impact. Frequently, the fraud perpetrator is conscious of the intended victim’s information, authorising the perpetrator to mislead the victim. 

Meaning of Fraud

Fraud meaning lies in an intentional ordinance (or downfall to act) with the motive of obtaining an unauthorised privilege by manipulating extortion or inaccurate notions or suppression of reality or other unscrupulous norms, which are assumed and relied upon by others. Divesting another self or the society of a windfall to which he/she/it is qualified.

Provision for Fraud under Companies Act 2013:

Section 447 of Companies Act, 2013 – “Whoever commits fraud, either in the conduct of any trade or business, or in the course of such trade or business, as defined in section 446 and section 447A.”

The fraudulent conduct is defined and it is seen that there are two references which is misappropriation of property and theft. The person who commits fraud in any one of these two ways has been prescribed to be held liable for committing fraud. Offences under these sections of the Act, (as laid down in the provision) are punishable with imprisonment, fine or both and even criminal record can be acquired by the perpetrator. 

Fraudulent act(s)

The fraudulent conduct is defined as “any act or omission where it is intended to cause an advantage or intended to cause loss.” . The fraud is charged when there has been a deliberate action where a person has used fraudulent means for material gain or dishonestly denying or depriving another person of a legal right. Fraudulent acts are penalised for violation of Section 447 A, 447 B and 447 C of the Act 2013.

Ingredients of a Fraud:

The fraudulent act should be intentional, fraudulent and should result in an advantage on the perpetrator and a loss to the person/organization affected by the fraud. 

Non-criminal Frauds

As written above, any act with the motive of obtaining unlawful gain or withholding another person’s rights to a legitimate profit can be categorized as fraud. Non-criminal Frauds are non-such intended for illicit gain but merely a mistake or negligence on behalf of the owner. However, if unethical methods have been used in conducting such non-crime related frauds then it can lead to criminal prosecution under Indian Penal Code sections or various other Acts falling under Prevention of Corruption Act, 1988.

Criminal Frauds

In India, Criminal Frauds are those that are explicitly intended for personal gain from fraud and by any means. These may be non-economic in nature like a fraud committed by changing medical records of a patient to show that the patient is cured from cancer when he is not. There could also be economic gain involved in such frauds where a person would make false claims about the quality of his product or its objective for which it is meant for and he receives money based on such claims. The consumer ends up paying more money because of being misled by the product being sold.

Some Examples of Fraud as per Companies Act, 2013:

• A person who has been appointed to manage the affairs of a company has knowingly abused his position in order to appoint himself as a director in the company and therefore committed an offence under Section 447(a) of Companies Act 2013.
• A person has fraudulently filed a false tax return with the Directorate General of Income Tax, I.T., New Delhi when he was not required to pay any Government taxes under Section 448 of Companies Act 2013.

Criminal Action for Fraud within India

According to the Companies Act 2013 & its provisions, any person who has committed fraud, as defined under that Act can be prosecuted under the Indian Penal Code. Offences like those stated above have been created under Sections 467, 468 and 471 of Indian Penal Code and are punishable with a fine or imprisonment for a period not exceeding seven years or both. If a person is found guilty of committing fraud by using dishonest means in order to commit an unlawful act, he has been prescribed to be punished with imprisonment of 7 years or more.

Conclusion

Fraud complicates deceit with the intent to illegally or unethical profit at the payment. In finance, conspiracy can assume various elements, including creating inaccurate security lawsuits, simmering the editions, pump & dump proposals, and individuality appropriation directing to unauthorised investments. Fraud meaning commands the frugality of billions of bucks every year, and those who snatch are accountable to penalties and prison terms.