Punishment for fraud under Companies Act, Section 447 deals with the provision related to punishment for fraud. It says: ‘Without prejudice to any liability including repayment of any debt under this Act or any other law for the time being in force, any person who is found to be guilty of fraud, shall be punishable with imprisonment for a term which shall not be less than 6 months but which may extend to 10 years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to 3 times the amount involved in the fraud, where the fraud in question involves public interest, the term of imprisonment shall not be less than 3 years. Now check more details about “Punishment for fraud under Companies Act” from below…
Punishment for fraud under Companies Act
Different sections of the Act provide punishment for fraud. These are 7(5), 7(6), 8(11), 34, 36, 38(1), 46(5), 56(7), 66(10), 75, 140(5), 206(4), 213, 229, 251(1), 266(1), 339(3), 448, and others. These sections provide punishment for directors, key managerial personnel (KMP), auditors and/or officers of company. Thus, the new Act goes beyond professional liability for fraud and extends to personal liability if a company contravenes such provisions
Penalties for corporate frauds under the Companies Act
| Section | Fraud (with respect to) | Who will be penalised |
| 7(5) | Company registration | A person furnishing false information or suppressing any material information of which he/she is aware |
| 36 | Inducing persons to invest money | The person involved |
| 75(1) | Acceptance of deposit with intent to defraud depositors or for any fraudulent purpose | Every officer of the company who accepted the deposit |
| 206(4) | Conducting business of a company for a fraudulent or unlawful purpose | Every officer of the company who has defaulted. |
| 213 | Business of a company being conducted with an intent to defraud its creditors; fraud, misfeasance or other misconduct of the company or any of its members; company withholding information from members with respect to its affairs, which they may reasonably expect | Every officer of the company who is in default and the person(s) concerned in the formation of the company or management of its affairs |
| 229 | Furnishing false statement, or mutilation, or destruction of documents | Person required to explain, or make a statement during the course of inspection, inquiry or investigation, or the officer or other employees, as required. |
| 251(1) A | Application for removal of name from the register to evade liabilities/intent to deceive | Persons in charge of the management of the company |
| 339(3) | Conducting business of the company with an intent to defraud its creditors, any other persons, or for any fraudulent purpose | Every person who was knowingly a party to the business in the aforesaid manner |
| 448 | Making a false statement in any return, report, certificate, financial statement, prospectus, statement or other document required by or for the purpose of any of the provisions of this Act or the rules made thereunder | Person(s) making such a statement |
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