Corporate Fraud Under Companies Act, 2013

Ananya Singh, LLM, Amity University, Noida

ABSTRACT

The offence of fraud is not new to mankind. It has had a strong presence in the society and has plagued the lives of several men and women. With the advancement of technology the fraudsters found newer ways to defraud the public. The structure of a company is such that it involves the interests of several stakeholders, which in turn means that it is accountable for its actions towards these stakeholders. When a corporate fraud is committed, it has devastating effect on a large number of individuals and financial institutions. The stock market is adversely affected too.

The financial and corporate frauds and scams in recent years in India have rekindled the thought on the need for high standards of corporate governance and stringent provisions to tackle fraud. This prompted our lawmakers to statutorily address the growing problem of corporate frauds by introducing stringent provisions in the new Companies Act, 2013 (New Act), ranging from increasing the role and duties of independent directors and that of the auditors. The new Act’s focus on the issue of tackling fraud is an indication of the trend in this direction which is likely to continue in the future. Not only by means of regulations, there is also a realization in the minds of corporate India to adhere to strict standards and they are becoming cautious and serious about the problems of fraud.1