This article is written by Minhaj Nazeer. It talks about the concept of corporate fraud in India. This article aims to provide an overview of the nature, causes and consequences of corporate fraud in India, as well as the relevant legislation and regulations, namely, the Prevention of Money Laundering Act, 2002, the Securities and Exchange Board of India, Act 1992 and the Companies Act, 2013 that deal with corporate fraud. The writer also mentioned the investigation and mitigation of corporate fraud, followed by the relevant case laws and some FAQs.
Introduction
In the corporate world, corporate fraud is a persuasive and complex scenario that builds a shadow over the integrity of business worldwide. The web of illegal financial transactions poses a significant threat to corporations and stakeholders. This ultimately kills shareholder’s trust, depletes investment money and harms the company’s brand name. This article discusses corporate fraud in detail. It mainly focuses on all the nuances of corporate fraud in India, essentially concentrating on the evolution, types, indicators, categories, etc. The concept of corporate fraud has been discussed with past popular examples of fraud that occurred in India and changes in regulations with respect to the same.
What is fraud
Under Section 17 of the Indian Contract Act, 1872 the term fraud is defined as any act by an individual who is a party to a contract, or any kind of willingness to allow any third person like agents, to trick the other person into entering into the contract. One of the criteria is to promise without any intention of performing it or any behaviour that the law defines as fraudulent, etc. To come under fraud the essential elements are like a false representation, or made without any knowledge of its truthfulness. According to Section 19 of the Act, the legal effect of fraud in a contract whose consent is obtained through fraudulent means is that it is voidable with the permission of the other party. If a party enters into the contract through fraud, the contract is considered voidable under Section 19 of the Contract Act. It was held in the case of Dr. Vimla v. Delhi Administration (1962) that the idea of deceit is a necessary ingredient of fraud, but it does not exhaust it. The expression ‘defraud’ involves two elements namely, deceit and injury to the person deceived. In this case, the injury is explained as anything which can be movable or immovable or anything which involves money.
What is corporate fraud
Corporate fraud is the illicit and deceptive practices committed within a company. These practices jeopardise the trust of stakeholders and the integrity of financial markets. Corporate fraud can be classified into two, it can be criminal or civil law violations. The Punjab National Bank Scam is one of the most massive as well as recent scams which is considered as a crime. The fraud involved a lump sum amount of 15,000 crores. The fraud which has less amount involved is considered as civil law violation. The violations are namely employee fraud, investment scams, misappropriation of assets, corruption etc. Individuals commit fraud for personal benefits or for the benefit of the company. Sometimes corporate frauds go beyond the purview of employees and badly impact the economy and the business.
Financial statement fraud is the most common mode of corporate fraud. Companies falsify accounting in order to mislead the financial figures. Pumping schemes which artificially raise stock prices before they reach the markets, are a kind of market manipulation. Corporate entities also make fraud disclosures to investors and fail to declare their income to lower tax liability.
Evolution and development of corporate fraud
During independence, corporate fraud grew at a slower rate due to restrictions in the economy and less globalisation. Later, with economic liberalisation in the late 1990s, fraud began to surge. The growth in technology and development further fueled fraudulent activities in the corporate world, companies started to use regulatory loopholes. In India, most of the corporate frauds are based on financial statement manipulations (false account statements), insider trading (an employee trading with public information before it is published), etc. The Satyam scandal in early 2000 has projected the technical drawbacks leading to a surge in fraud.
Harshad Mehta scam, 1992
This scam cost more than four thousand rupees for the country. Harshad Mehta committed the fraud by exploiting the loopholes of the Indian stock market. He utilised the advantage of poor coordination of the stock market and bank. The banks involved were premium banks like the State Bank of India and the National Housing Bank. After this scam, the Securities and Exchange Board of India (SEBI) expanded its jurisdiction over Foreign institutional investments, credit rating agencies, etc. Mehta and his associates syphoned off the funds from bank transactions and bought shares in different segments; this paved the way for a surge of price in the Bombay Stock Exchange (BSE). After getting caught the bank started asking for the money back. Harshad Mehta and his brother were arrested for misappropriating more than 28 lakh shares and around 90 companies by forging share transfer forms. The total amount of misappropriation was approximately 250 crores. Later he was acquitted from the case. There was a drastic fall in share prices and the market causing a breakdown in institutions like the Reserve Bank of India (RBI) and other commercial banks. The first reformation was introducing the Nation Stock Exchange (NSE) and a committee headed by Kumar Mangalam Bajaj and Narayana Murthy which is overseen by the Securities and Exchange Board of India (SEBI). The main structural change with respect to the scam was recording all the transactions related to the purchase of investments and subsidiary general ledger as a prevention to the scamsters.
Ketan Parekh scam, 2001
This scam resulted in a loss of 2000 crore. Like Mehta, the fraud was due to another loophole in the stock market. The fraudster took advantage of the gap in the banking system with the stock market in the country. After this fraud, the SEBI(Amendment) Act, 2002 was passed which brought some major changes in the prevalent legislation. That included Section 11A of SEBI (Amendment) Act, 2002 in which the issuing of prospectus, offer documents and advertisements asking for investments were introduced. The board regulated and started prohibiting the issue of prospectus, offer documents, and advertisements which solicit money for the issue of securities, this was a collective investment scheme. Ketan Parekh was a Chartered Accountant (CA) and was also part of the institutional brokerage business inherited from his father. He used to pick up substantial stakes from promoters at large discounts and shifted focus to institutional investors. There was an irregularity in shares which was bought by him and led to a 176 point loss in the market on that trading day. SEBI banned short sales and rumours started spreading in the exchange. Later on, the Bank of India filed a criminal case against Ketan Parekh for his involvement in the pay order scam of Madhapuva Mercantile Cooperative Bank and got arrested. Thereafter, SEBI prohibited his broking and merchant banking firms from starting a new business. This was the second largest scam and after this SEBI introduced Clause 49 to the Listing agreement to ensure that businesses are behaving in the best interests of the market by following all the corporate governance guidelines.
National Spot Exchange scam, 2013
This was another big scam that questioned the authorities and brokers’ intention towards investor protection. This showed that the government was not capable of overlooking the proper functioning of the companies which have public money. Post this scam, SEBI started an investigation against broking firms and regulated their functions. NSEL(National Spot Exchange Limited) was incorporated in the early 2000s, to establish a single market across the country for both manufactured and agricultural procedures. NSEL became the first ever electronic commodity exchange for spot delivery of contracts including agricultural products. This exchange took around 25 days to settle a contract while the permitted time was only half of it. Later on, the regulator Forward Market Commission (FMC) intervened and asked to settle the payment defaults. When investors were claiming commodities of their money, borrowers were not in a position to provide them because there was a goods shortage in warehouses. Eventually, large brokers and financial players came under investigation. The allegation was regarding the false promises to the clients. The brokers allowed the clients to execute trades even though they had less balance in their accounts. The team of officers from SEBI investigated and submitted the report. The investigation team suggested banning the brokers from commodities derivatives trading and also initiating prosecution for the misappropriation.
Indicators of corporate fraud
There should be multiple indicators to have a scope of fraudulent activity. There are several indicators such as unusual financial patterns, changes in employee behaviour, and lack of control inside the company, etc. To understand unusual financial patterns, usually sudden unaccountable fluctuations can be found in the revenue, profits or expenses. Unusual lifestyle changes and resistance to audits are indicators of change in employee behaviour. It is very empirical that the indicators should be considered collectively and not independently to make sure about the fraudulent activity.
Reasons behind increased corporate fraud cases
The major reason behind a surge in corporate fraud cases is high expectations from the business. Crucial reasons are economic pressure, competition in the market and lack of protection for whistleblowers in the organisations.
Let’s discuss them.
Economic Pressure
India’s economy is revolving rapidly because of intense competition and profit-driven businesses. This led the business to opt for an easy way to make more business by doing fraudulent activities so that they could cope with the economic conditions. Also, companies under financial strain may resort to unethical practices to achieve targets, increase investors and other factors such as securing loans.
Competition in the market
Most of the time, companies engage in fraudulent practices to match their advantage with other competitors. The pressure to outperform the peers leads to breaking the legalities. This leads to the manipulation of financial statements, securing contracts in an unethical manner and much more.
Less protection for whistleblowers
The lack of a whistleblower protection mechanism impacts the reporting of fraudulent activities. The fear of snitching and lack of confidence to reveal the wrongdoing of the colleague is the major issue in whistleblowing. This essentially allows the fraudulent practices to persist and remain undetected for a long period of time.
Categories of corporate fraud
Asset misappropriation
This is a theft or misuse of the company’s assets which belong to the company. It can be committed by any individual who ranks from directors to employees who are entrusted with the company’s assets. For example, this fraud wherein the perpetrator employs tricks to steal or misuse the company’s assets. Assets can be tangible and intangible, modus operandi of fraud will be fictitious sales, false inventory, falsifying asset requisition and transfer.
Bribery and corruption
This is a heinous crime when compared to other frauds because this essentially affects the company’s economic development. The act of bribery involves offering, giving or receiving anything which can hamper the official act of the company. While corruption is more heinous than bribery, it includes illegal gratification, bribery and economic extortion. Employees use their power improperly for business transactions by this the employee gains an advantage for themselves or for a third person.
Financial statements
This involves acts wherein the company’s financial statements of the company are misrepresented. This damages the company internally and externally. The forms of fraud are manipulating accounts, overstating revenue assets and investments, understating liabilities and non-disclosure of financial information.
Corporate Espionage
Due to high innovation and competition in the market, the companies use high-tech methods to collect information from other companies. For this, a bogus company is made for the purpose of manipulation and hides their details regarding the business transactions.
Money Laundering
This is an illegal process of making lump sum money that is generated by crimes such as drug trafficking or terrorist funding which is coming from a legitimate source. Most financial companies have anti-money laundering policies to scrutinise and prevent this activity.
Ponzi Scheme
This is an investment fraud that pays investors an amount by collecting money from new investors. Essentially, in Ponzi schemes, the organisers encourage investors by promising high returns with little risk. The fraudsters take a small portion of the newly invested money before paying the former investors, that’s how they keep moving forward.
Accounting misappropriation
In accounting fraud, the company manipulates financial statements to create impressive corporate financial stability. This can be committed by employees, accountants, or by the whole organisation misleading the stakeholders. It can be done by overstating its revenue, not recording expenses, etc.
Legislations which govern corporate fraud in India
Companies Act, 2013
The Companies Act, 2013 provides laws for punishment related to an individual who commits fraud against the company. Section 447 states that any individual who is guilty of fraud will be punished with imprisonment up to 10 years or the fine as decided according to the value of the fraud, it should be less than the fraud amount, it may extend to three times the amount of fraud involved.
Securities and Exchange Board of India Act, 1992
The Securities Exchange Board of India (SEBI) acts as a regulatory organisation to constantly monitor fraud. The SEBI was constituted as a non-statutory body on April 12 1988 through a resolution of the Government of India and the provisions came into force on January 30, 1992. The Corporation Finance Investigation Department (CFID) carries out detailed scrutiny on irregularities such as fraud, diversion, material misstatement, fraudulent related party transactions, non-compliance with the issue of IPO and suspected diversion of funds, etc. Key functions of SEBI include safeguarding the interests of Indian investors while educating them about securities markets and respected intermediaries. Also, SEBI facilitates the development and seamless functioning of the securities market. Regulating the business operations within the securities market is also one of the main functions of SEBI.
Section 12A – Prohibition of manipulative and deceptive devices, insider trading and acquisition of securities or control. This section prohibits manipulative and deceptive devices and insider trading to any person directly or indirectly to commit it. It says that no person shall directly or indirectly indulge in employing devices that are manipulative in nature or engaging in insider trading etc.
Section 15 E – Penalty for failure to observe rules and regulations by an asset management company. The section explains that where any asset management company of a mutual fund registered under this Act, fails to comply with any of the restrictions on the activities of asset management, then such company shall be liable for penalty. The penalty can be not less than one lakh rupees but which extends to a maximum of one crore rupees. Under this section, the SEBI provides penalties in cases of insider trading, nondisclosure of shares, failure to refund to the investors and other fraudulent and unfair trade practices.
Prevention of Money Laundering Act, 2002
Under the Prevention of Money Laundering Act (PMLA), corporate fraud is a predicate offence When any type of money laundering or other similar fraud to is committed to conceal or any benefits from the offence. If any person commits any fraud related to the acquisition, possession or any act that proceeds to money laundering that will be also considered as a money laundering offence. The provisions of PMLA protect against corporate frauds occurring in India. Section 3 talks about the offence of money laundering, it says whosoever directly or indirectly attempts to indulge or assist a party or actually involved in any process or connected with the proceeds of crime including its concealment, possession, acquisition shall be guilty of the offence of money laundering. Section 4 of the act talks about the punishment for money laundering. The punishment is rigorous imprisonment for a term which shall not be less than three years, it can also extend to seven years and a fine.
Corporate fraud provisions under Companies Act, 2013
Section 447: Punishment for Fraud
This section provides punishment for an individual who committed fraud against the company. It explains that any individual who is guilty of fraud shall be punished with a fine and imprisonment with a maximum period of 10 years. The fine should be not more than three times the amount involved in fraud. But in certain conditions, the fine may extend up to three times the amount of fraud involved.
Section 447A: Punishment for False Statement
Section 447A says that if any individual makes a false allegation in any return, report, or any other document which is related to the registrar will be punished with imprisonment for a maximum of three years or a fine of five thousand rupees or both.
Sections 448, 449 and 450: Punishment for forgery
Section 448 deals with the forgery offences against the company. Any individual who is considered guilty of forgery, when either a new forged document is created or existing documents of the company that are false and misleading statements with respect to the company. Then the person shall be punished with imprisonment which may extend up to 7 years and can be along with a fine of five thousand rupees or in certain cases the amount maybe three times the amount involved in fraud.
Section 542: Liability for fraudulent conduct of business
While winding up of a company, the persons who are carrying the business are personally liable for all the fraudulent conduct of business, and also if the company has any debts or other liabilities.
Non-compoundable fraud
Usually, the punishment for fraud is imprisonment and fine as provided under Section 447, it is considered a non-compoundable offence. The Act of fraud has recently become a more heinous offence after introducing regulations. The Act has mentioned the punishments under Section 447 and several sections as mentioned below have explained the fraud by directors, managers, and other officers of the company. The new laws go beyond the ambit of professional liability and include personal liability.
The table below explains the relevant sections under the Companies Act, 2013 of fraud and who will be accounted (defaulter) for the same
| Section | Fraud | Defaulter |
| 7(5) | False information or material suppression | Individual |
| 8 | Fraud in company affairs | Officer |
| 34 | False statements in prospectus | Individual who authorises the issue of prospectus |
| 36 | Fraudulently inducing to invest | Individual |
| 38 | Personation of securities, acquisition etc | Individual |
| 46(5) | Duplicate certificate of shares | Officer |
| 75(1) | Default of deposits/ interests | Officer of the company |
| 206 | Fraudulent business | Officer |
| 229 | False statement or destroying evidence during investigation | The individual who required to provide information regarding the case |
Investigation of corporate fraud
The investigation method is comprehensive, combining legal procedures and cutting edge technology to detect financial irregularities. SEBI, PMLA, and the Companies Act are examples of such regulations. The legislation empowers the regulatory body to investigate, scrutinise and enforce law proceedings if the companies or businesses are suspected of engaging or are found engaging in fraudulent activities like insider trading, misleading the financial statements, etc.
Serious Fraud Investigation Office
This is a multifunctional agency consisting of experts to detect fraudulent activities. The agency investigates cases of companies involved in financial fraud. The central government will investigate these companies. The agency can arrest in cases where an individual is found guilty of an offence under the Companies Act. The agency is established under Section 211 of the Companies Act, 2013. The investigating team consists of experts from different sectors like capital markets, banking sector, forensic audit, information technology and taxation. The agency has also had the power to arrest any person found guilty of committing fraud under the act. The agency takes up only complex matters and has interdepartmental ramifications, multidisciplinary aspects, etc. The Satyam scandal was one of the cases that was taken by this agency and submitted the report.
National Company Law Tribunal
This quasi-judicial authority handles corporate disputes, it has powers to provide relief for class action suits, mismanagement, etc. The tribunal is not bound by the procedural rules, it also decides cases by the principle of natural justice. This authority is also established under the Companies Act, 2013. NCLT has the power to award pecuniary damages and penalties for the wrong or offence committed by the officers of the company. The tribunal is not bound to any strict procedures rather the matter can be decided following the principles of natural justice.
How does lifting of corporate veil help with mitigation of corporate fraud
The corporate veil is a legal concept that separates a company’s actions from those of its shareholders. This is to safeguard stockholders from liability for the company’s conduct. Lifting of the corporate veil helps to reveal the individuals who committed the fraud behind the corporate entities. By piercing the corporate veil, the intent of the abuse of corporate structures should be proven. The corporate veil protects the shareholders and members from the defects occurring in the name of the company. For example, when the director of the company defaults when he is part of the company, the liability to the company is not to the director of the company. Essentially, the concept of a corporate veil protects the members of the company by shielding them from the repercussions of wrong doings in the name of the company.
Infamous corporate fraud cases
M/S Satyam Computers Services vs. Directorate of Enforcement (2011).
This case was the first major fraud India faced and resulted in stringent regulations, reporting and governance mechanisms. In this case, the company was reflecting large bank balances in the financial statements constantly but was inconsistent with other companies which were involved in the same business model. Apparently, a separate team was working on the scam. In order to convince the auditors during the closure of financials, they issued fake bank confirmations and statements as evidence. The approximate amount involved was around USD 1 billion. At the same time Satyam was receiving awards for good corporate governance and the promoter of the company acquired respect in the industry.
Satyam had a good business model and portfolio with a good number of international clients. The government took the initiative to revamp the company, initially, the government dismissed all the board of directors and appointed professionals. Later, the company was sold to Mahindra Group and currently, it is a major part of the successful technology business of the group.
Kingfisher Airlines Ltd vs. Union of India (2015).
In this case, the Kingfisher Airlines scam was another corporate fraud, in the airline industry, which led to the fall of the Kingfisher empire. The kingfisher is tagged as the king of good times, owned by the great businessman of the country, Vijay Mallya. Kingfisher was famous for its beverages, later over a short time period, the company established the most luxurious aeroplanes in the country. The service of the aircraft was of high quality and the company was the second highest in market share after Jet Airways. The company had bad debts, and Vijay Mallya had to sell his personal properties and beer business to liquidate the borrowings. A consortium of banks published an approx of INR 9000 crores as debt. This case is more of a business failure due to bad debts than a corporate fraud.
The table below shows the amount of loans taken by Vijay Mallya
| Serial No. | Name of the Bank | Loan Amount |
| 1 | Axis bank | 50 crores |
| 2 | Punjab and Sind bank | 60 crores |
| 3 | Federal bank | 90 crores |
| 4 | Indian Overseas bank | 140 crores |
| 5 | United bank of India | 430 crores |
| 6 | Bank of baroda | 550 crores |
| 7 | Punjab National Bank | 800 crores |
| 8 | State bank of India | 1600 crores |
Punjab National Bank vs. Union of India (2022).
This is a case of major banking fraud in the nation, which is INR 15000 crores. The fraud was committed by the proficient jewellers of the country, Nirav Modi and Mehul Choksi. They both engaged in exporting polished diamond business. They had strong retail chains of diamond business in India and other international destinations. The question of funding arose after some point. Apparently, the company was defrauding Punjab National Bank and other banks. They transacted large amounts of money without any underlying assistance from junior-level banking officials. The estimated amount involved was more than around INR 16000 rupees. RBI issued red alerts to all banks, advising the banks to have right system deficiencies. After this scam in 2018, the government approved the Fugitive Economic Offenders Bill to deter economic offenders from evading the process of Indian law by giving powers to the government to confiscate the assets of fugitives, including the Benami assets of absconding loan defaulters. The bill covers a wide range of economic offenders including loan defaulters, fraudsters, individuals who violate the laws governing taxes, black money, Benami properties, financial sector and corruption.
Union of India vs. Infrastructure Leasing & Financial Services Ltd (2022).
This is the case of the largest fraud in the country, as the company Infrastructure Leasing & Financial Services (ILFS) played a key role in infrastructure development in India. The company was backed by large shoulders like LIC and SBI and had representatives on the board. The debt amount was a sum of INR 91000 crores including the PF and pension funds. The fraud happened mainly as a result of the diversion of borrowed money associated with entities by some members of the senior management team among other factors. The company had a high credit rating and this made most of the asset management, and insurance companies invest large sums in its debt issuance. The rating agencies did not downgrade the rating of the company even when they had clear financial stress signals due to its high reputation. Even if the rating agencies had hints the actual rating was changed abruptly to the lowest from the highest after defaulting on repayment obligations. The company had a reputed top management, and no one challenged the decisions of the directors.
Subrata Chattoraj vs. Union of India (2014).
This case was a Ponzi scheme scam, the scheme was started by the Saradha Group. They collected money from investors by issuing bonds which are redeemable, debentures and promised high profits from investments. The agents were hired from throughout West Bengal with high salaries to expand quickly. This made the scheme get investments from around 200 companies. The company used a nexus of companies to avoid regulatory bodies. Later, in 2013, the scheme collapsed, incurring a loss of around 200 billion to the depositors and agents. The Securities Exchange Board of India barred the group from the securities market till the company was shut down.
How to prevent corporate fraud
Good corporate governance practices will essentially help to prevent the risk of fraud and corruption. To have good corporate governance the company would have intact written policies, procedures and protocols to ensure the expectations of the individuals of the company especially regarding financial reporting and compliance. Good governance provides transparency and accountability within the organisation which also helps to detect any irregularities in the activities. Through good corporate governance, the roles of the board will be divided equally, this will also help in balancing the accountability of the board members. This also provides intense robust internal controls and helps to detect the defaults in the company rapidly.
Role of technology
The technology offers several tools to prevent corporate fraud and increase good governance. Data analytics and artificial intelligence are key factors where the algorithms can learn from past data to understand fraud especially in financial frauds and also in other business operations. The decentralised mechanism of blockchain technology helps to identify patterns and anomalies which indicate fraud. Blockchain minimises fraud by creating fool-proof data for financial transactions. Digital identity verification technology facilitates a digital identity process to reduce impersonation. Cybersecurity measures like regular security audits and training on cybersecurity help to create a robust system against cyber threats. There is fraud detection software to identify irregularities and unusual behaviours that may give hints of fraudulent activities.
Recent developments in corporate fraud in India
The Securities Exchange Board of India introduced new provisions in Listing Obligations and Disclosure Requirements Regulations, 2015 (LODR Regulations, 2015) for occasions when a forensic audit is initiated, listed companies should mandatorily disclose certain information to stock exchanges. The company should inform the public that a forensic audit has taken place, the identity of the organisation and other justifications. Also, the company should submit a final forensic audit report with receipts of listed companies.
LODR (Second Amendment)Regulations, 2021
The amendments seek to enforce higher disclosure and standards of corporate governance in public listed companies. The main change in this amendment was the disclosure of fraud, default and arrests. The listed entities are now obligated to disclose any fraud or defaults by the company or subsidiary and any fraudulent activity, default, or arrest of its promoter, director, key managers or any senior management of the listed entity which has happened in India or outside India. The newly introduced compliance mandate is to increase international security requirements.
As per Regulation 30(6), a listed entity has to disclose to the exchange all the material information at the earliest and should not take more than 24 hours from the occurrence of the event or information. In case failure to disclose information or the information is made after 24 hours from the event occurred, the listed company should give an explanation for the delay along with such disclosures. These disclosures should be made within the specific timelines. The disclosure should be made as soon as possible within specific timeframes, the time period depends on the nature and origin of the event. The specified time frames are as mentioned below;
- Within 30 minutes the decision from the board of directors meeting with respect to the event should be disclosed.
- Within the next 12 hours after the event or information occurred should disclose from which listed entity it originated.
- Within 24 hours from the occurrence of the event, in cases when it did not originate from within the listed company.
Conclusion
Corporate fraud is a breach of trust which hampers the business culture and extends beyond financial malfeasance. It damages the very texture of businesses, destroys the trust of stakeholders and tarnishes the reputation of the organisations. The reason behind the surge in fraud cases is mainly due to the intense competition in the market creating an environment for unethical practices. The legislation governing fraud in India, like the SEBI Act, PMLA and Companies Act are acting rigorously to prevent malpractice. Frequently Asked Questions (FAQs)
What are specific legislative guidelines provided in SEBI, PMLA, and Companies Act regarding corporate fraud?
These legislations collectively try to prevent Corporate fraud by empowering regulatory bodies to monitor, penalise and prosecute, etc. for fraudulent activities ensuring a comprehensive approach by sustaining corporate integrity.
What is the lifting of the corporate veil?
The concept of corporate veil is a legal concept which separates the actions of a company from the actions of the shareholder. This is to protect the shareholders from being liable for the actions of the company. This also helps the court to determine whether they hold shareholders liable or not for the actions of the company.
How can technology help in easing the identification and prevention of corporate fraud?
Advancing data analytics and machine learning play a major role in identifying fraudulent companies which helps in investigations. These technologies will help to detect anomalies in corporate transactions.
Reference
- https://www.sebi.gov.in/department/corporation-finance-investigation-department-73/overview.html
- https://taxguru.in/company-law/corporate-fraud-light-sections-companies-act-2013.html#:~:text=This%20section%20of%20the%20Companies%20Act%202013%20states%20that%20if,thousand%20rupees%20or%20with%20both. .
- https://www.investor.gov/protect-your-investments/fraud/types-fraud/ponzi-scheme#:~:text=A%20Ponzi%20scheme%20is%20an,do%20not%20invest%20the%20money.
- https://taxguru.in/corporate-law/pmla-effective-framework-tackle-corporate-frauds-india.html#:~:text=The%20provisions%20of%20PMLA%20can,or%20benefit%20from%20the%20offence.
- https://corporate.cyrilamarchandblogs.com/category/white-collar-crime/
- https://www.icsi.edu/media/portals/70/6jan11.pdf
- https://www.cnbctv18.com/market/scam-1992-harshad-mehta-scam-explained-7417101.htm
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