Relevant Provisions and Enforcement Mechanism for Section 36 of Companies Act

Section 447 and explain the complaint, investigation, and prosecution process. Section 36 Of Companies Act 2013 | RegisterKaro

“Section 447 of the Companies Act, says Punishment for fraud:

 “The criminal Liability held under “Section 447, says Punishment for fraud.— 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 six months but which may 222 extend to ten 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 three times the amount involved in the fraud: Provided that where the fraud in question involves public interest, the term of imprisonment shall not be less than three years. Explanation.—For the purposes of this section—

(i) ―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 or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss; 

(ii) ―wrongful gain‖ means the gain by unlawful means of property to which the person gaining is not legally entitled; 

(iii) ―wrongful loss‖ means the loss by unlawful means of property to which the person losing is legally entitled.”

Section 447 provides the punishment for fraud and the offence committed under this can be non-compoundable in case of companies intersecting with Section 420 of IPC, 1860 and it is applicable for all persons involved in fraudulently inducing persons to invest money. Punishment for the offence may extend from 7 to 10 years and penalty up to 3 times the amount due. 

The Companies Act, 2013 has classified certain offences as similar to criminal offences under the Code of Criminal Procedure (Cr. PC) which are covered under cognizable and non-bailable and thus under Cr PC underneath to promoters, directors, managers, officers, and other key managerial employees. It is important to understand the various definitions and their subsequent consequences so that these issues can be used carefully and cautiously if they are in control.