INDIA Law and Practice Contributed by: Vijayendra Pratap Singh, Asif Ahmed, Bhanu Jindal and Jitesh Lakra, AZB & Partners
“SEBI Act”), which deals with fraud committed while dealing in securities. This definition includes any act, expression, omission or concealment committed, whether in a deceitful manner or not, by a person while dealing in securities, in order to induce another person or their agent to deal in securities, whether or not there is any wrongful gain or avoidance of any loss. 1.2 Causes of Action After Receipt of a Bribe The Prevention of Corruption Act, 1988 (the “PC Act”) Paying illegal gratification (bribes) to a public or a gov - ernment official is punishable under a special stat - ute – the Prevention of Corruption Act (the “PC Act”). The PC Act penalises a government servant as well as any person or organisation (including its officers) who gives any illegal gratification to a public official to obtain a benefit. The term “gratification” is used very broadly under the Act, and includes getting any undue advantage, whether pecuniary or otherwise. Likewise, “public servant” has been defined broadly to include officials working in corporations controlled or aided by the government, and anyone performing a public duty (such as bank officials, irrespective of whether they are employed by the government). There is no de minimis standard for the quantum that would qualify as a bribe. In order to prove the offence of bribery, the prosecution has to prove: • the demand of a bribe by the public servant or the offer to pay a bribe by a person; and • the acceptance or obtainment of the illegal grati - fication, either through direct or circumstantial evidence. Claims relating to bribery in India can be brought against public servants and can also lie against per - sons or organisations who bribe or attempt to bribe such public servants. Receipt of a bribe by an agent of a claimant in general is also punishable under the PC Act where such bribe has been received to induce a public servant to perform their public duty improperly or dishonestly. The Companies Act Under the Companies Act, it is the directors’ respon - sibility to create adequate internal financial controls
to prevent and detect fraud and other irregularities within a company. Such internal controls include the setting-up of channels for reporting the receipt of a bribe by an agent. In the event of a failure to do so, the stakeholders may avail of various recourses under the Companies Act, including: • prosecution for fraud; • an action for disgorgement pursuant to a class action (in the case of egregious default); or • an action for oppression and mismanagement. A statutory auditor of the company is obligated to report fraud to the audit committee or the board of directors. Where the suspected fraud exceeds INR1 crore, the auditor must also report such to the central government, after giving the audit committee or the board of directors (as the case may be) an opportu - nity to respond. Failure to do so exposes the auditor to various legal liabilities, as explained in 1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts . The company may also pass a special resolution that its affairs are required to be investigated and may inform the Registrar of Companies (ROC) or the Seri - ous Fraud Investigation Office (SFIO) – ie, the statu - tory corporate fraud-investigating agency constituted under the Companies Act. 1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts The BNS In India, abetment of an act is defined as providing any instigation or aid to facilitate the commission of an offence and is a punishable act in itself, regardless of whether the intended offence is committed. The defi - nition of abetment also includes engaging with one or more person(s) in a conspiracy for committing a fraudulent act, if any act or omission occurs in pursu - ance of that conspiracy. Where no specific punishment is prescribed for abet - ment, persons who conspire towards, assist in, or facilitate such fraudulent acts are punished with the same punishment as though they had committed the intended offence. Claims of abetment also extend to situations where a party assists in the commission of a
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