INDIA Law and Practice Contributed by: Vijayendra Pratap Singh, Asif Ahmed, Bhanu Jindal and Jitesh Lakra, AZB & Partners
crime by receiving or harbouring fraudulently obtained assets, provided that the party had knowledge that the assets were fraudulently obtained. Further, under Section 48 of the BNS, India has expanded extrater - ritorial application of abetment by making abetment outside India an offence where a crime is committed inside India. The Companies Act Where the statutory auditor fails to perform their duties or does not detect fraud despite it being brought to their notice, the auditor may face various actions, such as: • a class action for disgorgement; • regulatory action, including disbarment; and • criminal prosecution for fraud or abetment of fraud. In addition to other actions, they may also be removed from their position through a government action and debarred for up to five years if found guilty of having directly or indirectly acted in a fraudulent manner or colluding in a fraud by the company, its officers or its directors. In a landmark ruling in 2023 – Union of India v Deloitte Haskins and Sells LLP , reported in (2023) 8 SCC 56 – the Supreme Court of India held that an action seeking removal and debarment under Section 140 (5) of the Companies Act is maintainable even against statutory auditors who had resigned prior to such action being instituted. The Prevention of Money Laundering Act, 2002 (PMLA) The PMLA penalises the offence of money launder - ing per se, when such offence involves proceeds of crime in relation to a specified or scheduled offence – ie, offences listed in the Schedule to the PMLA. The existence of such predicate offence is a sine qua non for initiation of proceedings under the PMLA. Notably, offences such as cheating, forgery of valuable secu - rity and wills, etc, are scheduled offences under the PMLA. Under the PMLA, “money laundering” is defined very widely to include any of the following activities per - taining to proceeds of crime: • acquisition;
• possession; • use; • concealment; and • projection or claiming proceeds of crime as untainted property. These activities are independent of each other and are to be read disjunctively. Further, the definition covers not only persons direct - ly involved in any of the aforesaid activities but also those who indirectly or directly attempt to indulge in, or assist in, such activities. In other words, the PMLA criminalises not only an overt act of money laundering but also any attempt to commit it. The PC Act Under the PC Act, abetment of an offence under the Act by either a private person or a government official is punishable, whether or not the offence was commit - ted as a consequence of that abetment. 1.4 Limitation Periods In India, the Limitation Act, 1963 (the “Limitation Act”) provides that the period of limitation in the case of fraud commences from the time the fraud is actually discovered, or could have been discovered using rea - sonable measures by the victim. However, where the fraud is continuing, a fresh period of limitation begins to run at every moment of the time during which the fraud continues. Criminal Proceedings In general, the limitation period for an offence is dependent on the period of imprisonment prescribed for that offence. For example, where an offence is punishable with imprisonment for up to three years, a complaint must be filed within three years from the commission of the offence. In cases involving fraudu - lent acts, the limitation period would depend on the specific offence. Criminal courts also have inher - ent powers to condone delay where it is properly explained or where doing so serves the interests of justice. Additionally, no limitation period is prescribed for offences punishable with imprisonment exceeding three years. Accordingly, complaints for offences such
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