INDIA Law and Practice Contributed by: Vijayendra Pratap Singh, Asif Ahmed, Tanmay Sharma and Bhanu Jindal, AZB & Partners
1. Fraud Claims 1.1 General Characteristics of Fraud Claims Fraud has been expressly defined in various statutes such as the Companies Act, 2013 (the “Companies Act” ) and the Indian Contract Act, 1872 (the “Contract Act” ). However, in all cases, a basic characteristic of fraud claims is that there
form of “cheating” where someone, by deceitful or fraudulent means, induces a person to deliver a property to themselves. On the other hand, where a person has been entrusted with this property and dishonestly or illegally misappro - priates or converts it for their own use or benefit, this comprises the offence of “criminal breach of trust” . However, the BNS, under Section 111(1) (Expla - nation ii), has for the first time introduced the offence of “economic offence” as a part of a definition of a larger offence – namely, “organ - ised crime” . Here “economic offence” has been expansively defined to include offences such as criminal breach of trust, forgery, counterfeiting of currency notes, bank notes and government stamps, hawala transactions, mass marketing fraud or running any scheme to defraud sev - eral persons or doing any act which is meant to defraud any bank, financial institution or any other institution, for obtaining monetary benefit in any form. It is to be noted that not only the commission of a fraudulent act per se but also any agreement or conspiracy to enter into a fraudulent act, entered into by two or more persons, is penalised under the BNS, regardless of whether actual fraud is committed. There is a more nuanced definition of fraud in the Securities and Exchange Board of India (Prohi - bition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, made under the Securities and Exchange Board of India Act, 1992 (the “SEBI Act” ), which deals with fraud committed while dealing in securi - ties. 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
must be an intention to: • deceive another person; • take undue advantage of them; or • injure their interests.
Generally, a dishonest concealment of facts amounts to fraud as much as overt actions or the making of false statements. Specifically, under the Companies Act, an abuse of position with intent to deceive is also covered under fraud. The Companies Act also does not require the occurrence of loss to set up a case of fraud. In 2023, the Indian Parliament enacted a new penal statute – Bharatiya Nyaya Sanhita 2023 (BNS) – and repealed the existing pre-colonial Indian Penal Code 1860 (IPC). Similarly, the erstwhile Code of Criminal Procedure 1973 has also been repealed and replaced by a new stat - ute – Bharatiya Nagarik Suraksha Sanhita 2023 (BNSS). Both the BNS and BNSS came into effect from 1 July 2024. The BNS, like its predecessor statute the IPC, does not define fraud as a distinct offence. It only provides for fraudulent intention as an ingredient of various specific offences. The BNS defines “fraudulently” to mean with an intent to defraud. Dishonest misappropriation of property, or dis - honest conversion of property for one’s own use, is also a penal offence. This offence takes the
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