INDIA Law and Practice Contributed by: Vijayendra Pratap Singh, Asif Ahmed, Tanmay Sharma and Bhanu Jindal, AZB & Partners
may inform the Registrar of Companies (ROC) or the Serious Fraud Investigation Office (SFIO) – ie, the statutory 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 pro - viding 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. It is important to note that the definition of abetment in India also includes engaging with one or more person(s) in any con - spiracy for committing a fraudulent act, if any act or omission takes place in pursuance of that conspiracy. Where no punishment is specifically prescribed for abetment of an offence, parties who conspire towards, assist in or facilitate such fraudulent acts are punished with the same punishment as though they had committed the intended offence. The claims for abetment would extend to situations wherein a party’s assistance towards the commission of a crime consists of receiving or harbouring fraudulently obtained assets, but only if the party had knowledge that the assets were fraudulently obtained. However, under Section 48 of the BNS, India has expand - ed extraterritorial application of the offence of abetment by making abetment outside India an offence in respect of a crime committed inside India. The Companies Act In the event that the statutory auditor of the company 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 govern - ment action for removal and may be debarred for a period of five years if they are found to be guilty of having directly or indirectly acted in a fraudulent manner, or of having colluded 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 main - tainable 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 laundering 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. It is pertinent to note that the offences of cheating, forgery of valuable security and wills, etc, are scheduled offences under the PMLA. Under the PMLA, the offence of “money laundering” has been defined very widely to include any of the following activi - ties pertaining to proceeds of crime: • acquisition; • possession; • use; • concealment; and • projection or claiming proceeds of crime as untainted property.
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