Section 447 of Companies Act, 2013 – Punishment for fraud

SECTION 447. PUNISHMENT FOR FRAUD

[Effective from 12th September, 2013]

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 [involving an amount of at least ten lakh rupees or one per cent. of the turnover of the company, whichever is lower] [1], shall be punishable with imprisonment for a term which shall not be less than six months but which may 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.

[Provided further that where the fraud involves an amount less than ten lakh rupees or one per cent. of the turnover of the company, whichever is lower, and does not involve public interest, any person guilty of such fraud shall be punishable with imprisonment for a term which may extend to five years or with fine which may extend to [3] [fifty lakh rupees] or with both.] [2]

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.

 

Applicable Rules

Companies (Adjudication of Penalties) Rules, 2014

[Effective from 1st April, 2014] 

2. Definitions.—(1) In these rules, unless the context otherwise requires,—

(a)    “Act” means the Companies Act, 2013 (18 of 2013);

(b)    “Annexure” means the Annexure enclosed to these Rules;

(c)    “Fees” means fees as prescribed in the Companies (Registration Offices and Fees) Rules, 2014;

(d)    ”Form” or “e-Form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;

(e)    “Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;

(f)    “section” means section of the Act;

(2) Words and expressions used in these rules but not defined, and defined in the Act or in the Companies (Specification of definitions details) Rules, 2014 shall have the meanings respectively assigned to them in the Act or in the said Rules.

Companies (Miscellaneous) Rules, 2014

[Effective from 1st April, 2014] 

2. Definitions.—(1) In these rules, unless the context otherwise requires,—

(a)    “Act” means the Companies Act, 2013 (18 of 2013);

(b)    “Annexure” means Annexure enclosed to these Rules;

(c)    “Fees” means fees as prescribed in the Companies (Registration Offices and Fees) Rules, 2014;

(d)    ”Form” or “e-Form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;

(e)    “section” means section of the Act;

(2) Words and expressions used in these rules but not defined, and defined in the Act or in the Company (Specification of definitions details) Rules, 2014 shall have the meanings respectively assigned to them in the Act or in the said Rules.

[1] Inserted by the Companies (Amendment) Act 2017 vide Notification No. File No. 1/1/2018-CL.I dated 9th February, 2018.

[2] Inserted by the Companies (Amendment) Act 2017 vide Notification No. File No. 1/1/2018-CL.I dated 9th February, 2018.

[3] Substituted for the words “twenty lakh rupees” by The Companies (Amendment) Ordinance, 2019 dated 12th January, 2019 effective from 2nd November, 2018.