Section 447: Punishment for fraud

Companies Act, 2013 · Chapter XXIX: Miscellaneous · In force

This section is for punishing individuals guilty of fraud involving a company, with varying penalties based on the amount involved and whether public interest is affected.

Penalty

Without prejudice to any liability including repayment of any debt under this Actor any other law for the time being in force, any person who is found to be guilty of fraud, 1[involving an amount of at least ten lakh rupees or one per cent. of the turnover of the company, whichever is lower] 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:

2[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.]

The section, clause by clause

What the section says

In plain terms

provisoProvided that where the fraud in question involves public interest, the term of imprisonment shall not be less than three years.

proviso2[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.]

explanationExplanation.—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.

The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.

Amendment notes

1. Ins. by Act 1 of 2018, s. 92 (w.e.f. 9-2-2018).
2. The proviso ins. by s. 92, ibid. (w.e.f. 9-2-2018).
3. Subs. by Act 22 of 2019, s. 41, for “twenty lakh rupees” (w.e.f. 2-11-2018).

Referred to by

s. 7 Incorporation of company s. 8 Formation of companies with charitable objects, etc s. 34 Criminal liability for mis-statements in prospectus s. 36 Punishment for fraudulently inducing persons to invest money s. 38 Punishment for personation for acquisition, etc., of securities s. 46 Certificate of shares s. 56 Transfer and transmission of securities s. 66 Reduction of share capital s. 75 Damages for fraud s. 76A Punishment for contravention of section 73 or section 76 s. 86 Punishment for contravention s. 90 Register of significant beneficial owners in a company s. 140 Removal, resignation of auditor and giving of special notice s. 206 Power to call for information, inspect books and conduct inquiries s. 212 Investigation into affairs of Company by Serious Fraud Investigation Office s. 213 Investigation into company’s affairs in other cases s. 229 Penalty for furnishing false statement, mutilation, destruction of documents s. 251 Fraudulent application for removal of name s. 339 Liability for fraudulent conduct of business s. 448 Punishment for false statement

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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.