Strengthening of enforce mechanism to deal with corporate frauds is an evolving process as aspects of fraud touch upon many jurisdictions. Based on the experience gained over the experience gained over the years, the existing provisions regarding inspection, enquiry and investigation are proposed to be strengthened in the Companies Bill 2011, introduced in the current session of Parliament. It provides for more effective action against companies (and their officers) who indulge in fraudulent actions of non compliance with Law. The role of Key Managerial Personnel, Board Committees (Audit Committee, Remuneration Committee and Stakeholders Relationship Committee), Independent Director and auditors is being made more accountable in the management of company. The definition of ‘officer in default’ is also to be proposed to be revised to make it more relevant in the resent corporate and economic environment.
Though fraud is not explicitly defined in the existing Companies Act there are offences in IPC which include aspects relating to fraud. Frauds of various types like falsification of financial statements through overstatement of assets/ understatement of liabilities, diversion of funds in Project financing, over/under invoicing and capital market, including criminal breach of trust, misappropriation of funds/assets etc. under the IPC have been reported by the SFIO in various cases investigated by it and cases against such companies are being pursued before the concerned courts, under provisions of relevant Act.
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