How to deal with corporate frauds in India: from accounting frauds to insider trading

Learn more about corporate fraud, its socio-economic impact, relevant statutes, and practical steps to detect and prevent it. Whether you are a law student, a lawyer, or an investor, this is your guide to tackling corporate fraud in India.

Introduction

“Welcome to our chambers. I see you are settling in well with that slightly intimidating stack of case files. Before you dive into those, grab a cup of coffee and sit down for a chat”, said Adv. Chatterjee, a reputed mid-level counsel practising at the High Court of Calcutta, welcomed Saksham, a new joinee at this chamber. 

He went on, “You know how on most mornings I come in murmuring about some new financial scandal in the news? Yesterday, it was another multi-crore banking fraud; last week, it was some listed company cooking its books, by that I mean falsifying its financial records. You have probably wondered why I get so worked up about these headlines, right?”. 

Well, here is the thing: corporate fraud is not just something we read about in newspapers over our morning tea. It is the bread and butter of what we deal with here. Every other case that lands on our desk has some element of financial manipulation, insider trading, or good old-fashioned embezzlement. And trust me, after five years in this field, I have seen patterns that would make your head spin.

But here is why this should matter to you beyond just our case load: every single one of these scams affects real people. Your parents’ mutual fund returns? That company they invested in might be cooking numbers. The startup your friend joined? They might be paying ghost employees. Even your tax money ends up bailing out banks that fell for elaborate fraud schemes.

So today, I want to walk you through the world of corporate fraud in India. No legal jargon, no lectures, just real stories from cases I have worked on, patterns I have spotted, and practical information you need to know to understand and navigate corporate frauds. 

Ready? Let us dive into the not-so-impressive side of the boardrooms. 

What is corporate fraud?

Alright, so before we get into the details, let me explain what we are actually discussing here.

Imagine you are playing a board game with friends. Everyone knows the rules, everyone’s trying to win fair and square. But then there is that one person who secretly moves their piece extra spaces when no one’s looking, hides money under the board, and maybe even changes the rules mid-game to benefit themselves.

That is essentially corporate fraud, but instead of a board game, it’s a business, and instead of losing pocket money, we are talking about crores of rupees and thousands of jobs.

Corporate fraud happens when people inside a company, be it a CEO or an accounts manager, deliberately deceive stakeholders for personal gain. It is not an honest mistake or a business decision that went wrong. It is a calculated and intentional act, and it almost always involves covering tracks.

The goal? Usually one of these: steal money, mislead investors, dodge taxes, make the company look more profitable than it is, or protect their own interests, often at the expense of shareholders, employees, customers, or even taxpayers like you and me.

And it usually starts small and quiet, happening behind closed boardroom doors. But it almost always ends with massive losses, years of litigation (thankfully), and reputations destroyed beyond repair.

What are the types of corporate fraud?

Now, let me walk you through the different types of fraud we encounter. I will share some stories from cases I have worked on, names changed for confidentiality,  but the situations are real.

1. Accounting fraud

Let me provide you with a classic example of accounting fraud.

Picture this: BrightTech Ltd. was a software development company. The company was doing okay, but their last quarter was moving slower than the file at the government office. You know how it is, the market is not the same every quarter, some clients leave, the usual stuff.

But here is where it gets interesting. Instead of being honest with their investors about the temporary rough patch, the management chose a path to get “creative” with their numbers. And by creative, I mean fraudulent.

Here is what they did, and I want you to pay attention because this pattern shows up everywhere:

1. BrightTech creates fake sales invoices for software licenses that were never actually sold. We are talking about invoices worth crores for companies that either did not exist or never bought anything from them.
2. They recorded these sales as actual revenue in their books. Suddenly, their quarterly reports showed profits through the roof and revenue growth that made investors confident enough to pour in more money.
3. Banks saw these impressive numbers and approved bigger loans. 

However, the reality was, no actual money came in. Those “customers” were either shell companies or completely fictional. When auditors started digging, they found this massive gap between reported income and actual cash flow.

Real-world examples

In 2009, Ramalinga Raju of Satyam Computer Services admitted to falsifying over Rs. 7,000 crore in cash and assets. He created fake bank statements, invented clients that didn’t exist, and inflated the company’s balance sheet for years. It shook the entire IT sector and changed the way we view corporate governance in India.

More recently, DHFL pulled off an even more elaborate scheme. They created 2,60,000 fake home loan accounts and siphoned off Rs. 34,615 crore through 87 shell companies. The promoters were basically running a parallel banking system to hide their losses and mislead everyone, from regulators to investors. 

2. Payroll fraud

This one is my favourite to explain because I learned about it in the most unexpected way.

Back when I was in school, I must have been around 12, I had this classmate who was in charge of lunch distribution. We had 30 students in our section, but every day he would tell the delivery guy there were 31. He invented this fake student called “Ranbir Kapoor”, and every day, an extra lunch box would arrive. My friend would quietly pocket it, and since “Ranbir” never missed school or complained about his lunch, no one suspected anything.

Years later, when I first encountered a payroll fraud case, I had this enlightening moment. It is the same principle, just on a corporate scale with much higher stakes!

Here is how it typically works in the corporate world:

Ghost employees: A payroll manager creates fake employees in the system, complete with fake IDs, bank accounts, and attendance records. These workers never miss a day, never take sick leave, and their salaries go directly into accounts controlled by the fraudster.

Overtime manipulation: Employees collude with managers to falsify timesheets, claiming overtime hours they never worked. Or they clock in for each other to inflate their working hours.

Wage inflation: HR managers bump up certain employees’ salaries in the system and split the extra money with them.

Real-world example

I came across this case recently where an HR manager in China created 22 fake employees and ran this scam for eight years. He embezzled over 16 million yuan (approx. Rs. 18 crore) by maintaining fake attendance records and diverting salaries to his own accounts. The manager was caught only when someone noticed that one of the “perfect attendance” employees had never been seen in the office. He is now sentenced to imprisonment of over 10 years. 

3. Procurement fraud

Now this is where things get interesting, and I have seen this pattern in multiple cases. Let me talk about Angel, a procurement manager at Skyline Construction Pvt. Ltd. 

Angel’s job was to choose the best vendors for cement, steel, machinery, basically everything needed to build buildings. But she saw an opportunity to build her wealth while she was at it.

Here is how she designed the scheme:

Step 1: Creation of a shell company 

Angel convinced a friend to set up a fake company, which we call a shell company. On paper, it looks all legitimate with proper registration, letterheads, the works. But in reality? It was just a front desk with no actual business operations.

Step 2: The fake contracts 

Angel started approving contracts with this shell company for materials that were severely overpriced or failed to be delivered at all. She would create purchase orders for 100 bags of cement, pay for them, but only 70 would actually arrive. The difference? Pure profit for her network.

Step 3: Bid rigging 

For legitimate vendors, Angel would share confidential information about competitors’ bids. She would tell her friend at the shell company to bid Rs. 49 lakhs when Skyline’s regular vendors are bidding Rs. 50 lakhs. This way, she could control who won contracts.

Step 4: The kickbacks 

In return for these favours, winning vendors would give Angel kickbacks, which means cash payments, expensive gifts and sometimes even foreign trips, all under the table, of course.

Such frauds are hard to detect initially. It is only when someone does a detailed audit comparing market rates, delivery records, and vendor backgrounds that the fraud unravels.

Real-world example: 

During the Commonwealth Games 2010 in Delhi, officials were found guilty of kickbacks and overbilling on a massive scale. Contracts were awarded to favoured vendors at inflated prices, fake invoices were used to siphon public funds, and the entire incident became a national embarrassment. It showed how procurement fraud can happen even at the highest levels of government projects.

4. Asset misappropriation

Continuing with Angel’s story, because why stop at procurement fraud when you can diversify your criminal portfolio?

An internal audit eventually flagged some discrepancies in vendor deliveries and suspicious expense reimbursements. When a full investigation was carried out, Angel was found systematically stealing from the company in multiple ways:

Cash theft: Skyline sometimes received cash payments from small subcontractors or when it sold scrap materials. Angel would record these payments as smaller amounts than what was received. For example, if they received Rs. 1,00,000 in cash, she would record it as Rs. 80,000 and pocket the Rs. 20,000 difference. She continued this for over 5 years, imagine how much she would have accumulated?! 

Inventory theft: This was particularly clever. Angel would approve purchase orders for, say, 50 steel rods. But she had colluded with some vendors to deliver only 45 to the company site while diverting 5 to her cousin’s private construction project. The company paid for 50, received 45, and no one initially noticed the shortage because the paperwork showed full delivery.

Intellectual property theft: It was time for her to leave. But before leaving the company, Angel copied confidential information onto USB drives, supplier pricing lists, construction designs, project blueprints, and client contact databases. She later sold this information to competing firms, helping them underbid Skyline on government tenders.

Expense fraud: Angel took a personal vacation to Pondicherry with her family but submitted it as a “vendor site visit” for reimbursement. She used inflated taxi receipts and hotel bills, and fabricated meal expenses to claim Rs. 60,000 from the company for a family holiday.

Real-world example

The most famous case of asset misappropriation in India is that of Vijay Mallya and Kingfisher Airlines. Mallya was accused of diverting Rs. 9,000 crore in bank loans meant for airline operations to personal accounts, shell companies, and overseas entities. Instead of using the money to keep the airline running, he funded his lavish lifestyle and other business ventures. 

5. Insider trading

Let me simplify this with a recent case I worked on.

Meet Raj, who worked as a company secretary at ABC Ltd., a publicly listed company. As company secretary, Raj was privy to board meetings, strategic discussions, and confidential corporate decisions before they became publicly available.

One day, during a board meeting, Raj learned that ABC Ltd. was about to acquire a financially strong skincare startup. This was big news because the acquisition was expected to boost ABC’s stock price significantly as the startup had amazing growth potential and would expand ABC’s market reach.

Here is where Raj made a mistake: instead of keeping this information confidential as required by his position, he decided to make some quick money. Before the acquisition announcement was made public, Raj purchased a large quantity of ABC’s shares using his account. He even had his wife buy shares using her account.

When the acquisition was officially announced a week later, ABC’s stock price jumped by 30%. Raj immediately sold all his shares, making a substantial profit of several lakhs.

The problem? Raj had used material, price-sensitive, and non-public information to make this profit. This is textbook insider trading, and it is completely illegal.

SEBI’s surveillance systems flagged the unusual trading activity around the announcement date. They noticed that certain individuals, including Raj, had made significant purchases just before the news broke and sold immediately after. When they investigated, they found the connection between Raj’s position at the company and his trading pattern.

Real-world example 

In 2016, promoters and executives of Ranbaxy Laboratories were accused of insider trading related to the company’s merger with Sun Pharmaceutical Industries. The accused allegedly traded in Ranbaxy shares based on confidential information about merger negotiations. Some of them made significant profits by buying shares before the merger announcement and selling them after the stock price increased.

Impacts of corporate fraud

Now that you understand how these frauds work, let me tell you why they matter beyond just our case files.

1. Financial losses

Remember the Satyam scam I mentioned earlier? When Ramalinga Raju admitted to falsifying the company’s books, the impact was immediate and devastating. Overnight, the company lost $1.47 billion in market value. Think about that for a second, $1.47 billion gone in a day because investors realised they could not trust the numbers they had been seeing for years.

But here is what really hits: if you were an investor who put your hard-earned money into Satyam shares, thinking you were buying into a solid IT company, you would have lost a significant portion of your investment overnight. Your retirement fund, your children’s education savings, your dream house fund, all gone in a moment.

Here is a tip for you, which I strongly practice: the moment you get such a case, read up its annual reports critically. If you see a company showing massive profits but its cash flow statement shows very little actual cash coming in, that’s a red flag. This is something I use for making investment decisions, too. 

2. Loss of reputation

In the corporate world, reputation is everything. Once it is damaged, rebuilding takes decades, if it is even possible.

Take, for instance, IL&FS (Infrastructure Leasing & Financial Services). This was once considered a blue-chip company, a reliable infrastructure lender that everyone trusted with their money. When they started defaulting on payments in 2018, it exposed years of mismanagement and fraudulent practices.

But here is the ripple effect that most people don’t notice: even companies that had nothing to do with IL&FS but were in the same sector started coming on the radar and were getting scrutinised. Banks became wary of lending to infrastructure companies. The entire non-banking financial company (NBFC) sector faced a credibility crisis.

You might have heard of our clients, AFPL Housing Finance Ltd., and MKL Housing Finance limited. So both these companies run legitimate businesses, but during the phase of the IL&FS scam, their loans could not get approved because lenders were suspicious about the entire sector. That is the power of reputation damage. 

3. Legal trouble

When fraud gets exposed, the legal machinery kicks into high gear, and trust me, it is not pretty for anyone involved.

Companies end up spending years in court, paying exorbitant legal fees (which, admittedly, keep lawyers like us busy), dealing with regulatory investigations, and paying hefty fines. In the worst cases, executives end up behind bars.

I have seen companies spend more money on legal fees fighting fraud cases than they lost to the actual fraud. Many companies now have anonymous whistleblower channels specifically because they have learned it is better to catch fraud early than deal with the legal aftermath later.

4. The employee fallout

Here is something that really bothers me about corporate fraud: it is not just the big shots who suffer. The ripple effect usually hits innocent employees the hardest.

After the Satyam scandal, the employees who had absolutely no idea what was happening in the boardroom faced layoffs, career setbacks, and everyone looked at them suspiciously. 

These employees lost their jobs, their career momentum, and often faced financial hardship without a fault of their own fault. Seems unfair, right?

5. Market shockwaves

Corporate fraud does not happen in isolation, it sends shockwaves through entire markets and sectors.

In 2018, Punjab National Bank was hit by fraud worth approximately Rs. 11,400 crore involving fake guarantees and letters of undertaking. PNB’s stock did not just fall by 10%, it caused a panic across the entire Indian banking sector. Investors started questioning the internal controls of all public sector banks. Banking stocks across the board fell, which led to tighter regulations for the entire sector.

During times like these, it becomes crucial to follow credible financial journalists and stay alert to early warning signs. 

Which statutes deal with corporate fraud in India?

Now, let me walk you through the legal framework we work with. As a new lawyer in this field, you need to understand which laws apply to different types of fraud:

A. Primary corporate fraud laws

1. Companies Act, 2013 (Section 447)

• Covers: All forms of corporate fraud, including false statements, concealment of facts, destruction of records, and false accounting entries
• Powers: SFIO can investigate, arrest, and prosecute complex corporate frauds

2. Bharatiya Nyaya Sanhita, 2023

• Covers: Criminal fraud, cheating, breach of trust, document forgery
• Section 318: Cheating 
• Section 409: Criminal breach of trust by corporate officers 
• Section 61: Criminal conspiracy is often combined with fraud charges

3. Prevention of Money Laundering Act, 2002

• Covers: Laundering proceeds of corporate fraud, concealment of crime proceeds
• Powers: The Enforcement Directorate can attach and forfeit assets
• Special provision: Corporate entities face dissolution for money laundering violations. 

B. Securities market fraud laws

1. Securities and Exchange Board of India Act, 1992

• Covers: Market manipulation, insider trading, fraudulent transactions
• Section 12A: Monetary penalties up to ₹25 crores or 3 times unlawful gains
• Powers: SEBI can impose civil penalties, disgorgement orders, and criminal prosecution referrals

2. SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003

• Covers: Manipulative trading, false statements, fraudulent schemes affecting securities
• Mandatory: Listed companies must maintain proper disclosure standards
• Violations: Trading bans, monetary penalties, criminal prosecution

3. SEBI (Prohibition of Insider Trading) Regulations, 2015

• Covers: Trading on unpublished price-sensitive information
• Mandatory: Code of conduct for designated persons, disclosure requirements
• Penalty: Disgorgement of profits plus penalty up to Rs. 25 crores

C. Banking and financial fraud laws

1. Banking Regulation Act, 1949

• Covers: Banking fraud, false loan applications, misappropriation of funds
• Powers: RBI can impose penalties, cancel banking licenses
• Mandatory: Banks must report frauds exceeding Rs. 1 lakh to the RBI

2. Prevention of Corruption Act, 1988

• Covers: Corporate fraud involving public officials, bribery in government contracts
• Powers: CBI and state anti-corruption bureaus can investigate and prosecute
• Enhanced punishment: Stricter penalties for corruption involving public servants

Whom to approach with a complaint of corporate fraud? 

A. When to approach the SFIO (Serious Fraud Investigation Office)

• Complex corporate frauds involving public interest
• Listed company violations under the Companies Act, 2013
• Cases involving frauds exceeding ₹10 crores
• Shell company operations and money routing
• Corporate governance violations
• Contact: https://sfio.gov.in/ or Regional offices in Delhi, Mumbai, Chennai, Kolkata

B. When to approach SEBI

• Securities market manipulation and insider trading
• Listed company disclosure violations
• Fraudulent investment schemes involving securities
• Mutual fund and portfolio management fraud
• Market rigging and price manipulation
• Contact: https://www.sebi.gov.in/ or SEBI regional offices

C. When to approach CBI

• Multi-state corporate fraud operations
• Banking frauds involving public sector banks
• Corruption involving public officials in corporate deals
• Cases referred by the Central Government
• High-profile corporate scandals with national impact
• Contact: CBI headquarters or regional offices

D. When to approach the Enforcement Directorate (ED)

• Money laundering aspects of corporate fraud
• Foreign exchange violations (FEMA)
• Asset recovery and attachment are required
• Hawala transactions and offshore routing
• Corporate fraud with international connections
• Contact: ED regional offices based on jurisdiction

 E. When to approach the RBI

• Banking sector frauds and violations
• NBFC (Non-Banking Financial Company) frauds
• Payment system irregularities
• Cooperative bank frauds
• Frauds exceeding the Rs. 1 lakh threshold in banking
• Contact: RBI regional offices or Banking Ombudsman

F.  When to approach the Income Tax department

• Corporate tax evasion and TDS fraud
• Bogus billing and fake invoice schemes
• Undisclosed income and benami transactions
• Transfer pricing manipulations
• Corporate shell companies for tax avoidance
• Contact: Income Tax offices or the online portal

G. When to approach the Economic Offences Wing (EOW)

• State-level financial frauds exceeding Rs. 3 crores
• Investment scams and Ponzi schemes
• Real estate and land fraud
• Chit fund and deposit collection fraud
• Multi-level marketing frauds
• Contact: State police EOW units

H. When to approach the local police

• General criminal fraud under BNS provisions
• Smaller value frauds (below Rs. 3 crores)
• Immediate criminal action is required
• Document forgery and cheating cases
• When other agencies decline jurisdiction
• Contact: Local police stations with economic crime cells

1. When to approach the Registrar of Companies (ROC)

• Company law compliance violations
• False filings and document submissions
• Director disqualification matters
• Share transfer irregularities
• Non-compliance with statutory requirements
• Contact: ROC offices based on the company registration

What should be your pre-complaint strategy to report corporate fraud?

Before initiating any reporting process, conduct a thorough preliminary assessment:

A. Evidence collection protocol:

• Secure original documents, emails, and digital records immediately
• Create forensic copies of electronic evidence with proper chain of custody documentation
• Identify and preserve witness statements with signed affidavits
• Document financial irregularities with supporting bank statements, invoices, and accounting records
• Photograph physical evidence and maintain detailed logs

B. Legal risk assessment:

• Evaluate potential defamation claims and ensure evidence substantiates fraud allegations
• Consider client confidentiality obligations and attorney-client privilege protections
• Assess the statute of limitations for different types of fraud claims
• Review employment contracts for restrictive covenants that may affect whistleblowing. 

How to report corporate fraud in India

As a lawyer, you will often be the first person clients approach when they suspect fraud. Here is your phase-wise practical guide for the reporting process:

Phase 1: Internal reporting mechanisms

A. Whistleblower policy compliance:

• Review the company’s whistleblower policy thoroughly, these vary significantly across organisations. 
• Identify the designated vigil officer or audit committee contact details (usually disclosed in annual reports)
• Determine whether anonymous reporting is permitted and advisable given the client’s circumstances
• Document all internal reporting attempts with timestamps and acknowledgement receipts
• Follow up systematically if no response is received within policy-specified timeframes (typically 30-45 days)

B. Key considerations:

• Internal reporting may trigger document destruction or witness intimidation
• Consider simultaneous external reporting for serious fraud involving senior management
• Preserve all correspondence with internal committees for potential regulatory submissions

Phase 2: Regulatory authority engagement

A. Ministry of Corporate Affairs (MCA) 

1. When to approach:

• Companies Act violations (section 447)
• Director disqualification matters
• Non-compliance with statutory requirements
• Falsification of books of accounts

2. Practical filing process:

• Use the MCA21 portal’s complaint section
• Attach supporting documents in PDF format (maximum 10MB per file)
• Include specific sections violated and supporting legal precedents
• Request an inspection under Section 206 if a books of accounts examination is needed
• Timeline: MCA typically responds within 60-90 days for preliminary assessment. 

B. Serious Fraud Investigation Office (SFIO), in case of complex frauds

1. Threshold criteria:

• Frauds exceeding Rs. 1 crore (though discretionary for smaller amounts with public interest)
• Involvement of public sector undertakings
• Market manipulation affecting listed securities
• Complex multi-jurisdictional schemes

2. Strategic approach:

• Submit a detailed complaint with an executive summary highlighting public interest elements
• Include forensic analysis reports if available
• Provide witness contact details for potential interviews
• SFIO has powers similar to a civil court for evidence gathering
• Timeline: Initial assessment within 3-6 months, investigation may extend 2-3 years

C. Securities and Exchange Board of India (SEBI) – capital market frauds

1. SCORES platform navigation:

• Create investor login credentials
• Select the appropriate complaint category (insider trading, price manipulation, disclosure violations)
• Upload supporting documents with proper indexing
• Track complaint status through a unique registration number
• SEBI provides status updates every 30 days

2. Specialised reporting categories:

• Insider trading violations
• Market manipulation and fraudulent trading practices
• Disclosure norm violations by listed companies
• Mutual fund and portfolio management irregularities

Phase 3: Law enforcement integration

A. Criminal complaint strategy:

1. Local police (cognizable offences):

• File FIR against offences such as cheating, criminal breach of trust and forgery under Bharatiya Nyaya Sanhita 2023. 
• Request an investigation by the specialised economic crimes unit

2. Economic Offences Wing (EOW):

• Approach for frauds exceeding Rs. 25 lakhs
• Submit a complaint with a financial impact analysis
• Include bank account details for transaction tracing
• EOW has specialised forensic capabilities and interstate coordination

3. Central Bureau of Investigation (CBI):

• Required for public sector undertaking frauds exceeding Rs. 50 lakhs
• Inter-state or international fraud elements
• Submit through the state government or the high court reference
• Include jurisdictional analysis for multi-state operations

4. Enforcement Directorate (ED) in case of money laundering:

• File complaints for proceeds of crime under the Prevention of Money Laundering Act
• Include asset identification and beneficial ownership analysis
• ED can attach and confiscate fraud proceeds
• Coordinate with SFIO/CBI investigations for a comprehensive approach

Phase 4: Anti-corruption framework

A. Central Vigilance Commission (CVC):

• Public sector corruption cases
• Use the PIDPI mechanism for informant protection
• Submit through a secure online portal with encryption
• CVC coordinates with departmental vigilance units

B. State Vigilance Commissions:

• Local public sector irregularities
• Follow state-specific procedures and thresholds
• Coordinate with state anti-corruption bureaus

Final thoughts

You see, tackling corporate fraud in India requires a multi-dimensional approach. We have solid legal frameworks, namely the Companies Act, the Bharatiya Nyaya Sanhita, SEBI regulations, the PMLA, and specialised anti-corruption laws, which provide comprehensive coverage.

However, the real challenge lies in timely detection and strict enforcement. The most sophisticated legal framework is useless if frauds are not caught early or if enforcement is weak.

What gives me hope is seeing how technology is changing the game. AI-powered fraud detection, blockchain for transparent transactions, and digital audit trails are making it much harder for fraudsters to operate undetected.

For companies, the key is building a culture of ethical accountability. It is not enough to have policies on paper, you need employees who feel safe reporting misconduct, systems that catch irregularities early, and leadership that takes fraud prevention seriously.

As lawyers in this field, we play a crucial role not only in prosecuting fraud after it occurs, but also in helping companies establish rock-solid preventive mechanisms. Every case we handle, every compliance program we help design, and every whistleblower we protect contributes to creating a corporate environment where fraud becomes not just punishable, but preventable.

FAQs

1. Can a whistleblower remain anonymous in India? 

Yes, many companies allow anonymous reporting through their whistleblower portals. SEBI’s SCORES platform and the Central Vigilance Commission’s PIDPI mechanism also provide confidentiality protections.

2. Can auditors be held liable for corporate fraud? 

Absolutely. If auditors fail to detect or report fraud despite clear accounting discrepancies, they can face penalties under section 132 of the Companies Act. The National Financial Reporting Authority (NFRA) has the power to debar auditors and impose significant fines.

3. Is cyber fraud considered corporate fraud? 

Yes, if cyber fraud affects a company’s financials, data integrity, or operations, it falls under corporate fraud. It may invoke provisions of the Information Technology Act, 2000, in addition to the Companies Act and criminal law provisions.

4. Can a customer or vendor report a fraudulent company? 

Absolutely. Anyone affected by corporate misconduct, whether employee, vendor, shareholder, or customer, can report fraud to the appropriate authorities like SEBI, SFIO, or MCA.

5. Is non-compliance with regulatory filings considered fraud? 

Not necessarily, but deliberate falsification or concealment in filings (like fake balance sheets or hiding related-party transactions) constitutes fraud and is punishable under law.

6. Do independent directors have a role in preventing fraud? 

Yes, independent directors play a crucial role by overseeing audit committees, ensuring transparency in decision-making, and providing objective oversight of management actions.

7. How can investors in listed companies safeguard their interests? 

Keep a lookout for SEBI’s Investor Education and Protection Fund workshops and seminars, as they teach you to learn to spot red flags like inconsistent cash flows, excessive related-party transactions, or discrepancies between reported profits and actual cash generation in company filings.