Professional Documents
Culture Documents
Section 447 of the Company act provide for the definition of fraud and also the punishment
for committing the fraud. The section says that “fraud in relation to affairs of a company or
anybody corporate includes any act, omission, concealment of any fact or abuse of any
position committed by any person with the connivance in any manner, with the intent to
deceive, to gain undue advantage from or to injure the interest of, the company or its share
holders or its creditors or any other person, whether or not there is any wrongful gain or
wrongful loss.”
(1) the suggestion as a fact, of that which is not true, by one who does not believe it to be
true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
Explanation – Mere silence as to facts likely to affect the willingness of a person to enter into
a contract is not fraud, unless the circumstances of the case are such that, regard being had to
them, it is the duty of the person keeping silence to speak, or unless his silence, is, in itself,
equivalent to speech.
The companies R&D wing by installing software which helps to reduce the power
consumption and they must have known that the software is helping them with false
indications of emissions of HFC’s. By installing such software they had concealed the facts
to t he consumers at large which amounts fraud.
1.1 Whether the CEO, Board of Directors, Independent Director and the officers are
liable?
As per the definition in the Companies Act 2013, a ‘director’ means a director
appointed to the board of a company (whereas under the Companies Act 1956 – ie, up
to March 31 2014 – a ‘director’ includes any person occupying the position of
director, by whatever name called). Thus, under the current law, in order for a person
to be considered as a director he has to be appointed as such on the board of directors
of the company (whereas under the earlier company law, any person who occupied
the position of a director – whether appointed on the board of the company or
otherwise – by whatever name called, was considered as a director). The 2013 act
provides definitions for some of the terms used for directors, but the listing agreement
for equity shares, entered into by the listed company with the recognised stock
exchanges in India (the Bombay Stock Exchange, the National Stock Exchange and
others), might use different terminology in relation to directors.
Any act done in the company will be done with the consent of the CEO, Board
of Directors and officers. Hence they had the knowledge about the act which resulted
in fraud. Hence they were liable.ss