Corporate Fraud: Analysing Preventive Measures Under Indian Law
This article is written by Suhani Maheshwari, pursuing a BBA. LL.B. (Hons.) from Marathwada Mitra Mandal's Shankarrao Chavan Law College, Pune.
Corporate fraud has become one of the most serious threats to modern-day businesses and financial markets. With continuously evolving technology, rapid expansion of global commerce, and increasing complexity of corporate structures, the intense competition has increased the possibilities of fraudulent acts that harm investors, creditors, employees, regulators, and the overall economy. In India, major scandals like the Satyam Computer Services scandal, the Punjab National Bank Fraud, the Infrastructure Leasing & Financial Services (IL&FS) crisis, etc., have not only shown how damaging corporate misconduct can be but also stressed the need for effective prevention.
Corporate fraud involves various deceptive activities carried out by companies or individuals for illegal gain and benefit such as financial statement manipulation, insider trading, asset misappropriation, accounting fraud, bribery, corruption, market manipulation, cyber-enabled financial crimes, and many more. These activities impact negatively on governance, weaken investor confidence, damage market integrity, and harm economic growth.
Taking these causes and effects into consideration, India has developed a comprehensive legal framework to detect, prevent, and punish these fraudulent acts. Several laws, the Companies Act, 2013, and the Prevention of Money Laundering Act, 2002, along with corporate governance regulators, aim to ensure transparency, accountability, and ethical behaviour. Important bodies like the Serious Fraud Investigation Office (SFIO) and the Securities and Exchange Board of India (SEBI) play key roles in enforcing these laws.
This article explores what corporate fraud is, its causes and effects, and the preventive legal measures in India. It also covers how effective the current prevention measures are, including government practices, financial controls, audits, whistleblower protections, and regulatory oversight.
By examining major fraud cases and current challenges, this article aims to assess whether existing laws are enough to tackle evolving corporate misconduct and suggests ways to continuously improve fraud prevention in India.
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