Examples of Corporate Fraud
1. Harshad Mehta Scam (1992): Harshad Mehta was a stockbroker who set up a very big money scam in India. He was widely known as the “Big Bull.” Harshad Mehta exploited the loopholes and used tricks on the Bombay Stock Exchange by finding and using flaws in the banking system. He mainly committed this through an illegal act called ‘circular trading‘ and misappropriating bank receipts.
2. Saradha Group Scam (2013): The Saradha Group was a bunch of companies from Eastern India. The company took part in a big Ponzi scheme that tricked millions of customers who invested money in it. Sudipta Sen, the group’s top officer, guaranteed investors to generate guaranteed profit. The company made claims that investments would be made in things like real estate, media, or hotels. But this was not the case in reality. Instead, the amount gathered by the general public was used to pay other investors.
3. Kingfisher Airlines Debacle (2012): The Kingfisher Airlines fall is a very famous and popularly known business failure in India. It’s linked to money issues and wrongdoing by its head, Vijay Mallya. The airline had huge debts and didn’t pay back loans or dues to its vendors and lending banks. In the search, the investigating agencies found that the funds had been moved and the money rules were broken.
Corporate Frauds under Companies Act, 2013
India being a fast-growing economy, has seen huge ups and downs in the economy along with the huge influx of money flowing in and out of the economy. Growing GDP has surely paved the way for economic growth in the country, but it has also allowed some people and groups to enter the loopholes in the system to take unfair advantages. Frauds of any kind not only leave a huge impact on the economy but also pressure the government to come up with strict laws to tackle such fraud in the future.
In India, the Companies Act, 2013 is the umbrella act regulating companies and all related compliances. The purpose of forming the Companies Act is to provide a legal framework for the formation of companies, covering the strata of incorporation, compliance, accountability, management, administration, etc. A company is an artificial person created by law and has a separate legal entity, perpetual succession, a common seal, and limited liability.
Section 2(20) of the Companies Act, 2013 defines a company as a “Company incorporated under this act or any previous company law.”
Geeky Takeaways:
- As the economy is increasing, the chances of companies getting into dishonest acts are also increasing day by day. Frauds have a significant impact on the economy as well.
- When corporations get into unfair, illegal, and dishonest acts, such acts are referred to as corporate fraud.
- Corporate fraud may be done via creating falsified accounting, illegally transferring funds proceed, or shell companies to suppress profits.
- Major corporate frauds were the Satyam scam, the Kingfisher scam, and the Harshad Mehta scam.
Table of Content
- What is Corporate Fraud under Companies Act 2013?
- Types of Corporate Fraud
- Examples of Corporate Fraud
- Important Sections under Companies Act, 2013
- Conclusion
- Corporate Frauds under Companies Act, 2013- FAQs