Fraud has been expressly defined in various statutes such as the Companies Act, 2013 (the “Companies Act”) and the Indian Contract Act, 1872 (the “Contract Act”). However, in all cases, a basic characteristic of fraud claims is that there must be an intention to:

• deceive another person;
• take undue advantage of them; or
• injure their interests.

Generally, a dishonest concealment of facts amounts to fraud as much as overt actions or the making of false statements. Specifically, under the Companies Act, an abuse of position with intent to deceive is also covered under fraud. The Companies Act also does not require the occurrence of loss to set up a case of fraud.

In 2023, the Indian Parliament enacted a new penal statute – Bharatiya Nyaya Sanhita 2023 (BNS) – and repealed the existing pre-colonial Indian Penal Code 1860 (IPC). Similarly, the erstwhile Code of Criminal Procedure 1973 has also been repealed and replaced by a new statute –  Bharatiya Nagarik Suraksha Sanhita 2023 (BNSS). As per the Indian government’s notification dated 23 February 2024, both the aforesaid BNS and BNSS will come into effect from 1 July 2024.

The BNS, like its predecessor statute the IPC, does not define fraud as a distinct offence. It only provides for fraudulent intention as an ingredient of various specific offences. The BNSS defines “fraudulently” to mean with an intent to defraud.

Dishonest misappropriation of property, or dishonest conversion of property for one’s own use, is also a penal offence. This offence takes the form of “cheating” where someone, by deceitful or fraudulent means, induces a person to deliver a property to themself. On the other hand, where a person has been entrusted with this property and dishonestly or illegally misappropriates or converts it for their own use or benefit, this comprises the offence of “criminal breach of trust”.

It is to be noted that not only the commission of a fraudulent act per se but also any agreement or conspiracy to enter into a fraudulent act, entered into by two or more persons, is penalised under the BNSS, regardless of whether the actual fraud is committed.

There is a more nuanced definition of fraud in the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, made under the Securities and Exchange Board of India Act, 1992 (the “SEBI Act”), which deals with fraud committed while dealing in securities. This definition includes any act, expression, omission or concealment committed, whether in a deceitful manner or not, by a person while dealing in securities, in order to induce another person or their agent to deal in securities, whether or not there is any wrongful gain or avoidance of any loss.

The PC Act

Paying illegal gratification (corrupt payments) to a public or a government official is punishable under a special statute, the Prevention of Corruption Act, 1988 (the “PC Act”). The PC Act penalises a government servant as well as any person or organisation (including its officers) who makes the corrupt payment to the public official to obtain a benefit. The term “payments” is defined very broadly under the Act, and includes getting any undue advantage, whether pecuniary or otherwise. Likewise, “public servant” has been defined broadly to include officials working in corporations controlled or aided by the government, and anyone performing a public duty (such as bank officials, irrespective of whether they are employed by the government). There is no de minimis standard for the quantum that would qualify as a bribe. In order to prove the offence of bribery, the prosecution has to prove:

• the demand of a bribe by the public servant or the offer to pay a bribe by a person; and
• the acceptance or obtainment of the illegal gratification, either through direct or circumstantial evidence.

Claims relating to bribery in India can only be brought against public servants, and against persons or organisations who bribe or attempt to bribe such public servants. Receipt of a bribe by an agent of a claimant in general is also punishable under the PC Act where such a bribe has been received to induce a public servant to perform their public duty improperly or dishonestly.

The claimant in that case may proceed to file a complaint with specialised investigative agencies such as the Central Bureau of Investigation (CBI) or the State Anti-Corruption Bureau. However, the claimant may not be able to compel the CBI to act on a complaint, and the CBI may treat the complaint as information upon which it initiates its own investigation.

The Companies Act

Under the Companies Act, it is the directors’ responsibility to create adequate internal financial controls that enable the prevention and detection of fraud and other irregularities within a company. Such internal controls include the setting up of channels for reporting of the receipt of a bribe by an agent. In the event of a failure to do so, various recourses are available under the Companies Act, such as:

• prosecution for fraud;
• an action for disgorgement pursuant to a class action (in the case of egregious default); or
• an action for oppression and mismanagement.

A statutory auditor of the company is obligated to report fraud to the audit committee or the board of directors. Where the amount of suspected fraud is more than INR1,00,00,000 the auditor is also required to report such to the central government, after the audit committee or the board of directors (as the case may be) has been given an opportunity to respond to this. Where the auditor fails to do so, they are exposed to various legal liabilities, as explained in 1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts.

The company may also pass a special resolution that its affairs are required to be investigated and may inform the Registrar of Companies (ROC) or the Serious Fraud Investigation Office (SFIO), the statutory corporate fraud-investigating agency constituted under the Companies Act.

The IPC

In India, abetment of an act is defined as providing any instigation or aid to facilitate the commission of an offence, and is a punishable act in itself, regardless of whether the intended offence is committed. It is important to note that the definition of abetment in India also includes engaging with one or more person(s) in any conspiracy for committing a fraudulent act, if any act or omission takes place in pursuance of that conspiracy. Where there is no punishment specifically prescribed for abetment of an offence, parties who conspire towards, assist in or facilitate such fraudulent acts are punished with the same punishment as though they had committed the intended offence. The claims for abetment would extend to situations wherein a party’s assistance towards the commission of a crime consists of receiving or harbouring fraudulently obtained assets, but only if the party had knowledge that the assets were fraudulently obtained. However, under Section 48 of the BNS, India has expanded extraterritorial application of the offence of abetment by making abetment outside India an offence in respect of a crime committed inside India.

The Companies Act

In the event that the statutory auditor of the company fails to perform their duties, or does not detect fraud despite it being brought to their notice, the auditor may face various actions, such as:

• a class action for disgorgement;
• regulatory action, including disbarment; and
• criminal prosecution for fraud or abetment of fraud.

In addition to other actions, they may also be removed from their position through a government action for removal, and may be debarred for a period of five years if they are found to be guilty of having directly or indirectly acted in a fraudulent manner, or of having colluded in a fraud by the company, its officers or its directors. In a landmark ruling in 2023 – Union of India v Deloitte Haskins and Sells LLP, reported in (2023) 8 SCC 56 – the Supreme Court of India held that an action seeking removal and debarment under Section 140(5) of the Companies Act is maintainable even against statutory auditors who had resigned prior to such action being instituted.

The Prevention of Money Laundering Act, 2002 (PMLA)

The PMLA penalises the offence of money laundering per se, when such offence involves proceeds of crime in relation to a specified or scheduled offence – ie, offences listed in the Schedule to the PMLA. The existence of such predicate offence is a sine qua non for initiation of proceedings under the PMLA. It is pertinent to note that the offences of cheating, forgery of valuable security and wills, etc, are scheduled offences under the PMLA. Under the PMLA, the offence of “money laundering” has been defined very widely to include any of the following activities pertaining to proceeds of crime:

• acquisition;
• possession;
• use;
• concealment; and
• projection or claiming proceeds of crime as untainted property.

It is to be noted that the aforesaid activities are independent of each other and are therefore to be read disjunctively.

Within its scope, the definition covers not only persons who are directly involved in any of the aforesaid activities but also those persons who (indirectly or directly) attempt to indulge or assist in the aforesaid activities. In other words, the PMLA not only criminalises an overt act of money laundering but also any attempt to commit the act of money laundering.

The PC Act

Under the PC Act, abetment of an offence under the Act by either a private person or a government official is punishable, whether or not the offence was committed as a consequence of that abetment.

In India, the Limitation Act, 1963 (the “Limitation Act”) provides that the period of limitation in the case of fraud commences from the time the fraud is actually discovered, or could have been discovered using reasonable measures, by the victim. However, where the fraud is continuing, a fresh period of limitation begins to run at every moment of the time during which the fraud continues.

Criminal Proceedings

In general, the limitation period of an offence is dependent on the period of imprisonment prescribed for a particular offence. For example, if an offence is punishable with imprisonment for up to three years, a complaint must be filed within three years from the commission of the offence. In the case of offences relating to fraudulent acts, the limitation period would depend on the specific offence. It must be noted that criminal courts have inherent powers to condone delay where the delay has been properly explained or where it is in the interests of justice to do so.

Additionally, for offences punishable with imprisonment of more than three years, no limitation period has been prescribed. Thus, a complaint pertaining to the offence of cheating and dishonestly inducing delivery of property (punishable with up to seven years’ imprisonment) or the forgery of a valuable security or will (punishable with up to ten years’ imprisonment) can be filed at any point in time.

Civil Proceedings

For civil claims, the period of limitation is specified under the Schedule to the Limitation Act. The periods differ depending on the causes of action; however, as stated above, the cause of action would commence from the time that the fraud is discovered or was discoverable.

The Contract Act

Under the Contract Act, where an agreement is deemed to be void or voidable on account of fraud, the person who has received an undue advantage under such an agreement is bound to restore it. However, where restoration of such property is not possible on account of conversion of the proceeds of fraud, a claimant will still be entitled to compensation on account of the loss that they may have suffered. In such cases, the principles under Section 65 of the Contract Act may apply, which provide that any person who has received any advantage under such an agreement or contract is bound to restore it, or to make compensation for it to the person from whom they received it. The term “received any advantage” provides for restitution of an innocent party to such position as though they had not entered into such a contract. This allows any undue gain received under such a contract to be restituted to an innocent party.

Further, the Specific Relief Act, 1963 provides that a person entitled to the possession of specific movable property may recover it as per the procedure prescribed under the Code of Civil Procedure, 1908 (CPC). Accordingly, once the contract has been declared void, a party is entitled to prefer a civil suit seeking declaratory relief with respect to the title to the property, along with possession thereof.

The Insolvency and Bankruptcy Code, 2016 (IBC)

The IBC provides for various processes in order to claw back or disgorge any undue benefit received by any creditor or related party of a corporate debtor. Section 66 provides that, during the liquidation process or the corporate insolvency resolution process, where any resolution professional or liquidator finds that the corporate debtor has conducted their business with intent to defraud creditors or for any fraudulent purpose, the adjudicating authority may direct any persons (including directors or partners) who were knowingly parties to it to make such contributions to the assets of the corporate debtor as it may deem fit.

The obligation is also cast on the resolution professional to claw back such preferential transactions (if they qualify for the conditions in Section 43) or undervalued transactions (if they qualify for the conditions in Section 46) by making an application under Section 44 or 45 of the IBC, respectively. However, such processes only allow these transactions to be restored to a corporate debtor and not a claimant. Any person applying for such transactions to be reversed will be entitled to proceeds from such transactions in accordance with the resolution plan or the scheme provided for the distribution of assets in liquidation under Section 53 of the IBC. It has recently been held that such avoidance applications by the resolution professional (RP) will be unaffected by the approval of the resolution plan, or conclusion of the corporate insolvency resolution process (CIRP).

The Insolvency and Bankruptcy Board of India (IBBI) has also been given powers to direct “any person” who has made an unlawful gain or averted loss by contravening the IBC to disgorge an amount equivalent to such unlawful gain. The IBBI has also been given the power to take appropriate steps in order to restitute the loss suffered by such person on account of this contravention, if such person is identifiable and the loss suffered is directly attributable to the contravener.

The Code of Criminal Procedure (CrPC)

Under the CrPC, the police are also empowered to seize any movable property or evidence that they suspect may have been involved in any fraudulent act. Additionally, under Section 451 of the CrPC, the court has the power to pass an order, as it thinks fit, for proper custody of any property during the pendency of the criminal trial. Where the claimant seeks to establish their proprietary rights in a criminal proceeding to recover property, they may make a claim before the court. In that case the court can order the release/restoration of the seized property, either during the pendency of the investigation/trial or after conclusion of the trial. Such release/restoration of seized property may be without conditions or with conditions that the claimant shall execute a bond, with or without securities, to the satisfaction of the court.

New Provisions of Attachment and Forfeiture of Property Under the BNSS

The powers for attachment and forfeiture of property that were available under the CrPC have been retained under Chapter VII (Sections 111–124) of the BNSS.

However, in addition thereto, Section 107 BNSS also seeks to provide magistrates with powers to attach property identified as “proceeds of crime” pursuant to an application by an investigating officer, giving reasons for believing that the property is derived or obtained from a criminal activity or commission of an offence. The magistrates are empowered to attach and forfeit property under Section 107 after hearing all concerned parties. However, under Section 107(5), a magistrate is also empowered to pass an interim order of attachment, even prior to issuance of a notice, if the magistrate is of the opinion that issuing a notice to the owner of the property for attachment will defeat the object of the attachment or seizure. At the conclusion of such proceedings, if the magistrate is of the opinion that particular property constitutes proceeds of crime, it can direct pro rata distribution of such proceeds of crime to the victims of such crime. If there are no claimants for such distribution, the property shall stand forfeited to the government.

It is to be noted that the powers of attachment of property involved in proceeds of crime under the BNSS come with even fewer procedural safeguards than those provided under the PMLA, and it remains to be seen whether these can withstand the scrutiny of constitutionality once they are brought into force from 1 July 2024.

The PMLA

As stated in 1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts, under the PMLA, “proceeds of crime” are defined widely and constitute not only the property directly or indirectly obtained through fraudulent activities but also its equivalent value held in India when such property is taken or held outside India. It is relevant to note that if the proceeds of fraud have been mixed with other funds, the value of these proceeds may be identified under the enactment. This is important because it recognises that the tainted property may no longer be available.

The Directorate of Enforcement (ED), which is the investigating agency under the PMLA, is entitled to attach and (where not practicable to do so) to freeze such properties derived directly or indirectly from the proceeds of crime. However, the Supreme Court of India recently clarified that mere use of a property in the commission of the predicate offence will not render said property a proceed of crime.

If, upon completion of trial, the offence of money laundering is proved, such property forms part of the proceeds of crime and stands confiscated by the central government, vested free from all encumbrances. If, however, the trial results in an acquittal, the property is released to the persons entitled to receive it. Regardless, the special court trying the offence of money laundering is entitled to direct the government to restore the confiscated property to a bona fide claimant, who may have suffered a loss due to the offence of money laundering, at any point during or after the trial.

Criminal Proceedings

In the case of a criminal complaint relating to fraudulent acts, there are no rules of pre-action conduct. The complainant should approach the magistrate or, where the offence is cognisable, the police authorities in order to initiate investigation into the offence.

Civil Law Proceedings

Where a claimant is filing a civil claim relating to a fraud alleged to have been perpetrated under a contract, such party should furnish a legal notice (usually a demand notice) or such pre-action steps as required under the dispute resolution clause in the contract.

Moreover, specific legislation or provisions may have their own particular rules of pre-conduct action. For example, a claim under the Commercial Courts Act, 2015 (the “CC Act”) requires the parties to have undergone pre-institution mediation of the dispute where no urgent interim relief is sought by the claimant; a civil action against the government or a public official may only be instituted after a written notice has been served two months in advance, unless waived by the court. It is pertinent to mention that failure to adhere to pre-conduct action may be fatal to the claim in certain instances, specifically where the statute provides for this.

A victim of fraud may, while pursuing civil claims, file an application for a temporary injunction to prevent a party from alienating assets while adjudication on the claim is ongoing. The application must show that the common law criteria for an injunction is satisfied – ie, that:

• there is a prima facie case in favour of the claimant;
• the balance of convenience lies in favour of the claimant; and
• irreparable injury would be caused to the claimant if such an injunction is not granted.

This injunction is in personam. However, the injunction may also apply to third parties, where such third parties interfere with or obstruct the course of justice.

Where a suit is instituted for seeking damages/permanent injunction, the court fees payable will be computed as per the Court Fees Act, 1870 and the rules governing that specific court, which may be ad valorem (with or without caps, depending on where the action takes place). However, the fees payable for seeking an ad interim injunction under the suit may be a nominal fee. Such fees may differ for different courts and would need to be computed accordingly.

A similar right would be available to a party if it prefers an application under Section 9 of the Arbitration and Conciliation Act, 1996, wherein such party can seek an ad interim injunction for preservation of assets or the substratum of an arbitration, before, during and after the constitution of an arbitral tribunal but before execution of an arbitral award.

As mentioned in 1.5 Proprietary Claims Against Property, the CrPC and the BNSS allow police officers to seize any property that may be involved in the commission of any fraudulent offence. Additionally, under the BNSS, a magistrate now has the power to issue attachment orders (including ex parte interim attachment orders) if it is of the opinion that a property is involved in proceeds of crime. These powers can be exercised at a pretrial stage and even before an accused person has the opportunity to plead and establish their innocence in a trial. Further, a criminal court also has wide powers to secure the custody of any property produced before it during the pendency of trial. Such property may be directed to be released/restored to the claimant either during the pendency of investigation/trial or after conclusion of the trial.

Civil Law Remedies for Violation of an Injunction

Violation of the aforementioned orders granting an interim injunction would amount to contempt of court by the opposite party, and is punishable with civil imprisonment and/or a fine. The court would also be entitled to attach the property of the violating party. Further, the court may also declare any transaction in violation of such orders null and void.

Criminal Law Remedies for Violation of an Injunction

Under the IPC (and the BNS), any fraudulent removal or dissipation of assets to prevent a property from being forfeited for the satisfaction of an order or a decree that has been passed, or that is likely to be passed, is punishable by imprisonment of up to two years or a fine, or both.

Cross-Undertakings

In general, there is no statutory requirement for the claimant to give a cross-undertaking in damages, with the exception of patent suits filed in New Delhi. However, the courts (while keeping in mind equitable principles) or the arbitral tribunal (by way of the principles governing commercial arbitrations) may require a cross-undertaking to be given by a claimant to indemnify the losses suffered by a party on granting of an injunction against it, if such party ultimately succeeds in its defence. Further, while granting an injunction or an interim relief, a court can put parties to terms and direct a deposit of an amount it deems suitable till the time the issue is adjudicated.

Under Section 144 of the CPC, where any order is subsequently varied, reversed or modified, a party can apply to the court for restitution of its position to before the making of such an order, which could include refund of costs and payment of interest, damages and compensation.

Indian courts have laid down that, where an offence requiring mens rea or a guilty mind (such as fraud) is committed by persons exercising control over the affairs of a corporate entity, the offence would also be imputed to the entity. Such imputation will be dependent on the degree to which the corporation can be said to be acting through such persons, so as to make such persons the “alter ego” of the entity. Therefore, the corporate entity will be held to be liable for the actions of its director or officer if such persons are acting in the course of their regular duties. Such an entity would also be liable to pay a fine if convicted of the offence, where a fine and/or imprisonment are prescribed as a penalty under the relevant statute.

When a corporate entity has been used as a vehicle for fraud, and its separate identity has been misused to commit such frauds, the courts in India use the well-established common law doctrine of piercing the corporate veil to uncover the individuals who are the ultimate beneficial owners of the entity. In such circumstances, the courts will disregard the separate legal identity generally accorded to corporations in order to punish the actual perpetrators of the fraudulent conduct. The courts have frequently lifted the corporate veil where they suspect that the company itself is a sham entity created for an unlawful purpose or through unlawful means.

It is important to note that, in order to aid identification and regulation of such individuals, in 2018 the Ministry of Corporate Affairs in India introduced the Significant Beneficial Ownership Rules, which define the criteria for constituting a significant beneficial owner (SBO) in a company. The Rules require the reporting company to submit specified information pertaining to SBOs to the ROC, thereby providing investigative and regulatory agencies with ready access to ultimate beneficiaries in complex ownership structures. Similar rules also exist under the PMLA, wherein banks and financial institutions are charged with the responsibility of maintaining records of their clients and their respective beneficial owners. The Securities and Exchange Board of India (SEBI) has also issued multiple guidelines and circulars for identifying ultimate beneficial ownership among companies listed on a stock exchange.

Under the Companies Act, shareholders may institute oppression and mismanagement proceedings against the company and its director(s) where, inter alia, the affairs of the company have been or are being conducted in a manner that is prejudicial to public interest or prejudicial to such shareholders’ interests. The requirement for initiating such proceedings has been provided for under the Companies Act as not less than 100 members or one tenth of the total members (whichever is less), or any member(s) holding one tenth of the paid-up share capital of the company, in the case of a company that has a share capital. For a company that does not have a share capital, not less than one fifth of the total members of such a company can initiate such proceedings.

It should be noted that the High Court of Delhi has held that provisions under the Companies Act, including Sections 241 and 242, allowing for initiation of proceedings and the relief of freezing assets and disgorgement of property as disgorgement, are civil actions in the nature of equitable relief.

The Companies Act also permits institution of a class action, where members can approach the National Company Law Tribunal to seek certain orders, such as to claim damages or to demand any other suitable action from or against the company or its directors for any fraudulent, unlawful or wrongful act or omission on their part. For a company that has a share capital, a “class” is defined as not less than 100 members or not less than 5% of the total members (whichever is less), or members holding not less than 5% of the share capital of a company in the case of an unlisted company, and not less than 2% of the issued share capital in the case of a listed company. For a company without a share capital, a “class” has been defined as not less than one fifth of the total members of such a company.

Fraud Under the Contract Act

A suit for declaration of contract rendered void on account of fraud, or for claiming damages on account of such fraud committed by a private party, may require the joinder of an overseas party to such a suit. Such a joinder would be governed by the provisions of the CPC. While the CPC does not create a distinction between joinders of an overseas party and a domestic party, a joinder is allowed on account of liability under the same contract (Order I Rule 6) or on account of a cause of action (Order II Rule 3). In such cases, the courts allow issuing a notice/summons to an overseas party. However, if the overseas party fails to appear and defend its case, the courts may proceed ex parte to decide the suit.

A decree passed by an Indian court against an overseas party, specifically for damages on account of fraud, may need to be enforced specifically. In cases where the jurisdiction in which the decree is to be executed is a reciprocating country notified under the CPC, the decree would become enforceable in the reciprocating country. However, for non-reciprocating countries, a decree may only hold evidentiary value and may have to be adjudicated on merits.

Arbitrability of Fraud

The law in India allows fraud of a civil nature to be arbitrated between parties. Any allegation of fraud that affects the private dispute between parties is arbitrable, unless the allegation is that the arbitration agreement itself is vitiated by fraud. However, courts have held that the criminal aspects of fraud, forgery or fabrication, which would be visited with penal consequences, can only be adjudicated by a court of law, as they are in the realm of public law.

Indian law has made considerable strides in terms of joining non-signatories to an arbitration, be it domestic parties or overseas parties. Such a non-signatory party will need to discharge the onus of proving that it is either claiming “through” or “under” a signatory party, or that such a composite reference to the signatory and the non-signatory party is required to achieve the common object of the composite transaction.

Courts in India have also utilised the “group of companies” doctrine for the joinder of parties to an arbitration. This has recently been authoritatively ruled upon by a five-judge Constitution Bench of the Supreme Court of India in Cox & Kings Ltd v SAP India (P) Ltd 2023 INSC 1051. The Supreme Court ruled the “group of companies” doctrine to be an intrinsic part of the Indian legal system, and has further defined the contours of the doctrine by guard-railing it from misuse. In doing so, the Supreme Court has reiterated the essential difference between a non-party and non-signatory and has held that consent may be implied in some situations to include a non-signatory to an agreement as party to an arbitration. Under this doctrine, an arbitration agreement entered into by a company, being one within a group of companies, may bind a non-signatory affiliate, if the circumstances show that the mutual intention of all the parties was to bind both the signatory and the non-signatory affiliate.

Fraud Under the Companies Act

While the Companies Act provides punishment for fraud under Section 447, the applicability of the Companies Act to an overseas entity is limited. A foreign company, for the purposes of the Companies Act, is defined under Section 2(42) to mean any company or body corporate incorporated outside India which:

• has a place of business in India, whether by itself or through an agent, physically or through an electronic mode; and
• conducts any business activity in India in any other manner.

In this context, Section 379 of the Companies Act provides that, where not less than 50% of the paid-up share capital of a foreign company is held by one or more citizens of India, or by one or more companies or bodies corporate incorporated in India, whether singly or in aggregate, such company must comply with certain provisions as may be prescribed with regard to the business carried on by it in India as though it were a company incorporated in India.

Section 380 of the Companies Act provides for service of any process, notice or other document required to be served on a foreign company. Section 228 of the Companies Act provides for inspection, inquiry or investigation in relation to foreign companies.

Criminal Proceedings

An Indian court would have jurisdiction over criminal acts committed with a fraudulent intent under the IPC (and also under the BNS) when the act has been committed by:

• any citizen of India residing beyond India;
• any person on a ship or aircraft registered in India, wherever it may be; and
• any person who commits an offence involving a computer source in India.

Where an Indian court can exercise jurisdiction over an overseas entity, the CrPC (and also the BNSS) provides for an elaborate process for the valid service of summons or warrants, etc, in any contracting “state”, through an authority for transmission. In this regard, India has entered into mutual legal assistance treaties/arrangements (MLATs) with various countries that provide for reciprocal arrangements for the serving of such judicial documents. Such requests are processed by the Ministry of Home Affairs, which transfers such documents to the relevant Indian missions/embassies.

The difference between the two categories of countries is that the country where an MLAT is involved has an obligation to consider serving the documents; whereas non-MLAT countries do not have any obligation to consider such a request. Similarly, India has entered into various bilateral treaties that allow knowledge-sharing, mutual assistance and extradition for enabling investigation, arrest and production of accused persons in India.

Some expropriatory statutes, such as the PMLA, also allow attachment of property of equal value in India in cases where properties forming proceeds of crime are taken or held outside India.

The CrPC is the principle Indian legislation which provides for administration of substantive criminal procedure, including the issuance of summons by a court (or a police officer through the court) for the production of any document or material necessary for the purposes of any investigation, inquiry or trial. Summons in such cases can be issued to any person who the court believes to be in possession of such information.

The CrPC (and also the BNSS) provides for an elaborate process for the valid service of summons or warrants, etc, in any contracting “state”, through an authority for transmission. In this regard, India has entered into mutual legal assistance treaties/arrangements (MLATs) with various countries/contracting states that provide for reciprocal arrangements for the serving of such judicial documents. India is a member state to various multilateral treaties that provide for mutual assistance in enforcement. These include membership of the Financial Action Task Force and International Criminal Police Organization, which enable member states to share and access data on crimes and criminals as well as offer a range of technical and operational support. Similarly, India has also entered into various bilateral treaties that allow knowledge-sharing, mutual assistance and extradition for enabling investigation, arrest and production of accused persons in India.

The request for service of such judicial documents to an entity/person outside India are processed by the Ministry of Home Affairs (MHA). The MHA examines the request upon receipt to ensure that it is compliant with the provisions of any bilateral or multilateral treaty or any other international convention to which both India and the receiving country are signatories. It also examines the summons request to verify compliance with Indian law and the laws of the foreign recipient country. The request is then sent through the Ministry of External Affairs to the “Central Authority” of the reciprocating country. In the country to which a request for assistance is made, summons are served in accordance with the laws and procedures of that country.

It is pertinent to mention that the country where the MLAT is involved has an obligation to consider serving the documents; whereas non-MLAT countries do not have any obligation to consider such a request.

Some expropriatory statutes, such as the PMLA, also allow attachment of property of equal value in India in cases where properties forming proceeds of crime are taken or held outside India.

Civil Proceedings

Where a decree has been obtained by a petitioner based on a claim of fraud in contractual disputes, such a decree may be executed either by the court which passed it or by the court to which it is sent for execution. Order XXI of the CPC provides a detailed procedure for executing a decree in an Indian court. Courts have held that all execution petitions must be disposed of within six months of their filing, failing which an executing court must record the reasons for delay.

A decree obtained from a foreign jurisdiction may also be enforced in an Indian court provided it passes the test of finality as laid down in Section 13 of the CPC. Section 44A of the CPC provides that a decree of any superior court of a reciprocating territory is executable in India as a decree passed by an Indian district court. If the decree is passed by a non-reciprocating territory, a civil suit may be instituted before the appropriate court seeking its recognition and, thereafter, enforcement. Similarly, a domestic arbitral award passed under the A&C Act can be enforced in accordance with the provisions of the CPC, in the same manner as if it were a decree of the court. Such an enforcement under Section 36 of the A&C Act is subject to any appeal that may lie under Section 34 of the A&C Act. An international arbitral award may be enforced in India where the court is satisfied that it fulfils the conditions provided for in Sections 44, 48 and 57 of the A&C Act. Such an executable foreign award is deemed to be a decree of the court.

Criminal Proceedings

While cognisance of criminal fraud can only be taken by an Indian court exercising criminal jurisdiction, various agencies can investigate criminal acts of a fraudulent nature. Powers of investigation, as provided under the CrPC (and the BNSS) can be exercised by state police, and officers of special divisions such as the Economic Offence Wing and CBI. Special multidisciplinary agencies have also been given powers to investigate fraud under specific statutes – ie, the SFIO to investigate fraud under the Companies Act, and the ED to investigate the predicate offence of fraud under the PMLA.

In a significant ruling, in RK Gupta v Union of India (through Ministry of Corporate Affairs) 2023:DHC:9243, the High Court of Delhi recently held that the SFIO, an investigating agency under the Companies Act, has the power to investigate offences under the Indian Penal Code (which will soon be replaced by the BNS) in addition to the power to investigate offences under the Companies Act. However, on appeal, even though the Supreme Court of India refused to entertain a challenge against the High Court judgment, it did however observe that, since the issue as to whether SFIO inspectors are “police officers” under the CrPC did not directly arise for consideration in said case, the High Court judgment cannot be treated as a precedent in this regard.

Additionally, in order to secure the presence of an accused, a criminal court has the power to issue warrants (both bailable and non-bailable) against the accused person. However, in serious cases of fraud, where accused persons may be evading arrest, the executive can issue Look-Out Circulars (LOCs) for arrest of such persons. LOCs are essentially advisories/instructions issued to immigration authorities to inform law enforcement agencies if such an accused person is found to be leaving India or even travelling into India. Issuance of LOCs, however, does not automatically lead to arrest; it only results in accused persons being prevented from travelling out of India.

Criminal Proceedings

A right against self-incrimination is innate in Indian jurisprudence and has been guaranteed as a fundamental right by Article 20(3) of the Constitution of India. This fundamental right is echoed in various other statutes, including the CrPC and the Evidence Act. The protection applies to all forms of testimonial evidence, extending both to oral testimony and to the production of documents. It is important to note that this constitutional protection is not only available at the pretrial stage but also during the trial, and a witness may refrain from giving evidence that may result in self-incrimination. In such cases, since the burden of proof is on the investigation agencies and the prosecution, negative inference cannot be drawn from exercising this fundamental right.

This right may be diluted in certain special statutes where the burden of proof is on an accused to prove that punitive actions should not be exercised against them. For example, the Supreme Court of India recently held that protection of the right against self-incrimination guaranteed under Article 20(3) is not available to a person whose statement is recorded under the PMLA, since the nature of proceedings conducted by the ED under the Act is that of “inquiry” and not investigation per se. However, such right will be available once a person is arrested for the offence of money laundering under the PMLA.

Civil Proceedings

Under the same principle, since civil disputes do not lead to “self-incrimination”, no right to silence is available in civil proceedings for adjudication of fraud, and a court may draw adverse inferences on issues wherein the defendant does not adduce evidence or refuses to give testimony to defend their case. This is in line with the principle enshrined in Section 114 of the Evidence Act (Section 119 of the BSA).

In India, privilege from disclosing communications between a lawyer and their client is statutorily recognised under Sections 126, 128 and 129 of the Evidence Act (Sections 132(1), 132(3) and 133 of the BSA, respectively) and under Section 227 of the Companies Act. This privilege from disclosing communication between a client and lawyer exists even after such a relationship has ended. There are few exceptions to this rule – ie, where:

• any such communication was made in furtherance of any illegal purpose; and
• any fact observed by any lawyer, in the course of their employment as such, shows that any crime or fraud has been committed since the commencement of their employment.

This privilege is also waived in cases where a client expressly waives their privilege or adduces evidence and offers themself as a witness, in which case they may be compelled to disclose any communication, which, in the opinion of the court, is necessary in order to explain any evidence they have led, and no other. This has to be read in the context of Section 128 of the Evidence Act (Section 133 of the BSA) wherein, by merely volunteering to give evidence, such a privilege is not waived. The Section also contemplates that, if a party calls in their lawyer as a witness, they may be deemed to have consented to such disclosure only if they question their lawyer on fact, which otherwise would have been protected from disclosure under Section 126 (Section 132(1) of BSA).

While Section 126 (Section 132(1) of the BSA) provides for privilege in communication with a “barrister, attorney, pleader or vakil”, the same distinction is not visible in the Advocates Act, 1961 (the “Advocates Act”), wherein only an “advocate” is permitted to practise the “profession of law” in India. While the Advocates Act does not make a distinction between different types of legal professionals, the intent of the legislature is clear and intended to use an inclusive definition. Further, the language used in Section 129 (Section 134 of the BSA) uses an even wider connotation of “legal professional adviser”, which has not been defined in the Advocates Act.

However, it is to be noted that, under the Bar Council of India Rules (the “BCI Rules”), when a lawyer joins a company under full-time employment, they are under an obligation by such rules to surrender their registration as an advocate. This conundrum creates a complexity in recognising privilege of communication with “in-house” legal counsels in India.

There have been instances where the High Courts have considered the nature of advice or the scope of work of an in-house legal counsel to extend legal privilege to communications with in-house counsels or departmental lawyers engaged in government employment. However, some High Courts have taken the view that an in-house counsel cannot claim to be an “advocate” under the Advocates Act, and hence the legal privilege enshrined under the Evidence Act would not be available to such lawyers.