Federal Agencies

The CBI, which was established under the Delhi Special Police Establishment Act, 1946, is responsible for investigating complex crimes, including white-collar offences, typically in cases involving the PCA or cases of public importance. There are designated special courts notified to try cases investigated by the CBI.

The ED has been established to investigate contraventions of the Indian exchange control laws (FEMA) and anti-money laundering regulations. Cases investigated by the ED are adjudicated by Adjudicating Authorities set up under FEMA and PMLA. Additionally, there is a specialised Appellate Tribunal to hear appeals against orders of the Adjudicating Authorities under PMLA and FEMA.

The SFIO was established to investigate offences under the Companies Act, 2013 (Companies Act). SFIO investigations have been given priority, as all investigations by other investigative agencies must await the completion of the SFIO investigation. As part of its investigation, the SFIO can share information related to commission of an offence with other specialised investigating agencies in order to prosecute the offence outside its purview and is empowered to obtain information from other investigating agencies as part of its investigation. There are designated special courts notified to try cases under the Companies Act.

The Income Tax department (IT Authority) has the authority to investigate cases of income tax evasion, undisclosed foreign assets (termed “black money” under Indian law), and income tax fraud.

The Directorate of Revenue Intelligence is tasked with detecting and curbing smuggling of contraband, including drug trafficking and illicit international trade in wildlife and environmentally sensitive items, as well as combating commercial frauds related to international trade and evasion of Customs duty. The Directorate General of GST Intelligence (DGGI) is entrusted with the task of collection, collation, and dissemination of intelligence relating to evasion of Goods and Services Tax (GST), Central Excise Duty, and Service Tax.

The Central Vigilance Commission (CVC) is a federal authority which provides advice and guidance to its agencies on matters related to vigilance, and which receives complaints concerning allegations of corruption or misappropriation of office, and recommends appropriate action regarding these allegations. The matters investigated and recommended by CVC are tried by courts notified to try offences under the PCA.

State Agencies

The police force of each state/union territory is responsible for maintaining law and order in the designated area as well as registering complaints and investigating crimes. Additionally, a special branch has been established in the local police structure known as the Economic Offence Wing (EOW) in order to specifically deal with economic offences involving a certain threshold of monetary value. EOW is responsible for dealing with, inter alia, banking crimes, housing crimes, corporate frauds, general cheating, and crimes relating to the security and commodities markets.

Regulatory Oversight

Certain regulators are also empowered to investigate regulatory offences. For example, SEBI is empowered to investigate fraudulent and prohibited transactions in securities, including insider trading. The RBI can also prosecute banks and non-banking financial companies for regulatory offences.

Conflict of Jurisdiction

As different authorities are investigating the same offence, their jurisdictions are defined. While the SFIO has been established for investigating offences under the Companies Act, the Delhi High Court recently in RK Gupta v Union of India, 2023:DHC:9243 has held that SFIO has the power to investigate offences under the IPC also (now BNS). The Supreme Court, while refusing to entertain a challenge against the High Court judgment, has observed that since the issue as to whether SFIO Inspectors are “police officers” did not directly arise for consideration, the High Court judgment cannot be treated as a precedent.

The ED, meanwhile, has exclusive jurisdiction in terms of investigating money laundering offences. However, it cannot do so until an offence is registered by the police authorities for an offence listed in the Schedule to the PMLA, ie, a predicate offence. In the event, predicate offences have been quashed or the accused has been discharged in the predicate offence proceedings, the ED cannot continue with proceedings under the PMLA.

Similarly, regular police officers at a state level cannot exercise generic powers of investigation once a case is submitted to the exclusive jurisdiction of the CBI.

Civil/Administrative Enforcement Against White-Collar Offences

White-collar crime does not have any civil enforcement mechanisms, except a duty to disclose in certain cases and restitution under tort law. However, certain legislations, like the SEBI Act and the Insolvency and Bankruptcy Code, 2016 (IBC) provide for a claw-back/disgorgement of undue benefit received by the offender.

Generally, investigations are initiated on the basis of a complaint filed with the authority that is empowered to investigate. Some legislation vests the authorities with the power to initiate investigations on their own as well.

Preliminary Enquiry Under BNSS

BNSS under Section 173(3) has for the first time mandated carrying out of a preliminary enquiry when information regarding commission of a cognisable offence punishable for three years or more and less than seven years is received. This exercise is to be conducted within 14 days wherein an Investigating Officer is required to consider various factors and thereafter ascertain existence of a prima facie case for proceeding with the matter.

The prima facie satisfaction is a much higher standard than the previous regime wherein preliminary enquiry was only meant to ascertain whether the information received reveals any cognisable offence (Lalita Kumar v State of Uttar Pradesh (2014) 2 SCC 1).

Zero FIR, e-FIR and FIR

FIR forms the starting point for any investigation. Under BNSS, several new provisions have been introduced which deal with the manner of registration of FIR. Following judicial recognition, BNSS under Section 173 permits registration of a Zero FIR which essentially means registration of an FIR at any police station, irrespective of where the offence is committed. A Zero FIR is eventually required to be forwarded to the concerned police station having the requisite territorial jurisdiction.

Similarly, Section 173 has also introduced the concept of an e-FIR in which compliant is submitted electronically on the online e-FIR portal of the concerned police authority. Thereafter, the complainant is required to visit the police station within three days and sign a physical copy of the complaint, after which the FIR is required to be registered. BNSS also mandates that a copy of the e-FIR is required to be shared mandatorily with the complainant.

The MHA has come out with a Standard Operating Procedure (MHA SOP) which specifies the detailed steps that must be followed for registration of Zero FIR, e-FIR and also the manner in which preliminary enquiry is to be conducted.

The investigating machinery may also be brought into play at the direction of a court, in case of failure by police to initiate an investigation by registering an FIR. A public servant cannot be prosecuted for offences of bribery and corruption, except with the previous sanction of the government.

An ED investigation is initiated pursuant to a case being registered for commission of Scheduled Offences under PMLA. In such cases, a complaint is registered if the authority has reason to believe that “proceeds of crime” may have been generated through the commission of a scheduled offence.

The CBI and SFIO cannot initiate investigations on their own but must be specifically notified by the central government or by a court. In addition, the SFIO has the authority to investigate the affairs of a company if it is required in public interest to do so and if the shareholder approval is sought.

IT Authorities and the CVC can initiate investigations, however, there are certain internal safeguards provided by the IT Act and the CVA Act, 2003 that allow authorities to determine probable cause or develop prima facie view prior to initiating an investigation.

Investigation agencies have wide powers to investigate white-collar offences. However, the rules and regulations governing such powers vary across agencies.

The police, EOW, and CBI have the power to summon persons, conduct search and seizures, compel production of documents, and arrest accused persons for interrogation during the investigation. They may call any employee, officer, or director of a company to join the investigation. Failure to join the investigation may be treated as non co-operation and may justify arrest in some cases. Section 94 of BNSS, has been expanded to compel a person to produce even communication devices. This can potentially lead to issues of seizure of confidential, personal & sensitive information and legally privileged information. The scope of exclusion of such information is currently being tested by Indian Courts.

BNSS has introduced several provisions delineating the manner in which search and seizure proceedings are to be conducted. It is now mandatory to record search proceedings through audio-video electronic means preferably through smart phones till specialised devices are finalised. A crime scene is now required to be mandatorily video-graphed also.

The MHA SOP further instructs the first responder, to submit the record of audio-video documentation in mirror copy along with chain of custody of primary evidence. Further, when a crime scene is video-graphed, the same is required to be processed in an e-Case Diary or the Inter-operable Criminal Justice System (ICJS) enabled app e-Sakshya.

The CVC has been empowered with all the powers of a civil court. The powers include the power of summoning and enforcing attendance of any person and examining them on oath, production of any document, receiving evidence on affidavits, and requisitioning any public record.

The SFIO has the same power as that of an inspector, under the Companies Act, which include the powers of a civil court as mentioned above. SFIO also has the power to compel disclosure from officers and employees of a company under investigation. SFIO also has the power to arrest and has been statutorily empowered to object to grant of bail to the arrested person and no bail can be granted without hearing the SFIO prosecutor.

The IT Authorities have also been given powers of a civil court and can compel disclosure of documents which are in the possession and control of an accused, and/or compel the presence of the assessee and fine the person if they fail to follow such compulsion. The IT Authorities as well as the ED have the power to conduct dawn raids in the form of search and seizure operations. However, such powers can be exercised only if the authorities have reason to believe that income has been concealed or is likely to be concealed by any person within their jurisdiction.

The ED has the same powers as those of the IT Authorities under the IT Act for enforcing Indian exchange control regulations. In addition, for offence of money laundering, ED has the power to attach properties obtained from proceeds of crime, and in the event the property is located outside of India, it can attach a property of equivalent value located within India. Further, ED has the authority to summon, conduct searches and seizures, compel production of documents, and arrest accused persons for interrogation during the investigation. The statements recorded by the ED have to be signed by the accused/witness and can be used in the court of law, unlike the statements recorded by the police officials.

There is no right to counsel during interrogation, although a limited right to visit along with the accused and be present outside the room to see the witness (but not hear their responses) is available.

While there is a limited statutory mandate to conduct internal investigations under the Companies Act, there is no overarching requirement to do so. Further, any such internal investigation do not bar enforcement authorities from conducting an investigation. Nonetheless, internal investigations are a good corporate governance practice that should be conducted, as they may later on assist the company in demonstrating that it has acted bona fide during investigations/trials. Enactments such as PCA specifically provide that it shall be a valid defence for a commercial organisation if the company proves that it had in place adequate procedures to prevent persons associated with it from undertaking such conduct. In some cases where the company is being accused of fraud, and the internal investigation report reveals commission of such offence by the employee, without authority and beyond the knowledge of the company, then the company could take the position of a witness or victim to the fraud and not an accused.

Separately, fiduciary duties cast on directors may also require them to initiate internal investigations in addition to filing a formal disclosure with the authorities through a Director’s Responsibility Statement (DRS). Moreover, in the case of a publicly listed company, directors are duty bound to disclose fraudulent acts not only under a DRS but also under listing regulations with stock exchanges. Further, for such publicly listed companies, any forensic audit being conducted at the instance of a regulator or otherwise has to be mandatorily disclosed to the stock exchanges.

Prosecuting Authorities

Police/CBI/EOW

After an investigation is completed, the BNSS mandates police officials, CBI, and EOW to file a report with the jurisdictional court. Once the court is satisfied that an offence is made out and there is sufficient material to prosecute the accused, it can take cognisance of the offence and proceed with trial.

SFIO

The SFIOhas to prepare an investigation report/complaint, which has to be filed with the central government for its permission to initiate prosecution. Once such permission is granted, the report is presented to a special court notified to take cognisance of such offences. The special court operates in the same way as the criminal court based on the procedures notified under the BNSS.

Income tax (IT) authorities

In the event the IT Authorities conduct a search and seizure or audit of the books of accounts of a company/individual, the IT Authorities are mandated to prepare a report and assess the amount of tax evaded by the accused. A notice of demand of such tax is then issued to an individual, who can either pay the amount or challenge the assessment before the IT Authorities/tribunal.

CVC

Once an investigation is concluded by CVC, it has to submit a report to a commission that recommends further actions to be taken by the department/authorities. Depending on the course of action recommended, prosecution may be initiated before special courts constituted to prosecute matters (as in the case of offences under the PCA).

ED

If ED has reason to believe and that reason is documented, it has the powers to arrest, conduct search and seizure, and attach property it believes to be proceeds of crime. Following the issuance of the provisional attachment order, ED is required to file a complaint within 30 days with the Adjudicating Authority. Once the complaint is filed, the properties are attached for a period of 180 days during which period the Adjudicating Authority may uphold or reject the attachment order. Failure to do so would lead to setting aside of the attachment. Upon completion of investigation, ED must file a complaint.

In India, criminal jurisprudence does not allow for prosecution of criminal offences without a trial. Agreements for deferred prosecution or non-prosecution have no sanctity. However, certain offences can be compounded by an accused. Offences with punishment of more than seven years of imprisonment or offences of serious economic consequences are not compoundable in India. An offence of a less serious nature, such as regulatory filings violation, or a minor offence under the BNS  can be compounded, in the manner provided under BNSS.

Compounding is also permitted with respect to offences punishable with fines under the Companies Act and securities and exchange control regulations. False statements made in the board report or annual accounts, violations of securities law, including the failure to furnish information, returns, etc, and the failure to redress investors’ grievances and insider trading, as examples. Such offence may be compounded either before or after the initiation of prosecution.

The newly passed Jan Vishwas (Amendment of Provisions) Act, 2023 has decriminalised several offences across statutes where the offence was generally punishable with imprisonment or fine or where the prosecution was for minor offences/technical and procedural violation. For such offence, the JV Act has done away with prosecution by imposing a penalty for such contravention.

Corporate fraud and criminal company law offences are primarily addressed through various provisions of the Companies Act and also BNS. These laws target fraudulent activities, financial misconduct, and breach of trust within corporate structures.

Companies Act, 2013

The Companies Act defines corporate fraud as any act, omission, concealment of fact, or abuse of position by any individual aimed at deceiving or gaining undue advantage at the expense of the company, its shareholders, creditors, or any other person. The offence can occur even if no actual wrongful gain or loss has taken place.

Fraud under Companies Act is treated as a serious criminal offence, punishable with imprisonment for a minimum of 6 months, which can be extended to ten years, along with a fine up to three times the amount involved in the fraud. Where audit of a company is conducted by an audit firm, and a partner of the firm either acts fraudulently or abets the fraud, both the partner and the audit firm may be held jointly and severally liable for civil and criminal consequences.

Further, in cases where a company is under liquidation or in the process of winding up, any officer of the company who obstructs the liquidation process by providing false information or concealing the company’s assets will be subjected to imprisonment for a term between 3–5 years and a fine ranging from INR1,00,000/- to INR3,00,000/-.

Key Offences Under BNS

Criminal breach of trust

The essential elements for establishing a criminal breach of trust include the entrustment of property to a person, and that person dishonestly misappropriating or converting the property for their own use. The offence is more severe when the accused holds a fiduciary position, such as a director or trustee. Punishment for criminal breach of trust may be imprisonment for up to five years, along with a fine, depending on the circumstance. The offences relating to criminal breach of trust under the IPC have now been clubbed into one single provision, ie, Section 316 of BNS.

Cheating

Offence of cheating is committed when a person is deceived fraudulently or dishonestly, which induces them to deliver property or to take any action they would not have otherwise taken. Cheating is punishable by imprisonment for up to three years, along with a fine. These provisions safeguard individuals and businesses from fraudulent activities and act as deterrent for potential economic offenders. The offences relating to cheating under the IPC i have now been clubbed into one single provision, ie, Section 318 of BNS.

Forgery

Forgery involves creating a false document or electronic record with the intention to cause injury or to commit fraud. This offence is punishable with imprisonment of up to two years. If the forgery is done with the intent to cheat, the imprisonment can extend to seven years. Further, if the forgery is committed to harm the reputation of any party, imprisonment may extend to three years.

Falsification of accounts

If an officer, clerk, or servant of a company intentionally destroys, alters, or falsifies the company’s books, papers, or accounts with the intent to defraud, they can be held liable under this offence. The punishment for falsification of accounts is imprisonment of up to seven years or fine or both.

Dishonest misappropriation of property

This offence occurs when property belonging to another person is appropriated or converted for personal use by the accused with dishonest intent. While punishment for this offence is imprisonment for up to two years, BNS has for the first time mandated a minimum punishment of six months.

Organised crime & economic offence

Section 111 of BNS, for the first time has introduced the offence of Organised Crime which has been defined to mean any continuing unlawful activity such as kidnapping, robbery, contract killing cyber-crimes, illegal trafficking of person and goods, etc. by any person or group of persons to obtain direct or indirect material benefit, including financial benefits.

Economic offence, which forms part of Organised Crime has been further defined to mean certain unlawful activities such as criminal breach of trust, forgery, counterfeiting, hawala transactions (which essentially means a system to transfer unaccounted income/cash outside the traditional banking system), mass marketing fraud, which are carried out with the view to defraud banks, financial institutions or any other institution with the objective to obtain monetary benefit in any form.

Other Corporate Offences

Apart from the above offences, corporate fraud and criminal liability are addressed by other specialised legislations. For instance, corporate offences involving the violation of securities laws and foreign exchange regulations are dealt with under the SEBI regulations and the FEMA, which have been discussed above.

In India, the bribery of foreign public officials and bribery between private parties is not currently criminalised. The legal framework regarding corruption and bribery related offences are primarily provided under the PCA.

According to the PCA, a “public servant” is broadly defined to include any individual who performs a public duty and is employed by a public, government, or local authority. This definition also extends to employees of private institutions if their functions involve discharging public duties, such as Chairman of a private Bank (CBI v Ramesh Gelli, (2016) 3 SCC 788).

Under the PCA, offering or giving any undue advantage to a public servant, whether directly or through an intermediary, with the intent to induce or reward that public servant for performing or improperly performing a public duty constitutes a criminal offence. The offence is punishable by imprisonment for a period extending up to seven years or fine or both.

Furthermore, under the PCA, even facilitators who accept bribes with the purpose of influencing a public servant are held criminally liable. Thus, not only the person giving the bribe but also any intermediary or facilitator involved in the corrupt act is punishable. The punishment for facilitators ranges between 3–7 years of imprisonment.

The definition of “public servant” under BNS have been made broader than what is provided under PCA. Similarly, BNSS has also introduced the concept of “deemed sanction” for prosecution of judges and public servants, whereby if the competent authority fails to provide sanction within 120 days, such sanction will be automatically deemed to have been granted.

The PCA also imposes liability on commercial organisations, including foreign entities carrying on business within India, if any individual associated with such an organisation offers undue advantage to a public servant in order to secure an improper advantage for the organisation in the conduct of its business. An “associated person” can include directors, employees, consultants, or any other individual whose relationship with the organisation is deemed relevant based on all circumstances. The mere nature of the individual’s formal relationship with the organisation does not solely determine liability; instead, the totality of their involvement is considered.

At present, there is no specific obligation to disclose bribery and influence peddling in India. The only deterrent is provided by the strict penalty and punishment prescribed under the PCA. There is, however, a defence available to the bribe giver in the event that they have been compelled to bribe, and that after being so compelled, they informed the law enforcement agency within seven days of the act of being compelled.

Indian securities and banking laws recognise insider trading, market manipulation, and certain banking-related offences as serious violations.

Insider Trading

Insider trading is governed by Sections 12A and 15G of the Securities and Exchange Board of India Act, 1992 (SEBI Act) along with the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations).

Regulation 2(1)(g) of the PIT Regulations defines an “insider” to mean a connected person or any person in possession of or having access to Unpublished Price Sensitive Information (UPSI), regardless of how the person came in possession or had access to the UPSI. In fact, very recently, SEBI has expanded the definition of a connected person to inter alia, include a person sharing a household/residence with a connected person. Further, SEBI has also expanded the meaning of a deemed connected person from “immediate relative” to “relative”. The key elements of the offence of insider trading include:

• dealing in securities of a publicly traded company based on UPSI;
• communicating UPSI to any person, except where the communication is necessary for the ordinary course of business or as required by law; or
• counselling or procuring another person to deal in securities based on UPSI.

The defence available to an insider to prove his/her innocence includes instances where the communication or procurement of UPSI was done for legitimate purposes, performance of duties, or discharge of legal obligations. While there exists a presumption against the insider, the Supreme Court has ruled through a series of decisions, that such a presumption is subject to the existence of foundational facts to be demonstrated by SEBI.

A person found guilty of insider trading is liable to penalty which shall not be less than INR1 million/- and up to INR250 million/- or 3 times the amount of profit made, whichever is higher.

Market Manipulation

Stock Price Manipulation is regulated and made an offence under SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations)

SEBI prohibits the use or employment of any manipulative/deceptive device/artifice to defraud in connection with the issue, purchase, or sale of any securities listed or proposed to be listed. It also prohibits a person from committing fraud upon any person in connection with the issuance, dealing with the listed securities or securities proposed for listing. It is also an offence to indulge in manipulative, fraudulent, or unfair trade practice in the securities markets.

The PFUTP Regulations clarify that any act of diversion, misutilisation, or siphoning off of assets or earnings of a publicly traded company, as well as any concealment of such acts, is regarded as manipulating the books of accounts or financial statements of the company that directly or indirectly manipulates the price of its securities. This is deemed as a “manipulative, fraudulent, and an unfair trade practice” in the securities market.

Dealing in securities would be treated as manipulative, fraudulent/unfair trade practice if it involves acts such as knowingly indulging in creation of false or misleading appearance of trading in the securities market and dealing in a security intending to operate only as a device to inflate, depress, or cause fluctuations in the price of a security for wrongful gain/avoidance of a loss.

In addition to the above, if any person contravenes or attempts to contravene or abets the contravention of the provisions of the SEBI Act along with its regulations, he/she can be punished with imprisonment of up to ten years, or with a fine, which may extend to INR250 million/- or with both.

Criminal Banking Law

In addition to the BNS, there are certain special statutes that prescribe penalties in relation to certain offences relating to banking. These include the Reserve Bank of India Act, 1934 (RBI Act) which provides for penalty in case of wilfully making or omitting to make material statements by any person under any application, return, statement, etc, in connection with an invitation of deposit of money from the public. Separately, failure to produce books of accounts as required under the RBI Act entails a fine of up to INR2,000/- for each offence with an additional fine if the offence persists. Also, if a person other than the entity of the RBI or as expressly permitted by the government of India draws, accepts, makes, or issues any bill of exchange or promissory note for payment of money payable to the bearer on demand, then such a person shall be punishable with a fine, which may extend to the amount of the bill of exchange or promissory note.

The RBI also regulates Non-Banking Financial Companies (NBFC) and has the power to remove directors of a NBFC, supersede the Board of Directors of such NBFC, determine the policy, and give directions to NBFCs, to collect information from NBFCs, take action against the NBFC auditors for failure to comply with directions or provisions of the RBI Act, prohibit acceptance of deposit and alienation of assets, inspect the NBFC, and file a winding-up petition on behalf of the NBFC.

The RBI is also the regulatory authority for payment systems under the Payment and Settlement Systems Act, 2007 (PSS Act). The PSS Act provides that any person responsible for violation of the PSS Act shall be punishable with imprisonment for a term of one month to ten years or with a fine which may extend to INR10 million/- or with both. On repeat offence or failure to comply, the RBI can levy a further fine which may extend to INR100,000/- for every day the contravention continues. Persons who, at the time of the contravention was in charge of and was responsible to the company for the conduct of business, as well as the company itself, shall be guilty of the contravention. Under both the RBI Act and the PSS Act, it is only the RBI that can file a complaint with the court.

Separately, there are certain pieces of local legislation which regulate money lending at a state level.

Tax Fraud Under Indian Law

Tax fraud consists of inter alia, the following principal offences:

• fraudulently removing, concealing, transferring, or delivering any property or any interest in such property with an intention to prevent recovery of taxes;
• parting with a company’s property in contravention of the IT Act;
• failure to deposit tax deducted or collected at source;
• wilful attempt to evade tax imposable or reportable under the IT Act;
• failure to furnish return where tax liability exceeds INR10,000/-;
• failure to produce accounts and documents if information is sought by the IT Authorities, or failure to get accounts audited as directed by the IT Authorities;
• failure to furnish returns in search (raid) cases;
• abetment to the offence of filing of false returns; and
• making false statement to evade taxes, penalty, or interest or abetting or inducing any person to make or deliver a false account or a false declaration.

Punishment prescribed in relation to the aforesaid offences may entail penalty and rigorous imprisonment between two months to seven years along with a fine, depending on the nature of the offence.

Undisclosed Income

If a person holds foreign income or assets that are undisclosed, they can be prosecuted under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (Black Money Act). Offences under this legislation in addition to penalty, also entail rigorous imprisonment ranging from six months to seven years. As part of the IT Act and the Black Money Act, taxpayers are required to make full and true disclosure of their income and assets, failing which they may be prosecuted and fined.

In case of prosecution, culpable mental state is presumed, unless the defendant proves otherwise. Culpable mental state includes intention, motive or knowledge of a fact or belief in such, or reason to believe a fact.

The Companies Act mandates a company to maintain its books of accounts for a period of up to eight preceding financial years. Further, the books If there is an inquiry or investigation pending against the company under the Companies Act, the company may be required to maintain its books of accounts for a longer period of time. Further, if the senior management, including the managing director and the CFO or any person authorised by the Board, fails to comply with such obligations, then such person will be punished with imprisonment for a term extending to one year and/or fines between INR50,000/- and INR500,000/-.

The managing director, the whole-time director in charge of finance, the CFO, or any other person charged with the duty of complying with the requirements of maintaining the financial statement of the company shall be punishable with imprisonment for a term, which may extend to one year or with fines between INR50,000 and INR500,000/-, or with both. This would be the case if the books:

• do not show the true and fair view of the state of affairs of the company;
• do not comply with the accounting standards notified under the Companies Act; or
• are not in the form or forms provided for one or more different classes of companies in the Companies Act.

If the concerned officer is found to maintain false books of accounts they may, depending on the facts and allegations, be subject to the various offences mentioned in 3.1 Criminal Company Law and Corporate Fraud.

The PMLA also mandates that every person or entity that falls under the definition of “reporting entity”, shall maintain a record of all transactions, maintain a record of documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence relating to its clients for a period of five years from the date of transaction between a client and the reporting entity, or five years after the business relationship between a client and the reporting entity has ended or the account has been closed, whichever is later. By a recent amendment, chartered accountants, company secretaries, and certified management accountants have been notified as the “reporting entity” under the PMLA for certain transactions.

Cartelisation and anti-competitive practices are regulated by the Competition Commission of India constituted under the Competition Act, 2002 (Competition Act) which provides for civil penalties and only provides criminal liability when there is non-compliance with the orders/directions issued under the Competition Act, he/she shall be punishable with imprisonment and/or fine.

In terms of the Competition Act, agreements in respect of production, supply, distribution, storage, acquisition or control of goods, or provision of services, which cause or are likely to cause an appreciable adverse effect on competition within India are prohibited and, if entered, would be void. Further, an enterprise that imposes unfair, discriminatory conditions on purchase or sale of goods/services or imposes unfair or discriminatory price on the purchase/sale of goods or services (including predatory prices) would be regarded as abusing its dominant position.

After conducting an inquiry, if the Competition Commission of India (CCI) finds contravention of the aforesaid prohibitions, it may take various actions including imposition of penalty of up to 10% of the average turnover of the enterprise for the three preceding financial years.

In case of anti-competitive agreement entered into by a cartel, CCI may impose upon each producer, seller, distributor, trader, or service provider included in that cartel, a penalty of up to three times its profit for each year of the continuance of such agreement or 10% of its turnover for each year of the continuance of such agreement, whichever is higher.

Further, failure to comply with the orders or directions of CCI, shall be punishable with a fine which may extend to INR100,000/- for each day during which such non-compliance occurred, subject to a maximum of INR10 million/-. Failure to comply with the orders or directions issued or failure to pay the fine shall be punishable with imprisonment for a term which may extend to three years, or with a fine which may extend to INR250 million/-, or both.

The CCI can also order for the recovery of compensation from any enterprise for any loss or damage shown to have been suffered because of the particular enterprise violating directions issued by CCI or contravening any decision or order of the Commission. Similar powers have also been given to the Appellate Tribunal under Section 53Q of the Competition Act.

As per the Consumer Protection Act, 2019 (CPA), which deals with consumer protection in India:

• Offence of false or misleading advertisement prejudicial to the interest of consumers is punishable with imprisonment for a term which may extend to two years and with a fine of up to INR1 million/-. Every subsequent offence is punishable with imprisonment for a term which may extend to five years and with a fine which may extend to INR5 million/-.
• Offence of manufacturing products containing adulterants, for sale or storing, selling or distributing or importing, result in imprisonment ranging from six months to life along with a fine ranging from INR100,000/- to INR1 million/-, depending on the nature of injury caused.

Additionally, prosecution for non-compliance with orders of the central authority under the CPA shall be punished with imprisonment for a term which may extend to six months or with a fine which may extend to INR2 million, or with both.

Cyber-crimes in India are primarily addressed under Information Technology Act, 2000 (Information Technology Act). The BNS also provided for general offences (such as theft, criminal breach of trust etc) which could be invoked for commission of cyber offences.

However, for the first time, Section 111 of BNS has provides for cyber-crimes as a part of a larger offence of “organised crime”. The BNS, however, does not define “cyber-crimes”.

BNS

Section 1(5) of the BNS provides for extraterritorial jurisdiction to prosecute any person within and beyond India committing an offence targeting a computer resource located in India. The scope of exterritorial application of BNS stands further expanded under Section 48 of BNS as per which abetment by a person outside Indian of an offence in India is also punishable.

In addition, while the Information Technology Act provides for specific offences targeting computer networks, acts that are not specifically covered under the Information Technology Act can be prosecuted under the BNS. However, for offences that fall within the scope of both the statues, the Info Act will prevail of BNS.

Hacking and Data Theft

Number of actions ranging from hacking, data theft, virus attacks, causing damage to computer networks, destroying/denying access to authorised persons, tampering/manipulating of computer systems etc have been prohibited under the Information Technology Act. The maximum punishment for the above offences is imprisonment for up to three years and/or a fine of up to INR500,000/-.

The Information Technology Act also prescribes punishment for dishonestly receiving a stolen computer resource or communication device, which may result in imprisonment of up to three years and/or a fine of up to INR100,000/-.

Sending, by means of a computer resource or a communication device, any information that is grossly offensive or has a menacing material, or any information, knowing that it is false, but for the purpose of causing annoyance, inconvenience, danger, obstruction, insult, injury, criminal intimidation, enmity, hatred or ill will, or issuing an e-mail for the purpose of causing annoyance or inconvenience or to deceive or mislead the addressee or recipient about the origin of such messages, is punishable with imprisonment for a term which may extend to three years as well as fine.

Fraudulent or dishonest use of the electronic signature, password, or any other unique identification feature of a person is punishable with imprisonment for a term which may extend to three years and fine which may extend to INR100,000/-.

Where there is a conflict between the provisions of the Information Technology Act and the IPC (now BNS), the Supreme Court of India has held that the Information Technology Act, being a special statute, shall prevail over the IPC.

The Indian foreign trade/customs laws provide for an export and import control mechanism. However, restrictions are provided on import/export of specified items from specified countries and with certain organisation and individuals/entities associated with such organisation. For some regulated commodities, the quantity of such commodity could also be regulated. Commodities that are listed in the List of Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET List) or other multilateral treaties and arrangements are also controlled and regulated by, and subject to permission from the central government.

Trade sanctions that are imposed on countries or entities are typically on the basis of resolutions passed by the UN, other international organisation, sanctions, and embargos.

Items restricted to be imported from/exported to identified countries/organisation/entities are typically aligned with United Nations Security Council Resolutions/items specified by other multilateral organisation, such as the International Atomic Energy Agency.

Under the BNS, whoever intends to facilitate, or knowingly causes the facilitation of the commission of an offence punishable with death or imprisonment for life, voluntarily conceals by any means, the existence of a design to commit such offence or makes any representation which they know to be false in respect of such design, shall

• if the offence be committed, be punished with imprisonment for a term which may extend to seven years and a fine; or
• if the offence is not committed, with imprisonment for a term which may extend to three years and fine

When the concealment is done with respect to any other offence punishable with imprisonment, such concealment is punishable with imprisonment for a period of one-fourth of the longest term of such imprisonment if the offence is committed, and one-eighth of the longest term of such imprisonment if the offence is not committed.

In cases of common intent offences, the BNS upholds the principle of joint liability. This means that if two or more individuals are involved in the commission of an offence, each participant is treated as if they committed the act individually. Consequently, all parties may be held liable for the offence committed, regardless of the extent of their involvement.

Thus, if an offence occurs as a result of the abettor’s instigation or assistance, the abettor is punishable in the same manner as the principal offender. Under BNSS, a person who conspires with or assists another to commit a corporate offence can be held liable, with expanded definitions of abetment that now include foreign entities. Specifically, abetment by a person in India of an offence committed outside India is punishable under BNS. Abetment from outside India to commit a crime in India, has been criminalised for the first time under BNS.

A conspiracy occurs when two or more persons agree to perform an illegal act or to carry out a legal act using illegal means. Under BNS, any individual involved in a criminal conspiracy to commit an offence punishable by death, life imprisonment, or rigorous imprisonment for two years or more will face the same penalties as if they had abetted the offence.

Certain statutes, such as PCA, impose additional liabilities for abetment in corporate offences. Specifically, the PCA outlines punishable with imprisonment for a minimum of three years, extending up to seven years for abetment of offences under the PCA. Further, distinct offences of bribing a public servant, punishable with imprisonment for a term which may extend to seven years and abetment, punishable with imprisonment for a term between three to seven years have been prescribed under the PCA.

PMLA is India’s primary legislation dealing with the offence of money laundering, with ED being the relevant prosecution agency. PMLA is based on the international anti-money laundering initiative by the Financial Action Task Force. In order to invoke PMLA, ED needs to establish two foundational facts:

• that a scheduled offence has been committed (which includes offences under the BNS, anti-narcotics laws, and anti-terrorism laws, evasion of indirect tax); and
• that it has resulted in the generation of “proceeds of crime” (PoC).

PoC refers to any property which has been derived as a result of the predicate offence. The test here is that the property should have been derived as a result of the criminal activity relating to a scheduled offence. The process or activity can be in any form, be it one of concealment, possession, acquisition, use of PoC, or claiming it to be untainted property. Any involvement in even one of these processes or activities would constitute money laundering.

In the event that the person named in the criminal activity relating to a scheduled offence is finally discharged, acquitted by a court of competent jurisdiction, or if the scheduled offence is quashed, then PMLA prosecution falls away. The offence of money laundering is considered to be a continuing offence, the cause of action for which renews with every day of the possession of PoC. For details on prosecution and enforcement authorities, refer to 2.5 Prosecution.

A strong defence strategy in a criminal offence has two hallmarks:

• version of facts to be pleaded needs to be plausible; and
• version of facts is backed by credible and admissible evidence.

During trial, an accused person has a chance to establish their defence against the charges brought by the prosecution, including by cross-examining witnesses and bringing witnesses of their own.

The burden of proof must be discharged beyond all reasonable doubt. The onus of proof rests on the prosecution. Even in cases where there is reverse burden of proof such as the PMLA, the prosecution still needs to prove the foundational facts.

Another defence available to accused persons is that of assailing the chain of custody or deviation from due process as provided under BNSS. The two statutes have ample safeguards and provisions supervising the procedure for seizure of case-related property and articles.

In cases under the PCA, it is a valid defence for a commercial organisation against vicarious liability if the company proves that it had in place adequate procedures, as prescribed, to prevent persons associated with it from undertaking such conduct.

A similar defence is also provided for vicarious liability prosecution where, in addition to showing that a person was not in charge or responsible for the contravention, an accused person will not be liable to punishment if he/she proves that the contravention took place without his/her knowledge or that he/she exercised due diligence to prevent such contravention.

While there are no de minimis exceptions for white-collar offences, certain statutes cast reporting obligations and liability over a certain amount (eg, reporting under tax laws and PMLA – similarly, any gift received by a “public servant” below INR5,000/- is not considered a bribe under PCA).

The BNS statutorily prescribes general exceptions, which are the defences provided to the accused that exculpate criminal liability. Under Indian law, acts or omissions by children, or a person of unsound mind, or committed by a person justified by law, or committed under the influence of intoxication, or committed by a person in good faith, or acts committed by a person under threat or duress are generally either exempt from prosecution or prosecuted to a lesser degree than what the offence would have otherwise attracted. However, the burden of proof for availing benefit of such exception is high and inferences will be drawn from the overall facts and circumstances of the case and the credible evidence presented by the accused person to show that such mitigating factors and influences existed.

Plea bargaining is permitted in limited circumstances. It is not allowed in cases where the prescribed punishment is death or life imprisonment or imprisonment for a term exceeding seven years. Plea bargaining also does not apply where the offence affects the socio-economic condition of the country or has been committed against a woman, or a child under the age of 14 years.

A person accused of an offence may file a plea-bargaining application in the jurisdictional court with a brief description of the facts of the case. A prerequisite for such an application is that the accused person has not previously been convicted of the same offence by a court. After understanding the nature and extent of punishment provided by the law for the offence, the application is voluntarily preferred.

Once the court is satisfied that the application has been filed voluntarily, it shall provide time to the public prosecutor/complainant to mutually work out a satisfactory disposition of the case. Where such a result has been reached, the court shall award compensation to the victim and hear the parties’ argument regarding the severity of the punishment and thereafter the court may impose either half or one-fourth of the minimum punishment.

Every person is mandated under law to co-operate with the relevant investigation agencies in matters of inquiry/investigation. This includes providing the requisitioned materials/information/documents requested by the investigation agencies and appearance before the relevant investigation officer when summoned either to provide any information/materials/documents or to record a statement.

There is also a legal duty to furnish correct and accurate information to the investigation officer. Failure of such duty It is punishable under law. However, the constitutional right against self-incrimination is an exception. Further, except for certain offences listed under Section 33 of BNSS, or any other law calling for active disclosure, there is no general duty to disclose the commission of an offence.

In the event that an accused person pleads guilty to an offence during or before commencement of trial, the courts have discretion to take a lenient view while sentencing them. However, while exercising this discretion, the court cannot award a sentence, which is lower than the minimum sentence prescribed for such offence. This is, however, subject to plea bargains.

The Whistle Blowers Protection Act (WB Act) to establish a mechanism for receiving complaints relating to disclosure on allegations of corruption or wilful misuse of power by public servants and to further provide adequate safeguards against victimisation was notified on May 2014. However, the Act is yet to be operationalised. One of the drawbacks of the WB Act is that it does not cover corporate whistle-blowers.

In addition, there are certain other voluntary mechanisms in India to deal with whistle-blowing. The SEBI Act mandates that every listed company must have a whistle-blower policy in place. Moreover, SEBI has also introduced a reward mechanism from 2019 onwards to encourage employees of listed companies to come forward with their concerns.

In 2020, the Ministry of Corporate Affairs implemented a new format for conducting statutory audits of companies, known as the Company Auditors Report Order, 2020, and has been made applicable for audits beginning from financial year 2021–2022. A salient feature of this order is that the auditor of the company will now be obligated to generate reports regarding whistle-blower complaints filed against the company during the said financial year.

The Companies Act also creates an obligation on auditors to report fraud in the company they are auditing. Failure to do so shall render such auditor not to be eligible to be appointed as an auditor of any company for a period of five years from the date of passing of the order and the auditor shall also be liable for such action for fraud under Companies Act.

In addition to the aforesaid, BNSS for the first time has provided for witness protection schemes to be notified by a state government.

Another significant addition under the BNSS is that withdrawal of prosecution can now only take place with the prior permission of the complainant (which can include a whistle-blower). Such a provision for the first time allows a whistle-blower to be a formal participant in proceedings before the concerned criminal court.