I OVERVIEW

While the general principles of asset tracing in India are set out in the trusts law, civil procedure and criminal law, the Indian courts have yet to substantively address these issues. The absence of precedent and jurisprudence on the subject is surprising given India's robust judiciary. Additionally, India is ranked poorly on global transparency indices.

Indian law recognises the supervening claim of a bona fide purchaser for value without notice. However, the conflicting demands of a claimant who has suffered fraud against the rights of such a bona fide purchaser have yet to be decided by Indian courts.

As set out in this chapter, the elements required for Indian courts to develop the jurisprudence for asset tracing already exist in Indian law, and this will arguably develop as efforts to increase transparency succeed. Interestingly, in India this may well develop in criminal law and not in civil actions.

II LEGAL RIGHTS AND REMEDIES

i Civil and criminal remedies

Civil remedies

Tracing is the most sought remedy in respect of fraud under civil law. Recourse is generally available under contract law, company law, tort and trust law.

Law of tort

The law of tort in India is similar to the law of tort in England; consequently, fraud and conversion are recognised in India as follows:

  1. fraud: The act of wilfully making a false statement with the intent that the plaintiff acts in reliance on it, and where the plaintiff suffers harm in consequence, is a fraud in tort;2
  2. fraudulent representation: For a representation to be fraudulent, the fraudster must be aware of its falsity, or be indifferent to its truth, and have made the representation with the intent of inducing the victim to act on it and consequently cause him or her damage; and
  3. conversion: This is an act of wilful interference with movable property without lawful justification in a manner that is inconsistent with the right of another, thereby depriving the other of the use and possession of the movable.

Those who abet a tortious act have equal liability to those who commit the wrong. A person procuring a wrongful act from another is liable if he or she knowingly induces that wrongful act. All persons who aid, counsel, direct or join in committing a wrongful act are joint tortfeasors who are liable jointly and severally to the injured party.

The principal remedy for a tort is an action for damages. In certain cases, an injunction restraining any dealing in or with the property obtained by fraud may also be obtained in addition to damages. Another remedy that may be available is specific restitution of property.

Contract law

The principal legislation governing contracts in India is the Indian Contract Act 1872 (Contract Act).

Section 19 of the Contract Act allows a party to void a contract where consent to the contract was caused by coercion, fraud or misrepresentation.3 Should a party choose not to void a contract for fraud, any such person may also insist that the contract be performed and that he or she be put in the position in which he or she would have been had the representations been true.

In addition to claiming rescission of the contract on account of fraud (where the rescinding party is liable to restore any benefit received under a contract that is voidable),4 a claimant may also bring a civil suit for damages.

As a general rule, damages are calculated based on the position that a plaintiff would have been in had the representation been true, as opposed to the position he or she is in owing to the fraud.5 A claim for effective restitution would, in all likelihood, necessitate an action to trace a specific asset.

Corporate law
Fraud under the Companies Act 2013 (the Companies Act)

Section 447 of the Companies Act defines fraud to include an act, omission, concealment of any fact and abuse of position with the intent to deceive or gain an advantage over, or to cause injury to, a company, its shareholders or its creditors, regardless of whether or not there is in fact any wrongful gain or wrongful loss.

Section 448 of the Companies Act also provides that any false statements made in, inter alia, the financial statements, prospectus and reports of a company will be treated as a fraud against the company.

Penalties for fraud under the Companies Act include imprisonment and fine.

The Companies Act also allows for a company or any of its members, creditors or contributories to complain to the courts about the wrongful possession of any of the company's property by an officer or employee.6 While not strictly tracing, we believe that it is possible that this will provide the basis for a tracing action should facts permit an aggrieved party to seek this remedy.

The Companies Act stipulates that the fraudulent management of a company's affairs, including fraudulent acts or misconduct on the part of the management, and the formation of a company for unlawful or fraudulent purposes, are grounds for the compulsory winding up of a company.7

Investigative authorities

The police, the Central Bureau of Investigation, the Directorate of Enforcement, the National Company Law Tribunal and the Serious Fraud Investigation Office (SFIO) are the authorities that investigate economic offences in India, including those of fraud. In the year ending on 31 March 2017, the SFIO had completed 87 investigations, including investigations for fraudulent matters.8 This number is more than double the number of investigations completed in the year ending on 31 March 2015. We believe that over time the SFIO will be the principal investigative authority for matters concerning public fraud, while the police will continue to investigate economic offences against individual persons and companies.9

At Indian law, for every offence committed by a company or its officers, the company and the officer in default are held liable, making the directors and the management of the company vicariously liable for the acts of the company subject to their involvement in the conduct of its business.

Trust law

The Indian Trusts Act 1882 allows beneficiaries of a trust to bring an action against trustees for a 'breach of trust', essentially being a breach of the trustees' duties towards the beneficiary.10 This would include improper acts such as fraud on part of the trustees of an express trust or a constructive trust.

If trust property reaches the hands of a third party inconsistently with the trust's aims, the beneficiary may institute a suit to declare that the property in question is actually a part of the trust.11 Where a trustee has disposed of the trust property and the money or other property received can be traced into his or her hands, or the hands of his or her legal representative or legatee, the beneficiary has the same rights as he or she would to the original trust property.

Remedies under criminal law

Offences and penalties under the Indian Penal Code 1860 (the Penal Code)

The Penal Code is the principal legislation describing criminal offences, and it recognises acts of criminal conspiracy, criminal misappropriation of property, criminal breach of trust, cheating, dishonest or fraudulent removal or concealment of property, and forgery as offences.

Fraud

'Fraud' per se is not defined under the Penal Code and is not a specific offence under the Penal Code. The Penal Code, however, provides a specific definition of the term 'fraudulently', which in turn is an essential ingredient for commission of various offences under the Penal Code.

A person is said to do a thing fraudulently if he or she does that thing with the intent to defraud, but not otherwise.12 To constitute fraud under the Penal Code, there must be deceit or an intention to deceive; and injury, actual or possible, or the intention to cause actual or possible injury.13 The emphasis is thus on the 'intent to defraud' as against 'intent to deceive' and acting 'dishonestly' where the essence lies in the intention to cause wrongful gain to one person or wrongful loss to another person.14 Intent to defraud is established only when the deception has as its aim some advantage or the likelihood of advantage to the person who causes the deceit or some kind of injury or the possibility of injury to another. Fraud thus operates on the mind and produces results that the perpetrator of the fraud has contemplated. The expression defraud thus must be understood in its legal sense and not popular sense. It consists of two elements, namely deceit and injury15 to the person so deceived. The idea of deceit is a necessary ingredient of fraud, but it does not exhaust it, there being an additional element implicit in the expression.

The act of deceiving a person, fraudulently or dishonestly, and thereby inducing him or her to deliver any property to any person, grant consent for that property to be retained by any person, or commit an act or omission that causes or is likely to cause damage to the property, is punishable under the Penal Code as an offence of 'cheating'.

Dishonest misappropriation or conversion of property by a person entrusted with that property constitutes an offence of 'criminal breach of trust'.

In sum, the act of fraud forms an essential component of several offences under the Penal Code, and the offender is liable to be proceeded against and convicted in accordance with the procedural laws prescribed in this respect.

Offences relating to property

Property that has come into a person's possession through theft, extortion, robbery or criminal misappropriation, or in respect of which criminal misconduct is committed, whether within or outside India, is construed as 'stolen property'. However, if the stolen property subsequently comes into the possession of a person legally entitled to its possession, it ceases to be classified as stolen property.16

Receipt17 and retention18 of stolen property are offences under the Penal Code. Habitual receiving and selling of stolen property and the act of assistance in the concealment of stolen property are recognised as separate offences under the Penal Code.

Courts have the power to trace and identify property that they reasonably believe to be stolen19 by conducting an inquiry, investigation or survey and for this purpose may issue summons for the production of any document or information that they consider necessary for the purpose of carrying out the investigation.20

Property identified as stolen is forfeited to the government free from all encumbrances.21 Where certain properties are commingled, the court will identify and specify to the best of its knowledge those properties that it believes are proceeds of crimes.22 When only part of the property is proven to be stolen, an option will be given to the person affected to pay a fine equal to the market value of that part of the property in lieu of forfeiture,23 upon payment of which the order of forfeiture shall be revoked.24

Abetment

Unless expressly provided for, an abettor of an offence and any act committed by that abettor in relation to the offence in question, are both punishable with the same punishment as provided for the offence.25 The term 'abetment' under the Penal Code includes the abetment of an act in India that is committed outside India and that would constitute an offence if committed in India.26

Procedural laws

Offences associated with fraud are cognisable, and the law permits police officers to investigate any cognisable offence without the order of a magistrate. Hence, the police have the power to arrest persons in connection with fraudulent offences27 without a magistrate's order,28 and thereafter record the relevant information and produce the detainees before a magistrate.29

ii Defences to fraud claims

Defences under civil law

The Sale of Goods Act30 and the Transfer of Property Act31 protect a buyer who, in good faith and without notice of defect in title, purchases an asset without notice of the vendor's defect in the title to that asset. While these protections are circumscribed by the stipulations of the relevant statute, they should provide a defence to a tracing action where the asset concerned has been alienated by the counterparty to the impugned contract.

More specifically:

  1. an action for damages in tort would fail if the claim is not founded or is found to be malicious;
  2. at contract, Indian law provides for a carve out that, for consent caused by misrepresentation or by silence, for actions that are considered fraudulent within the meaning of the Contract Act, the contract is nevertheless not voidable if the party whose consent was so caused had the means of discovering the truth;
  3. for breach of trust, a trustee may claim that the beneficiary fraudulently induced the trustee to commit the breach; or that the beneficiary, being competent to contract, willingly concurred with the breach, or subsequently acquiesced therein;32 and
  4. the Limitation Act 1963 prescribes the limitation period within which any claim may be filed, outside of which time the claim will be dismissed by the courts irrespective of whether limitation is set up as a defence.33 If the knowledge of the right or title on which a claim is founded or any document to establish a claim is fraudulently concealed, the limitation period begins to run from the time the plaintiff discovers or could, with reasonable diligence, have discovered the fraud; or from the time the plaintiff first had the means of producing or compelling the production of a concealed document.34 In the case of a continuing tort, the limitation period continues to run at every moment during which the tort persists.35

Defences under criminal law

Period of limitation

The Code of Criminal Procedure 1973 (the Code of Criminal Procedure) prescribes the period of limitation for cognisance of offences.36 However, limitation is prescribed only for those offences punishable with imprisonment of up to three years and irrespective of this bar, the courts may take cognisance of an offence after the expiry of the limitation period in the interests of justice and upon a sufficient cause being shown for the delay.

III SEIZURE AND EVIDENCE

i Securing assets and proceeds

Efforts to secure assets may be taken pending the outcome of a claim, and the procedures will vary depending on whether the claim is civil or criminal in nature.

Civil proceedings

The Code of Civil Procedure 1908 (the Code of Civil Procedure) sets out the procedural requirements for civil actions in India and also provides options to the claimant for attachment before the judgment37 and appointment of a receiver.38

Attachment before judgment

At any stage of a dispute, if a court is satisfied that the defendant is about to dispose of or remove the whole or a part of the property in question from the jurisdiction of the court with the intent to obstruct or delay the execution of any decree that may be passed against the defendant, the court may order the defendant to furnish security or to show cause as to why he or she does not need to furnish security.

If the defendant fails to do as ordered, the court may order the specified property to be attached. The attachment will, however, not affect any rights of third parties against the attached property that have accrued prior to the attachment; and not bar any person holding a decree against the defendant from applying for a sale of the attached property in execution of the decree.

Indian courts have viewed granting an order for attachment as a drastic and extraordinary measure to be used sparingly and strictly in accordance with the Code of Civil Procedure when the court is satisfied that the plaintiff has a prima facie case and the defendant is about to dispose of his or her property.

Appointment of a receiver

A court may, when it considers it to be just and convenient:

  1. order the appointment of a receiver of any property;
  2. remove from any person possession of the property;
  3. commit the property to the possession of the receiver; and
  4. confer rights in relation to the property on the receiver.

A receiver will not be appointed:

  1. unless the plaintiff proves prima facie that he or she has a very strong chance of succeeding in the suit, and shows adverse and conflicting claims to the property along with some danger or emergency or loss of his or her own right demanding immediate action;
  2. if it has the effect of depriving a de facto possession, as that may cause irreparable wrong; and
  3. if the party making the application comes to court with unclean hands.

Additionally, the court must exercise sound and judicial discretion, and must take into consideration all the circumstances of the case as may be required to provide justice.

Criminal proceedings

Criminal proceedings for fraud are likely to be more effective than civil proceedings as courts, the police and enforcement agencies have broader powers with respect to the seizure and confiscation of property under the Code of Criminal Procedure. The courts are, inter alia, authorised to issue summons for the production of any documents or information as may be considered necessary for an investigation or an inquiry,39 and to issue search warrants,40 including to any place outside India with which the Indian government has made arrangements.41 A police officer may be authorised by a magistrate to, inter alia, enter and search any place, take into possession any property that is reasonably suspected to be stolen42 and seize43 any property that he or she, of his or her own accord, suspects to be stolen or that creates suspicion of an offence.

ii Obtaining evidence

In civil proceedings, the plaintiff may apply to the court to issue summons requiring a witness to be present in court, or the court may suo moto summon any person for the same who, after the issuance of the summons, has a duty to be present and give evidence, or produce any document in his or her possession or power, as may be directed by the court.

Where a party to a suit refuses to give evidence when required, the court may pronounce judgment against that party or make any order it deems fit.

In criminal proceedings, courts have the power to summon any person as a witness and examine them, or to examine any person in attendance,44 and to recall or re-examine any person at any stage of a proceeding.

Investigators may summon any person who appears to be acquainted with the facts and circumstances of the case,45 although statements recorded in investigations by the police are of limited evidentiary value,46 the case being different where the statements are recorded by the Directorate of Enforcement.47

IV FRAUD IN SPECIFIC CONTEXTS

i Banking and money laundering

Banking

Central bank regulations

The Reserve Bank of India (RBI) regulates the banking sector in India. The RBI issued the Master Direction on Frauds on 1 July 2016 (the Master Direction) to address, inter alia, frauds related to cheques and loans.

The Master Direction requires banks and financial institutions to frame policies for fraud risk management and investigation, and to report any discovered frauds. Any matter in which a criminal process has been initiated otherwise than by the police must be treated as a fraud.

The Master Direction was amended to provide for an online, searchable central fraud registry based on instances of reported fraud. The registry is currently accessible only by banks.

The RBI has also recently released regulations limiting customer liability in unauthorised or fraudulent electronic banking transactions.48 These regulations require banks and PPI issuers49 to provide mechanisms for reporting unauthorised electronic transactions and limit customer liability if the customer informs the bank of the unauthorised transaction within a specified number of days.

Negotiable instruments

Under Indian law, any person who obtains a negotiable instrument by fraud is not entitled to claim the amount due thereon.50 However, a holder of such an instrument in 'due course' who acquired the instrument for consideration without notice of fraud may make such a claim.51

Money laundering

The Prevention of Money Laundering Act 2002 stipulates, inter alia, that the 'proceeds of crime' including any property obtained or increased in value, directly or indirectly, by money laundering may be seized and forfeited. Where property is taken or held outside India, 'proceeds of crime' also include property equivalent in value held within India. India has reciprocal arrangements with contracting states to deal with cases of money laundering.

ii Insolvency

Pursuant to extant law, an 'act of insolvency' includes transfer of property that would otherwise be void due to fraudulent preference were the debtor adjudged an insolvent. The property of the insolvent vests in the official assignee, and remedy against an insolvent is available to creditors only as prescribed under law.52

If during the insolvency resolution process or liquidation process of a company it is found that the business was being carried out with a fraudulent purpose or with the intent to defraud creditors, action may be taken against the persons who were knowingly involved in carrying out the business, including requiring them to make such contributions to the assets of the company as may be deemed fit. An officer of the company may also be punished for committing fraud prior to the insolvency commencement date.53

An order of discharge operates against liabilities, save for those incurred as a consequence of fraud or as means of any fraud. A fraud by the debtor is grounds for the refusal of absolute discharge.

iii Arbitration

In 2009, a division bench of the Supreme Court of India held that an issue of fraud requires adducing and elaborate examination of evidence, and is, therefore, beyond the competence of an arbitrator.54 However, in 2014,55 a single judge of the Supreme Court of India held in favour of the arbitrability of fraud while noting that allegations of fraud to void an arbitration contract for delaying or avoiding reference to arbitration have become routine.

A division bench of the Supreme Court settled the position in October 201656 by holding that a mere allegation of fraud cannot be reason to set aside an arbitration agreement and the court can only set aside an arbitration agreement if:

  1. the allegations of fraud are so serious that they may constitute a criminal offence;
  2. the allegations of fraud and resulting issues are so complex that they can be decided only by a civil court upon the review of voluminous evidence; and
  3. fraud is alleged against the arbitration provision itself or the parent contract.

iv Fraud's effect on evidentiary rules and legal privilege

In certain cases, fraud has the effect of relaxing strict evidentiary rules. Illustratively, ordinarily, in order to give contents of a document that are in the possession of another party as secondary evidence, notice must be given to the party possessing the document except if the party has obtained possession of the document by fraud. Similarly, oral evidence, usually inadmissible, is permitted where fraud is sought to be proven as a ground to invalidate the contract.57

Separately, while information received by lawyers during the course of their engagement is privileged and confidential, the prohibition from disclosure ceases to apply where the lawyer has observed any fact showing that any fraud has been committed after the commencement of his or her engagement.58

V INTERNATIONAL ASPECTS

i Conflict of law and choice of law in fraud claims

While there are no specific rules in relation to fraud claims, Indian courts generally respect an express choice of the parties in relation to the law governing the contract provided that the choice is 'bona fide and legal'.59 The law chosen must relate to the subject matter of the contract or the parties in some manner, and must not be designed to overcome some specific prohibitions prescribed in the laws of the jurisdictions in which the parties reside or to which the transaction in some manner relates. Consequently, where the fraud arises out of a contract with an express choice-of-law provision, sufficient nexus needs to be established for an Indian court to honour the provision.

ii Collection of evidence in support of proceedings abroad

In criminal proceedings, the Code of Criminal Procedure provides enabling provisions to secure the arrest of persons and the seizure of property with respect to contracting states with which India has arrangements.

If a court in India receives a warrant of arrest issued by a court in a contracting state for any person requiring him or her to attend or produce any document or thing, it may execute the warrant as if it were issued within India.

In civil proceedings, Rules 18 to 22 of Order XXVI of the Code of Civil Procedure allow a high court to issue a commission for examination of a witness situated in India upon a request made by a foreign court to obtain the evidence of that witness in any proceeding before it.

iii Seizure of assets or proceeds of fraud in support of the victim of fraud

The Code of Criminal Procedure provides enabling provisions to secure seizure of property with respect to contracting states.

Where the government receives a letter from a contracting state requesting attachment of property in India resulting from the commission of an offence in that state, the government may forward the letter to an Indian court, which may authorise the tracing of the property. If the property is believed to be concealed or disposed of by the police officer conducting the search, the property may be seized. Further, as a result of the investigation and after hearing the affected person, if it is established that the properties are the proceeds of a crime, the court may forfeit the properties in favour of the government.

iv Enforcement of judgments granted abroad in relation to fraud claims

To enforce a foreign decree or a judgment passed by a court located in a reciprocating territory,60 an execution application may be filed in an Indian court having competent jurisdiction (such as a court within whose jurisdiction the immovable property of the judgment debtor is located) under the Code of Civil Procedure, and the decree of judgment may be executed in India as if it had been passed by an Indian court.61

In respect of a court located in any country other than a 'reciprocating territory', a fresh suit upon judgment may be filed within three years of the date of the foreign judgment. The foreign suit will be treated merely as evidence against the defendant and will not be binding on the Indian courts. However, where a certified copy of the foreign judgment is produced, Indian courts will proceed on the assumption that it was passed by a court of competent jurisdiction. While considering the foreign judgment, Indian courts are not permitted to decide on the accuracy of the judgment, but only to ensure that the foreign court has applied its mind to the facts of the case and the law on the point.62

v Fraud as a defence to enforcement of judgments granted abroad

Any judgment or decree would be enforced in India unless the judgment:

  1. has not been pronounced by a court of competent jurisdiction or on the merits;
  2. on the face of it is founded on an incorrect view of international law, or has not recognised Indian law where that law is applicable;
  3. was obtained in proceedings opposed to natural justice or by fraud; or
  4. sustains a claim founded on a breach of any law in force in India.63

Courts have previously held that a foreign judgment would be hit by Section 13(e) of the Code of Civil Procedure (i.e., inconclusive on account of being obtained by fraud) where the foreign court was misled or tricked, as a result of which the judgment or order came to be passed.64 However, the Supreme Court of India, while noting that there is an essential distinction between mistake and trickery, has observed that while a judgment cannot be set aside on the ground in the case of former, it ought to be set aside in cases of the latter.65

VI CURRENT DEVELOPMENTS

The Indian government has, over the past few years, taken several measures to curb the use of 'black money', namely money held outside the formal economic system. In 2015, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 was notified to address the issue of undisclosed income and assets held outside India by Indian residents. In 2016, the Income Declaration Scheme was declared, which permitted taxpayers to disclose previously undisclosed domestic income and assets subject to payment of tax, a surcharge and a penalty with respect to the income and assets disclosed. By midnight on 30 September 2016 (the last date for disclosure), a total of 64,271 declarations were filed and an aggregate amount of 652,500 million rupees of income and assets were disclosed.66 Following this, on 8 November 2016, the Indian government demonetised all 500 rupee and 1,000 rupee banknotes to target black money held in cash. New currency was issued in banknotes of 2,000 rupees and 500 rupees. The efficacy of the demonetisation is questionable, however, as media reports indicate that as much as 1,100 million rupees of the 6,100 million rupees seized by the authorities in their post-demonetisation raids was in new currency.67

The law relating to 'benami' transactions was also amended in 2016.68 Benami transactions are transactions where, inter alia, property is held by one person for the benefit of another (or where consideration is paid by another person), transactions with respect to property made in a fictitious name or with fictitious or untraceable consideration. These transactions are commonly used in India to evade taxation. The term 'property' is defined broadly and includes property in its converted form and also proceeds from the property. Property that is the subject of a benami transaction may be provisionally attached and is liable to be confiscated by the central government.

In 2018, the Fugitive Economic Offenders Act was enacted to 'deter fugitive economic offenders from evading the process of law in India by staying outside the jurisdiction of Indian courts, to preserve the sanctity of the rule of law in India'.

The Fugitive Economic Offenders Act defines a fugitive economic offender as an individual against whom a warrant of arrest has been issued in relation to a scheduled offence'69 and who has either left India to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution, and it further stipulates the process for declaration of an individual as a fugitive economic offender. Upon this declaration, the courts may confiscate the properties of the fugitive both in India and abroad; the confiscation necessarily preceding trial and conviction, or acquittal, of the person declared as a fugitive. All properties constituting the proceeds of crimes, whether owned by the fugitive or not, are the subject matter of confiscation under the Fugitive Economic Offenders Act;70 the only exemption being a property where any other person has an interest, acquired bona fide and without knowledge that the property constitutes proceeds of crime.71 In cases where proceeds of crime cannot be identified, the authorities are empowered to confiscate assets of equivalent value. The right, title and interest in all confiscated properties vest with the central government. The Fugitive Economic Offenders Act, however, is applicable only in relation to offences where the proceeds for crimes involved are 1 billion rupees and above.72

Another necessary consequence of being declared a fugitive is that the fugitive is barred from raising and defending any civil claims; this bar extends to all juristic entities in which the fugitive holds a key managerial position or a controlling interest.73

While the Fugitive Economic Offenders Act is well intended and recent, its efficacy is yet to be seen. To date, numerous applications have been filed in competent courts by the Directorate of Enforcement under the Fugitive Economic Offenders Act for declaration of offenders as fugitives. In early January 2019, industrialist and erstwhile liquor baron Vijay Mallya, accused of and charged with various scheduled offences including that of money laundering, was the first individual to be declared a fugitive economic offender and have his assets, in India and abroad, confiscated subsequent to the declaration. Proceedings under the Fugitive Economic Offenders Act against Nirav Modi, a trader in diamonds accused of fraudulently embezzling funds in excess of 135 billion rupees using his businesses, are also ongoing.74 Although both Mallya and Modi have been charged as fugitive economic offenders, neither has yet returned to India to face prosecutions and extradition. It would be trite to say that this is a long drawn-out process with there being provisions of appeal to the higher authorities and courts available against the extradition order.

Although some measures have been taken to curb fraud in India, asset tracing in India is still a developing area, both legislatively and in practice. It is essential that tracing develops and is recognised as an appropriate remedy under Indian law. However, it is unclear whether this proposed development will happen under civil law or evolve from judgments of courts addressing criminal matters. In the absence of rapid developments on the subject, the Indian government's objective of improving transparency will remain, in large measure, unfulfilled.


Footnotes

1 Justin Bharucha and Sonam Gupta are partners at Bharucha & Partners, and were assisted by Mita Sood, an associate at Bharucha & Partners.

2 Bradford Building Society v. Borders, 1941 2 All ER 2015.

3 Section 17 of the Contract Act defines fraud as the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; the active concealment of a fact by one having knowledge or belief of the fact; a promise made without any intention of performing it; and any other act fitted to deceive, or any such act or omission as the law specially declares to be fraudulent. However, it is also clarified that failure to disclose a fact will not constitute fraud, unless circumstances show that an individual had a duty to speak, or that silence would amount to speech. This would be the case, for example, where parties stand in a fiduciary relationship against one another.

4 Section 64 of the Contract Act.

5 The Indian Contract and Specific Relief Acts, Pollock and Mulla, 13th edition.

6 Section 452 of the Companies Act.

7 Section 271 of the Companies Act.

8 Data beyond 2017 has not been published on the SFIO's website.

9 The SFIO is charged to investigate cases characterised by complexity and having interdepartmental and multidisciplinary ramifications; and substantial involvement of public interest to be judged by size, either in terms of monetary misappropriation or in terms of persons affected and the possibility of investigation leading to or contributing towards a clear improvement in systems, laws and procedures.

10 Section 23 of the Indian Trusts Act 1882.

11 Section 63 of the Indian Trusts Act 1882.

12 Section 25 of the Penal Code.

13 The Indian Penal Code, Ratanlal and Dhirajlal, 32nd edition, p. 106.

14 Section 24 IPC and Constitution Bench Judgement in Dr S Dutt v. State of UP reported at AIR 1966 SC 523.

15 Injury may be a non-economic or a non-pecuniary loss; see Dr Vimla v. Delhi Administration; AIR 1963 SC 1572.

16 Section 410 of the Penal Code.

17 Section 411 of the Penal Code.

18 Section 412 of the Penal Code.

19 Section 105C(1) of the Code of Criminal Procedure read with Section 105D(1) of the Code of Criminal Procedure.

20 Section 91 of the Code of Criminal Procedure.

21 Section 105H(3) of the Code of Criminal Procedure.

22 Section 105H(2) of the Code of Criminal Procedure.

23 Section 105I(1) of the Code of Criminal Procedure.

24 Section 105I(3) of the Code of Criminal Procedure.

25 Section 109 of the Penal Code.

26 Section 108A of the Penal Code.

27 Including suspects.

28 Section 151 of the Code of Criminal Procedure.

29 Section 154 of the Code of Criminal Procedure.

30 Which applies to property not being immovable property subject to the Transfer of Property Act.

31 Which principally applies to immovable property.

32 Section 23 of the Indian Trusts Act 1882.

33 Section 3 of the Limitation Act 1963.

34 Section 17 of the Limitation Act 1963.

35 Section 22 of the Limitation Act 1963.

36 Sections 467–468 of the Code of Criminal Procedure.

37 Section 60 and Order XXXVIII of the Code of Civil Procedure.

38 Order XL of the Code of Civil Procedure.

39 Section 91 of the Code of Criminal Procedure.

40 Section 93 of the Code of Criminal Procedure.

41 Section 105 of the Code of Criminal Procedure.

42 Section 94 of the Code of Criminal Procedure.

43 Section 102 of the Code of Criminal Procedure.

44 Section 311 of the Code of Criminal Procedure.

45 Section 160 of the Code of Criminal Procedure.

46 Section 161 of the Code of Criminal Procedure.

47 Section 50 of the Prevention of Money Laundering Act, 2002.

48 RBI Circular on Customer Protection – Limiting Liability of Customers in Unauthorised Electronic Banking Transactions, dated 6 July 2017 and RBI Circular on Customer Protection – Limiting Liability of Customers in Unauthorised Electronic Banking Transactions, dated 4 January 2019.

49 Entities issuing Pre-paid Payment Instruments (PPI).

50 Section 58 of the Negotiable Instruments Act 1881.

51 The bona fide purchaser would also be protected in respect of property discussed earlier.

52 In December 2016, the Ministry of Corporate Affairs started notifying the Insolvency and Bankruptcy Code 2016 in tranches. Part III of the Insolvency Code governing individuals is yet to be notified.

53 Sections 66 and 73 of the Insolvency Code.

54 N Radhakrishnan v. Maestro Engineers & Ors, 2009 (13) SCALE 403.

55 Swiss Timing Limited v. Organising Committee, Commonwealth Games, 2010, AIR 2014 SC 3723.

56 A. Ayyasamy v. A. Paramasivam & Ors, AIR 2016 SC 4675.

57 Section 92 of the Indian Evidence Act 1872.

58 Section 126 of the Indian Evidence Act 1872.

59 British India Steam Navigation Co Ltd. v. Shanmughavilas Cashew Industries and Ors (1990) 3 SCC 481.

60 Illustratively, the United Kingdom, Aden, Fiji, Singapore, Malaysia, Trinidad and Tobago, New Zealand, the Cook Islands (including Niue) and the Trust Territories of Western Samoa, Hong Kong, Papua and New Guinea, Bangladesh and the United Arab Emirates.

61 Section 44A of the Code of Civil Procedure.

62 Formosa Plastic Corporation Ltd v. Ashok Chauhan & Ors 76 (1998) DLT 817.

63 Section 13 of the Code of Civil Procedure.

64 Maganbhai Chottubhai Patel v. Maniben, AIR 1985 Guj 187.

65 Sankaran Govindan v. Lakshmi Bharathi, AIR 1974 SC 1764.

66 Ministry of Finance Press Release on Income Declaration Scheme 2016, dated 1 October 2016.

67 See '17% of cash seized in raids during demonetization were in new notes', The Times of India, 9 July 2017.

68 The Benami Transactions (Prohibition) Amendment Act 2016.

69 Section 2(m) of the Act defines scheduled offences as the offences contained in the Schedule to the Ordinance. The Schedule lists a number of offences under different statues such as the IPC, Companies Act, Black Money Act and Prevention of Corruption Act, etc, which are essentially economic offences.

70 Section 12(2) of the Act.

71 Section 12(7) of the Act.

72 Section 2(m) of the Act.

73 Section 14 of the Act.

74 See 'Declaration of Nirav Modi as fugitive hits roadblock, Adv Vijay Aggarwal cites legal issues', India Today, 17 June 2019.