Corporate Fraud and Corporate Accountability in India: A Critical Study of the Companies Act, 2013

Introduction

The corporate sector occupies a significant position in the economic development of India. Companies contribute to economic growth by mobilising capital, generating employment, facilitating technological development and promoting investment. The expansion of corporate activity, however, has also increased the possibility of corporate misconduct and financial fraud. Modern companies operate through complex structures involving shareholders, directors, managers, auditors, creditors and various intermediaries. Where corporate powers are exercised dishonestly or without adequate supervision, the corporate structure may become a means of committing fraud.

Corporate fraud can seriously damage the interests of investors and other stakeholders. It may involve falsification of accounts, manipulation of financial statements, diversion of company funds, concealment of liabilities, creation of fictitious assets or transactions, fraudulent related-party transactions and abuse of managerial authority. Major corporate scandals have demonstrated that fraud is often not the result of a single dishonest transaction but may arise from systematic failures in corporate governance, internal controls and professional oversight.

The Companies Act, 2013 substantially strengthened the legal framework for dealing with corporate fraud. One of its major developments was the statutory recognition of fraud under Section 447.¹ The Act also gave statutory recognition to the Serious Fraud Investigation Office (SFIO) under Section 211 and created a specialised investigation framework under Section 212.² In addition, provisions concerning directors’ duties, auditors, audit committees, internal controls, related-party transactions and vigil mechanisms collectively seek to improve corporate accountability.

Corporate accountability means that persons exercising corporate power must be answerable for their decisions and actions. Directors, promoters, managerial personnel and auditors cannot use the separate legal personality of a company as a shield for fraudulent conduct. Corporate accountability therefore involves the prevention, detection, investigation and punishment of corporate wrongdoing.

The present research critically examines whether the Companies Act, 2013 has established an effective framework for combating corporate fraud and strengthening corporate accountability in India.

Statement of the problem

Corporate fraud has become increasingly complex because modern corporations operate through multiple entities, subsidiaries, financial intermediaries and cross-border transactions. Fraud may therefore involve several individuals and organisations simultaneously.

The problem is not merely the absence of legal provisions. India possesses an extensive statutory and regulatory framework. The more significant challenge concerns effective implementation and enforcement.

Corporate fraud may arise because of:

•  weak internal control systems;

•  concentration of managerial power;

•  manipulation of accounts;

•  lack of auditor independence;

•  ineffective board supervision;

•  conflicts of interest;

•  inadequate disclosure;

•  weak whistle-blower mechanisms;

•  delayed investigation; and

•  inadequate coordination among regulatory authorities.

The central problem examined in this research is whether the Companies Act, 2013 is capable of effectively preventing corporate fraud, identifying responsible individuals and ensuring meaningful corporate accountability.

Research questions

The present research seeks to answer the following questions:

1.  What is meant by corporate fraud under Indian company law?

2.  What are the major forms and causes of corporate fraud in India?

3.  How does the Companies Act, 2013 regulate and punish corporate fraud?

4.  What is the significance of Section 447 of the Companies Act, 2013?

5.  What role does the SFIO perform in investigating serious corporate fraud?

6.  What responsibilities are imposed upon directors and auditors for preventing corporate misconduct?

7.  How does corporate governance contribute to corporate accountability?

8.  What are the principal weaknesses in the existing regulatory framework?

9.  What reforms are required to strengthen corporate accountability in India?

Objectives of the study

The principal objective of this research is to critically examine the legal framework relating to corporate fraud and corporate accountability under the Companies Act, 2013.

The specific objectives are:

•  To understand the meaning and nature of corporate fraud.

•  To identify major forms and causes of corporate fraud.

•  To analyse the relevant provisions of the Companies Act, 2013.

•  To critically examine Section 447 dealing with fraud.

•  To study the role and powers of the SFIO.

•  To examine directors’ duties in relation to corporate accountability.

•  To analyse the responsibilities of statutory auditors.

•  To study the role of corporate governance in preventing fraud.

•  To identify shortcomings in the existing legal framework.

•  To suggest reforms for strengthening corporate accountability.

Research methodology

The present research is primarily doctrinal, descriptive and analytical in nature. It examines statutory provisions, judicial decisions and academic literature concerning corporate fraud and corporate accountability.

A. Primary sources

The primary sources used include:

•  the Companies Act, 2013;

•  rules framed under the Companies Act;

•  relevant SEBI regulations;

•  judicial decisions of the Supreme Court and other courts; and

•  official government notifications and reports.

B. Secondary sources

Secondary sources include:

•  textbooks on company law;

•  commentaries;

•  research articles;

•  law journals;

•  corporate governance reports;

•  government publications; and

•  recognised legal databases.

The research uses qualitative analysis to evaluate the effectiveness of the existing legal framework.

Meaning and nature of corporate fraud

Corporate fraud may broadly be described as intentional deception committed in connection with the affairs of a company for obtaining an unlawful or unfair advantage or causing wrongful loss to another person.

Section 447 of the Companies Act, 2013 is particularly important because its Explanation gives fraud a broad statutory meaning. It encompasses acts, omissions, concealment of facts and abuse of position committed with the requisite intent to deceive, to gain undue advantage, or to injure the interests of the company, its shareholders, its creditors or any other person, whether or not any wrongful gain or wrongful loss results.³

Thus, corporate fraud is broader than simple theft or misappropriation. It may involve sophisticated financial arrangements that appear lawful on the surface but are actually designed to conceal wrongdoing.

A. Essential characteristics of corporate fraud

Corporate fraud commonly involves:

•  intentional deception;

•  concealment of material facts;

•  abuse of corporate position;

•  manipulation of corporate records;

•  obtaining an undue advantage;

•  wrongful gain to one person;

•  wrongful loss to another; and

•  breach of corporate or professional responsibility.

Corporate fraud may be committed by directors, promoters, managerial personnel, employees, auditors or other persons associated with corporate activities.

Major forms of corporate fraud

Corporate fraud may appear in different forms depending upon the nature and activities of a company.

A. Financial statement fraud

Financial statement fraud occurs when a company’s financial position is intentionally misrepresented. It may involve:

•  overstating revenue;

•  understating liabilities;

•  hiding losses;

•  recording fictitious sales;

•  creating fictitious assets; and

•  manipulating expenses.

The objective may be to attract investment, obtain credit or present an artificially strong financial position.

B. Misappropriation of assets

Corporate funds or property may be diverted for personal benefit. Misappropriation can involve:

•  unauthorised withdrawal of funds;

•  diversion of company property;

•  fictitious payments;

•  fraudulent reimbursement; and

•  personal use of corporate resources.

C. Related-party fraud

Related-party transactions are not inherently unlawful. However, they may become a mechanism for fraud where transactions are structured to transfer corporate assets or benefits to promoters, directors or connected entities on unfair terms.

D. Accounting fraud

Accounting records may be deliberately manipulated to conceal the company’s true financial condition.

E. Procurement fraud

Procurement fraud may include:

•  fictitious suppliers;

•  inflated invoices;

•  kickbacks;

•  manipulated tender procedures; and

•  collusion between employees and suppliers.

F. Loan and banking fraud

False financial information may be submitted to banks or financial institutions for obtaining credit facilities.

G. Disclosure fraud

Corporate management may conceal information that is material to shareholders, creditors or investors.

Causes of corporate fraud

Corporate fraud rarely results from one factor. It generally arises from a combination of organisational weaknesses and individual misconduct. Major causes include:

1.  Weak corporate governance: Ineffective board supervision allows management to operate without meaningful accountability.

2.  Concentration of power: Excessive control in the hands of one individual or a small group can weaken checks and balances.

3.  Weak internal controls: Inadequate financial controls make manipulation easier.

4.  Lack of auditor independence: Auditors who are excessively dependent upon management may fail to challenge questionable transactions.

5.  Pressure to show financial performance: Management may manipulate financial statements to achieve unrealistic financial targets.

6.  Conflict of interest: Personal interests may influence corporate decisions.

7.  Weak whistle-blower protection: Employees may hesitate to disclose wrongdoing for fear of retaliation.

8.  Complex corporate structures: Multiple subsidiaries and related entities can make fraudulent transactions difficult to trace.

Corporate fraud under the Companies Act, 2013

The Companies Act, 2013 adopts a comprehensive approach towards corporate fraud. Rather than dealing only with punishment after fraud occurs, the Act contains provisions designed to promote transparency and prevent misconduct. Important provisions include:⁴

•  Section 134 – Financial statement and Board’s report;

•  Section 143 – Powers and duties of auditors;

•  Section 166 – Duties of directors;

•  Section 177 – Audit Committee and vigil mechanism;

•  Section 188 – Related-party transactions;

•  Section 206 – Power to call for information, inspect books and conduct inquiries;

•  Section 210 – Investigation into affairs of a company;

•  Section 211 – Establishment of SFIO;

•  Section 212 – Investigation by SFIO;

•  Section 245 – Class action; and

•  Section 447 – Punishment for fraud.

Together, these provisions create preventive, investigative and punitive mechanisms.

Section 447: punishment for fraud

Section 447 is the central provision dealing with fraud under the Companies Act, 2013.

The importance of Section 447 lies in its broad approach. Fraud may arise through an affirmative act, an omission, concealment of facts or abuse of position when accompanied by the required fraudulent intent.⁵

A. Importance of Section 447

The provision is significant because:

•  it gives statutory recognition to corporate fraud;

•  it covers abuse of corporate position;

•  it defines both wrongful gain and wrongful loss, while treating conduct as fraud whether or not either results;⁶

•  it imposes serious consequences for fraud;⁷

•  it strengthens individual accountability; and

•  it acts as a deterrent against corporate misconduct.

The provision reflects the legislative intention that serious corporate fraud should not be treated merely as a procedural violation.

Serious Fraud Investigation Office (SFIO)

The Serious Fraud Investigation Office is one of the most important institutions for investigating complex corporate fraud.

Section 211 provides the statutory basis for the SFIO.⁸ Its multidisciplinary character is particularly important because sophisticated corporate fraud may involve accounting, banking, taxation, capital markets, information technology and legal issues.

A. Composition and expertise

The SFIO draws expertise from areas such as:⁹

•  banking;

•  corporate affairs;

•  taxation;

•  forensic auditing;

•  capital markets;

•  information technology; and

•  law.

The multidisciplinary approach enables investigators to understand complicated corporate structures and transactions.

Investigation by SFIO under Section 212

Section 212 deals with investigation into the affairs of a company by the SFIO.

The Central Government may assign an investigation to the SFIO in the circumstances provided by the Act, including where it considers investigation necessary in the public interest.¹⁰

A. Importance of SFIO investigation

SFIO investigation is significant because:

1.  it provides specialised investigation;

2.  it allows examination of complex corporate transactions;

3.  forensic accounting techniques can be employed;

4.  digital and documentary evidence can be examined;

5.  individuals responsible for fraudulent conduct may be identified; and

6.  investigation can cover interconnected corporate entities where legally relevant.

The effectiveness of the SFIO is therefore central to the enforcement of India’s corporate fraud regime.

Directors’ duties and corporate accountability

Directors exercise substantial control over corporate affairs. Consequently, corporate accountability cannot be achieved without director accountability.

Section 166 of the Companies Act, 2013 codifies important duties of directors.¹¹ Directors are expected to:

•  act in accordance with the articles of the company;

•  act in good faith;

•  promote the objects of the company;

•  act in the best interests of the company and relevant stakeholders;

•  exercise due and reasonable care, skill and diligence;

•  exercise independent judgment;

•  avoid conflicts of interest; and

•  refrain from obtaining undue gain or advantage.

Directors who participate in fraudulent conduct cannot ordinarily escape accountability merely because the conduct was undertaken in the company’s name.

Role and responsibility of auditors

Auditors perform an important gatekeeping function in the corporate governance system. The reliability of corporate financial statements substantially depends upon the independence and professional competence of auditors.

Major responsibilities of auditors include:

•  examination of financial statements;

•  verification of accounting records;

•  evaluation of financial reporting;

•  identification of material misstatements;

•  compliance with auditing standards;

•  reporting matters required by law; and

•  reporting specified frauds in accordance with the statutory framework.¹²

Auditor independence is therefore essential. If auditors become economically or professionally dependent upon management, their ability to question suspicious transactions may be compromised.

Audit committee and vigil mechanism

Section 177 strengthens internal corporate accountability through requirements relating to audit committees and vigil mechanisms for listed companies and other prescribed classes of companies.¹³

A. Audit committee

An effective audit committee assists in:¹⁴

•  monitoring financial reporting;

•  supervising internal controls;

•  reviewing auditor performance;

•  examining related-party transactions; and

•  strengthening accountability.

B. Vigil mechanism

A vigil mechanism enables directors and employees in applicable companies to report genuine concerns.¹⁵

Such mechanisms are important because employees often become aware of fraudulent activities before external regulators do. A meaningful whistle-blowing framework should therefore ensure confidentiality and protection against retaliation.¹⁶

Related-party transactions

Related-party transactions are a significant corporate governance concern. Section 188 regulates specified transactions involving related parties.¹⁷

Such transactions are not prohibited merely because the parties are related. However, adequate disclosure, approval and procedural safeguards are necessary because conflicts of interest may arise.¹⁸

Corporate fraud may occur where controlling persons use related entities to:

•  divert assets;

•  transfer profits;

•  obtain unfair benefits;

•  enter into sham transactions; or

•  conceal the true beneficiaries of transactions.

Transparency is therefore crucial.

Corporate governance and fraud prevention

Corporate governance is one of the most effective preventive mechanisms against fraud. It seeks to establish a system through which corporate powers are exercised responsibly and decision-makers remain accountable.

Essential elements of effective corporate governance include:

•  transparency;

•  accountability;

•  independent board oversight;

•  reliable financial reporting;

•  effective internal controls;

•  auditor independence;

•  protection against conflicts of interest;

•  shareholder participation; and

•  ethical corporate leadership.

Corporate fraud prevention should therefore begin within the company itself rather than only after regulatory intervention.

Corporate fraud and the corporate veil

The doctrine of separate corporate personality recognises that a company is legally distinct from its shareholders and directors. This principle is essential for modern corporate law. However, separate legal personality cannot legitimately be used to protect fraudulent conduct.¹⁹

In Delhi Development Authority v. Skipper Construction Co. (P) Ltd., the Supreme Court dealt with the misuse of corporate structures in circumstances involving fraud. It held that where the corporate character is employed for committing illegality or for defrauding others, the court will ignore it and look at the reality behind the corporate veil, and that the several companies created by the promoter and his family could be treated as one entity belonging to and controlled by them where incorporation was merely a cloak for committing illegalities or defrauding people. The decision demonstrates the willingness of courts to look beyond corporate personality where necessary to prevent misuse of the corporate form.²⁰

Thus, the corporate veil serves legitimate business activity but cannot become a shield for fraud.

Judicial approach towards corporate accountability

Indian courts have repeatedly recognised that persons controlling a company cannot automatically be held criminally responsible merely because of their designation. At the same time, individuals who personally participate in, or are legally responsible for, fraudulent conduct may be proceeded against.

In Sunil Bharti Mittal v. Central Bureau of Investigation, the Supreme Court discussed the principles governing the attribution of corporate criminal liability and the circumstances in which persons controlling a corporation may personally face criminal proceedings. It held that an individual may be made an accused along with the company where there is sufficient evidence of his active role coupled with criminal intent, or where the statutory regime itself provides for vicarious liability; in the absence of such a provision, the liability of directors cannot be imputed automatically.²¹

The case demonstrates an important aspect of corporate accountability: responsibility should be based upon the applicable statutory framework and legally attributable conduct rather than merely the position held by an individual.

Corporate fraud and stakeholder protection

Corporate fraud affects more than shareholders. Its consequences may extend to:

•  investors;

•  creditors;

•  employees;

•  financial institutions;

•  customers;

•  suppliers;

•  government revenue; and

•  the economy.

Corporate accountability must therefore adopt a stakeholder-oriented approach. An effective regulatory system should provide mechanisms for:

1.  detecting fraud;

2.  investigating wrongdoing;

3.  punishing responsible persons;

4.  recovering assets where legally permissible;

5.  compensating affected persons through available remedies; and

6.  preventing recurrence.

Critical analysis of the Companies Act, 2013

The Companies Act, 2013 has considerably strengthened India’s legal framework concerning corporate fraud.

A. Major strengths

1.  Specific recognition of fraud: Section 447 provides a statutory framework for fraud.

2.  Specialised investigation: The SFIO provides multidisciplinary investigation.

3.  Directors’ duties: Section 166 strengthens the accountability of directors.

4.  Auditor accountability: Auditors have significant statutory responsibilities.

5.  Audit committees: Section 177 promotes internal oversight.

6.  Vigil mechanism: Internal reporting mechanisms can facilitate early detection.

7.  Related-party regulation: Section 188 addresses conflicts of interest in specified transactions.

8.  Class action: Section 245 provides a collective remedy to eligible members and depositors.

B. Major limitations

Despite these strengths, certain difficulties remain:

•  delay in investigations;

•  complexity of corporate transactions;

•  difficulty in tracing funds;

•  cross-border transactions;

•  technological sophistication of fraud;

•  regulatory overlap;

•  possible weaknesses in auditor independence;

•  inadequate awareness of whistle-blower mechanisms; and

•  lengthy litigation.

Thus, strong statutory provisions do not automatically ensure effective corporate accountability.

Findings of the study

The study makes the following major findings:

1.  Corporate fraud is a serious threat to corporate governance and investor confidence.

2.  Corporate fraud frequently arises from failures in both individual ethics and institutional controls.

3.  The Companies Act, 2013 provides a stronger fraud-control framework than its predecessor.

4.  Section 447 is central to the statutory framework dealing with fraud.

5.  The SFIO has an important role in investigating serious and complex corporate fraud.

6.  Directors’ duties are an essential component of corporate accountability.

7.  Auditors function as important corporate gatekeepers.

8.  Auditor independence is necessary for effective fraud detection.

9.  Audit committees and internal controls can reduce fraud risk.

10.  Whistle-blower mechanisms are important for early detection.

11.  Related-party transactions require careful monitoring.

12.  Effective corporate governance can prevent many forms of misconduct.

13.  Delayed investigation can weaken enforcement.

14.  Corporate fraud increasingly requires technological and forensic expertise.

15.  Effective enforcement requires coordination among different regulatory institutions.

Suggestions and recommendations

A. Strengthening the SFIO

The SFIO should continuously strengthen its expertise in:

•  forensic accounting;

•  digital forensics;

•  artificial intelligence;

•  data analytics;

•  cybersecurity; and

•  cross-border financial investigation.

B. Strengthening auditor independence

Effective safeguards should minimise conflicts between auditors and corporate management.

C. Effective whistle-blower protection

Employees reporting genuine corporate misconduct should receive meaningful protection against retaliation.

D. Strengthening internal controls

Companies should regularly review their internal financial controls and fraud-risk management systems.²²

E. Improved regulatory coordination

Better coordination is required, where jurisdictionally applicable, among bodies such as:²³

•  the Ministry of Corporate Affairs;

•  the SFIO;

•  SEBI;

•  the RBI;

•  the Enforcement Directorate;

•  the income tax authorities; and

•  other investigating agencies.

F. Timely investigation and trial

Corporate fraud matters should be investigated and adjudicated without avoidable delay.

G. Greater use of technology

Regulatory authorities should increasingly use technology for identifying unusual financial patterns and complex transaction networks.

H. Stronger ethical governance

Companies should move beyond mere statutory compliance and develop a genuine culture of integrity, accountability and transparency.

Conclusion

Corporate fraud is a multidimensional problem that affects the credibility of the corporate system and the interests of numerous stakeholders. Fraudulent corporate practices can destroy shareholder wealth, harm creditors, threaten employment, undermine financial institutions and reduce public confidence in markets.

The Companies Act, 2013 represents an important development in India’s response to this problem. Section 447 provides a specific statutory framework for fraud, while Sections 211 and 212 establish the role of the Serious Fraud Investigation Office in investigating serious corporate misconduct. Other provisions concerning directors’ duties, auditors, audit committees, vigil mechanisms, related-party transactions, inspection and investigation collectively contribute to a broader system of corporate accountability.

Nevertheless, corporate accountability cannot depend exclusively upon punishment after fraud has occurred. An effective system must place equal emphasis on prevention, early detection, investigation and enforcement.

The analysis demonstrates that four groups have particularly important responsibilities: directors must exercise corporate power responsibly; auditors must maintain independence and professional scepticism; boards and audit committees must establish effective internal controls; and regulatory authorities must ensure timely and coordinated enforcement.

Technological development presents an additional challenge. Corporate fraud may increasingly involve digital records, complex financial structures, multiple jurisdictions and sophisticated methods of concealing transactions. Consequently, enforcement agencies must continuously develop technological and forensic capabilities.

The effectiveness of the Companies Act, 2013 ultimately depends not merely upon the severity of its penalties but upon the quality of implementation. A strong corporate accountability framework requires transparency, ethical management, independent auditing, effective investigation, whistle-blower protection and responsible corporate governance.

Therefore, the objective of corporate law should be broader than punishing fraudulent conduct after financial damage has occurred. The law should create an environment in which fraud is difficult to commit, likely to be detected, efficiently investigated and appropriately punished.

Corporate accountability is consequently not merely a legal obligation. It is an essential condition for maintaining investor confidence, protecting stakeholders and ensuring the sustainable development of the Indian corporate sector.

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Footnotes

1. The Companies Act, No. 18 of 2013, India Code (2013), § 447.

2. Id. §§ 211–212. The proviso to § 211(1) deems the office set up under Government of India Resolution No. 45011/16/2003-Adm-I, dated July 2, 2003, to be the Serious Fraud Investigation Office until an office is established under that sub-section.

3. Id. § 447, Explanation (i) (defining “fraud”, in relation to the affairs of a company or any body corporate, to include “any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss”).

4. Id. §§ 134, 143, 166, 177, 188, 206, 210–212, 245, 447.

5. Id. § 447, Explanation (i).

6. Id. § 447, Explanation (i)–(iii).

7. Id. § 447 (where the fraud involves at least ten lakh rupees or one per cent of the company’s turnover, whichever is lower, imprisonment for not less than six months, extending to ten years, and a fine of not less than the amount involved in the fraud, extending to three times that amount; where the fraud involves public interest, imprisonment for not less than three years). Under the second proviso, inserted with that threshold by the Companies (Amendment) Act, 2017 (No. 1 of 2018) with effect from February 9, 2018, a fraud involving less than ten lakh rupees or one per cent of the company’s turnover, whichever is lower, and not involving public interest is punishable with imprisonment for up to five years, or a fine of up to fifty lakh rupees (substituted for twenty lakh rupees by the Companies (Amendment) Act, 2019 (No. 22 of 2019) with effect from November 2, 2018), or both.

8. Id. § 211(1).

9. Id. § 211(2) (experts in banking, corporate affairs, taxation, forensic audit, capital market, information technology, law, or such other fields as may be prescribed).

10. Id. § 212(1)(a)–(d) (on a report of the Registrar or an inspector under § 208, on intimation of a special resolution passed by the company, in the public interest, or on a request from a department of the Central Government or a State Government); see, e.g., Serious Fraud Investigation Office v. Rahul Modi, (2023) 15 SCC 311, ¶ 2 (India) (investigation into the affairs of the Adarsh Group of companies and LLPs directed under § 212(1)(c)), https://api.sci.gov.in/supremecourt/2019/20286/20286_2019_35_1501_33176_Judgement_07-Feb-2022.pdf.

11. Companies Act § 166(1)–(6).

12. Companies Act § 143(12)–(13); Companies (Audit and Auditors) Rules, 2014, r. 13(1) (as substituted by the Companies (Audit and Auditors) Amendment Rules, 2015) (a fraud that involves or is expected to involve individually an amount of one crore rupees or above is reported to the Central Government). Under the first proviso to § 143(12), a fraud involving a lesser amount is reported to the audit committee or, in other cases, to the Board; § 143(13) protects an auditor who reports in good faith.

13. Companies Act § 177(1), (9).

14. Id. § 177(4) (the terms of reference include recommending the appointment of auditors, reviewing and monitoring the auditor’s independence and performance, examining the financial statement and the auditors’ report, approving transactions with related parties, and evaluating internal financial controls and risk management systems).

15. Id. § 177(9); Companies (Meetings of Board and its Powers) Rules, 2014, r. 7(1) (every listed company, companies that accept deposits from the public, and companies that have borrowed more than fifty crore rupees from banks and public financial institutions).

16. See Companies Act § 177(10) (the vigil mechanism must provide adequate safeguards against victimisation of persons who use it and direct access to the chairperson of the Audit Committee in appropriate or exceptional cases).

17. Id. § 188(1).

18. Id. § 188(1)–(2) (consent of the Board; prior approval of the company by resolution above prescribed thresholds, on which a member who is a related party may not vote; exemption for transactions in the ordinary course of business on an arm’s length basis; and reference to every such contract or arrangement in the Board’s report, with its justification).

19. Life Insurance Corp. of India v. Escorts Ltd., (1986) 1 SCC 264 (India) (the corporate veil may be lifted where, among other cases, “fraud or improper conduct is intended to be prevented”).

20. Delhi Development Authority v. Skipper Construction Co. (P) Ltd., (1996) 4 SCC 622 (India); see also State of U.P. v. Renusagar Power Co., (1988) 4 SCC 59 (India) (lifting the veil to treat a parent company and its wholly owned and controlled subsidiary as one concern).

21. Sunil Bharti Mittal v. Central Bureau of Investigation, (2015) 4 SCC 609 (India).

22. See Companies Act § 134(5)(c), (e) (the directors’ responsibility statement must state that proper and sufficient care was taken to maintain adequate accounting records for safeguarding the company’s assets and for preventing and detecting fraud and other irregularities, and, for a listed company, that adequate internal financial controls were laid down and were operating effectively); id. § 177(4)(vii).

23. See, e.g., The Securities and Exchange Board of India Act, No. 15 of 1992, India Code (1992), §§ 11, 12A; The Prevention of Money-Laundering Act, No. 15 of 2003, India Code (2003), § 3; Companies Act § 212(2) (once a case is assigned to the Serious Fraud Investigation Office, no other investigating agency of the Central Government or a State Government may proceed with the investigation of offences under the Act in that case).