Devas Antrix Case

Background

The recent judgment of the Supreme Court (“SC”) in Devas Multimedia Private Limited v. Antrix Corporation Limited[1] (“the Antrix case”) has many interesting facets. It brings to light some interesting questions of law on the enforcement of foreign arbitral awards and the Bilateral Investment Treaties when the claimant company (Decree holder) is ordered to be wound up (for the first time in India)  on the grounds of fraud, which is against the public policy of India and most jurisdictions that are signatories to the New York Convention.

Continue Reading SC’s decision in the Devas Antrix Case: Does it dilute evidentiary value of the Auditor’s Report under the Companies Act?

Liquidation Process

Introduction

The Insolvency and Bankruptcy Code, 2016 (“IBC”), an umbrella legislation, has successfully envisaged the process of speedy resolution or liquidation of a corporate entity and has proved to be a milestone in the Indian legal framework. By bringing IBC in force, the legislature has sought to maximise the value of the assets of the debtor, and to adopt a fair and transparent procedure for the disposition of the assets while balancing the interests of all stakeholders.

Continue Reading Enforcement directorate under PMLA can no longer attach assets once liquidation process has been initiated under IBC

 

Serious Fraud Investigation Office – Keeping a close watch on frauds in India Inc

The Serious Fraud Investigation Office (‘SFIO’) is an organisation established under the aegis of the Ministry of Corporate Affairs (‘MCA’) – for investigation and prosecution of white-collar crimes. The SFIO was constituted in July 2003 following the recommendations of the Naresh Chandra Committee. In 2002, the Naresh Chandra Committee had recommended setting up a ‘Corporate Serious Fraud Office’, to uncover corporate fraud, and supervise prosecutions under various economic legislations.
Continue Reading Serious Fraud Investigation Office – Keeping a close watch on frauds in India Inc

The PMLA – is the net cast too wide

The Prevention of Money Laundering Act, 2002 (‘PMLA’) has undergone multiple amendments after it was brought into operation on July 1, 2005. Most recently, the PMLA was amended through the –

  • Finance Act, 2015 (‘2015 Amendment’)
  • Finance Act, 2018 (‘2018 Amendment’)
  • Finance Act, 2019 (‘2019 Amendment’)

These amendments aimed to plug loopholes in the operation of the PMLA – to strengthen the framework for tackling money laundering. In furtherance of this objective, the 2019 Amendment has clarified the definition of “proceeds of crime” under Section 2(1)(u). Amendments were also made to Section 45, following the Supreme Court’s decision in the Nikesh Tarachand Shah[1] case – which struck down the pre-conditions for bail prescribed under Section 45(1). Over the years, the list of “scheduled offences” under Schedule I of the PMLA has also been amended significantly. Another aspect that arises in many PMLA proceedings is the admissibility of statements made to investigating officers.
Continue Reading The PMLA – is the net cast too wide?

Corporate Frauds – Emerging Legal Architecture & Judicial Trends

Corporate scandals and frauds in India are as old as the hills. The 1950s witnessed the infamous LIC/ Mundhra scam, which was the first major financial fraud of the independent India. Frauds continued with an alarming regularity thereafter in every decade – the infamous Harshad Mehta, Ketan Parekh, Sahara, and Satyam scams are just a few of them. These frauds were investigated by the law enforcement agencies under the relevant provisions of the Indian Penal Code, 1860 (IPC). The Companies Act, 1956 did not have any separate definition of ‘fraud’. Legally, it was not necessary to have a separate one as Lord Macaulay’s IPC adequately dealt with all such crimes. The Companies Bill, 2008 was the original legislative proposal to replace the Companies Act, 1956 basis Dr. J.J. Irani Committee Report (Irani Report). The Irani report did not have any recommendation for a provision like Section 447 dealing with frauds. It seems the intervening major corporate scandals of 2007-08 led the Parliamentary Standing Committee to recommend two new legislative changes:
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Introduction

The growth and diversification of businesses have led to an increase in white collar crimes. The term ‘white collar crime’ was first defined by Edwin Hardin Sutherland as crimes committed by persons who hold high societal status and repute in their profession. As the complexity of such crimes has grown over the years and investigations have become refined, we have seen an increase in private professional services offering support to companies and their management in dealing with white collar crimes.

These support services extend from providing an in-depth analysis of the crime to the management, carrying out forensic investigations into the affairs of the company, including audit and forensic diligence reports and preparing the company for legal proceedings. The need for internal private investigations has also increased as a result of strengthening of laws on compliances and reporting of white collar crimes. The allegations may vary from offences under the Indian Penal Code (such as fraud, cheating, forgery, etc.) to offences under offences under special statutes (such as money laundering, insider trading, corruption, etc.).

Continue Reading For or Against Forensic diligence when facing a White-Collar Investigation: Evidentiary Value

Finance Act 2019 - Prevention of Money Laundering Act Amendment

The Finance Act, 2019 (the 2019 Act) is the Central Government’s endeavour to tighten the gaps around the existing provisions of the Prevention of Money Laundering Act, 2002 (PMLA). Amidst the growing number of financial crimes and high-profile cases, the 2019 Act attempts to make the existing provisions stricter and better armoured to detect suspicious transactions. Additionally, the Act, along with the other amendments, has a greater aim of targeting money laundering and terrorist financing. The 2019 Act attempts to remove the ambiguity in the existing provisions by amending eight clauses of the PMLA.
Continue Reading PMLA Amendment 2019 – Plugging the Loopholes

Extradition Law - Fundamentals and Processes

Part I of the article elaborates on legal basis and purpose extradition, the procedure and the statutory provisions of Indian Extradition Act, 1962 as well as the key aspects of the extradition treaty between India and the UK. Here we will discuss the extradition treaties between India and the US, India and UAE. This post further elaborates on the practice of non-extradition of own nationals and various issues that may be faced by States whilst processing a request for extradition.

Extradition Treaty Between India & the United States (US)

The offence is extraditable if punishable under the laws in both contracting parties by imprisonments for more than one year or by a more severe penalty. This applies:
Continue Reading Extradition Law: Fundamentals and Processes – Part II

Indian Extradition Law - Fundamentals and Processes - Part 1

 

Under International law, extradition[i] is a formal, diplomatic process by which one state requests another to effect the return of custody of a fugitive criminal[ii] for crimes punishable by the laws of the requesting State and committed outside the jurisdiction of the country where such person has taken refuge. International extradition[iii] is an obligation undertaken by States in good faith to promote and execute justice[iv].

The first formal act providing for extradition was adopted in 1833 by Belgium, which also passed the first law on the right to asylum. Extradition Acts not only specify extraditable crimes, but also detail procedures and safeguards whilst defining the relationship between the Act and the treaty.
Continue Reading Extradition Law: Fundamentals and Processes – Part I

Corporate Criminal Liability - Directors

Criminal liability encompasses two elements: actus reus (guilty act) and mens rea (guilty mind). There is no dispute that a company is liable to be prosecuted for criminal offences. However, the company being an artificial person cannot have the requisite mens rea, hence the question whether a company could be prosecuted for an offence for which the mandatory sentence is imprisonment.

The law has evolved from the position that a company cannot be prosecuted for offences that require imposition of a mandatory imprisonment[1], to the position that the mens rea of the ‘alter ego’ of the company (i.e. the person or group of people that guide the business of the company) will be imputed to the company as laid down by the Supreme Court in Iridium case [2].
Continue Reading Corporate Criminal Liability – #DirectorToo