International Fraud & Asset Tracing 2026 Comparisons

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

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

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

In 2023, the Indian Parliament enacted a new penal statute – Bharatiya Nyaya Sanhita 2023 (BNS) – and repealed the existing pre-colonial Indian Penal Code 1860 (IPC). Similarly, the erstwhile Code of Criminal Procedure 1973 has also been repealed and replaced by a new statute – Bharatiya Nagarik Suraksha Sanhita 2023 (BNSS). Both the BNS and BNSS came into effect from 1 July 2024. 

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

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

However, the BNS, under Section 111(1) (Explanation ii), has for the first time introduced the offence of “economic offence” as a part of a definition of a larger offence – namely, “organised crime”. Here “economic offence” has been expansively defined to include offences such as criminal breach of trust, forgery, counterfeiting of currency and valuable securities, financial scams, Ponzi schemes, mass-marketing fraud or multi-level marketing schemes to defraud the public for monetary gain, large-scale organised betting in any form, offences of money laundering and hawala transactions.

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

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

The Prevention of Corruption Act, 1988 (the “PC Act”)

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

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

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

The Companies Act

Under the Companies Act, it is the directors’ responsibility to create adequate internal financial controls to prevent and detect fraud and other irregularities within a company. Such internal controls include the setting-up of channels for reporting the receipt of a bribe by an agent. In the event of a failure to do so, the stakeholders may avail of various recourses under the Companies Act, including:

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

A statutory auditor of the company is obligated to report fraud to the audit committee or the board of directors. Where the suspected fraud exceeds INR1 crore, the auditor must also report such to the central government, after giving the audit committee or the board of directors (as the case may be) an opportunity to respond. Failure to do so exposes the auditor to various legal liabilities, as explained in 1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts.

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

The BNS

In India, abetment of an act is defined as providing any instigation or aid to facilitate the commission of an offence and is a punishable act in itself, regardless of whether the intended offence is committed. The definition of abetment also includes engaging with one or more person(s) in a conspiracy for committing a fraudulent act, if any act or omission occurs in pursuance of that conspiracy.

Where no specific punishment is prescribed for abetment, persons who conspire towards, assist in, or facilitate such fraudulent acts are punished with the same punishment as though they had committed the intended offence. Claims of abetment also extend to situations where a party assists in the commission of a crime by receiving or harbouring fraudulently obtained assets, provided that the party had knowledge that the assets were fraudulently obtained. Further, under Section 48 of the BNS, India has expanded extraterritorial application of abetment by making abetment outside India an offence where a crime is committed inside India.

The Companies Act

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

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

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

The Prevention of Money Laundering Act, 2002 (PMLA)

The PMLA penalises the offence of money laundering per se, when such offence involves proceeds of crime in relation to a specified or scheduled offence – ie, offences listed in the Schedule to the PMLA. The existence of such predicate offence is a sine qua non for initiation of proceedings under the PMLA. Notably, offences such as cheating, forgery of valuable security and wills, etc, are scheduled offences under the PMLA.

Under the PMLA, “money laundering” is defined very widely to include any of the following activities pertaining to proceeds of crime:

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

These activities are independent of each other and are to be read disjunctively.

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

The PC Act

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

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

Criminal Proceedings

In general, the limitation period for an offence is dependent on the period of imprisonment prescribed for that offence. For example, where an offence is punishable with imprisonment for up to three years, a complaint must be filed within three years from the commission of the offence. In cases involving fraudulent acts, the limitation period would depend on the specific offence. Criminal courts also have inherent powers to condone delay where it is properly explained or where doing so serves the interests of justice.

Additionally, no limitation period is prescribed for offences punishable with imprisonment exceeding three years. Accordingly, complaints for offences such as cheating and dishonestly inducing delivery of property (punishable with up to seven years’ imprisonment) or forgery of a valuable security or a will (punishable with up to ten years’ imprisonment) may be filed at any time.

Civil Proceedings

For civil claims, the limitation period is prescribed under the Schedule to the Limitation Act and varies depending on the causes of action. However, as stated above, the cause of action commences when the fraud is discovered or could reasonably have been discovered. The Supreme Court in Daliben Valjibai and Others v Prajajpati Kodarbhai Kachrabhai and Another, 2024 INSC 1049, decided on 11 December 2024, reiterated that in cases pertaining to fraud a limitation period of three years begins from the date of knowledge of the fraud.

The Contract Act

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

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

The Insolvency and Bankruptcy Code, 2016 (IBC)

The IBC provides for various mechanisms to claw back or disgorge any undue benefit received by any creditor or related party of a corporate debtor. Section 66 provides that during the liquidation or corporate insolvency resolution process, where any resolution professional (RP) or liquidator finds that the corporate debtor conducted their business with intent to defraud creditors or for any fraudulent purpose, the adjudicating authority may direct any persons (including directors or partners) knowingly involved in it to contribute to the assets of the corporate debtor.

The RP is also obligated to claw back such preferential transactions (if they qualify for the conditions in Section 43) or undervalued transactions (if they qualify for the conditions in Section 46) by filling an application under Section 44 or 45 of the IBC, respectively. These processes restore the transactions to the corporate debtor rather than to an individual claimant. Any person seeking such reversal will be entitled to proceeds from such transactions only in accordance with the resolution plan or the distribution scheme under Section 53 of the IBC. It has recently been held that such avoidance applications by the RP will be unaffected by the approval of the resolution plan or conclusion of the corporate insolvency resolution process (CIRP).

The Insolvency and Bankruptcy Board of India (IBBI) is also empowered to direct “any person” who has made an unlawful gain or averted losses by contravening the IBC to disgorge an amount equivalent to such unlawful gain. The IBBI may also take steps to restitute losses suffered by identifiable persons where such loss is directly attributable to the contravention. 

Pertinently, under Section 32A of the IBC, a new right has been conferred on the successful resolution applicant, whereby any prior attachment, seizure, retention or confiscation of property of the corporate debtor, in relation to offences committed before the commencement of the CIRP, shall stand released and made available free from encumbrances to the resolution applicant if such property is covered under the approved resolution plan.

The BNSS

Under the BNSS, the police are also empowered to seize any movable property or evidence suspected to be involved in any fraudulent act. Additionally, under Section 497 of the BNSS (Section 451 of the Code of Criminal Procedure (CrPC)), the court may pass such orders as it thinks fit for proper custody of any property during the pendency of the criminal trial.

Section 497 of the BNSS also introduces procedural requirements for handling property produced before the court or magistrate, including disposal, destruction, confiscation or delivery.

Where a claimant seeks to establish their proprietary rights in a criminal proceeding to recover property, they may make a claim before the court. The court may then order the release/restoration of the seized property, either during the pendency of the investigation/trial or after its conclusion. Such release/restoration may be granted with or without conditions including execution of a bond, with or without securities, to the satisfaction of the court. 

New Provisions of Attachment and Forfeiture of Property Under the BNSS

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

However, in addition thereto, the newly introduced Section 107 of the BNSS also empowers the magistrate to attach property identified as “proceeds of crime” upon an application by an investigating officer giving reasons for believing that the property is derived or obtained from a criminal activity or commission of an offence. This is subject to the magistrate hearing the affected party. However, under Section 107(5), the magistrate may also pass an ex parte interim order of attachment. If the magistrate ultimately finds the property to be proceeds of crime, it can direct pro rata distribution of such proceeds of crime to the victims of such crime. Where no claimants exist, the property stands forfeited to the government.

The Kerala High Court recently distinguished the powers of seizure under Section 106 BNSS from attachment under Section 107 BNSS, and held that seizure under Section 106 may be carried out by the police with an ex post facto report to the magistrate, whereas attachment under Section 107 can be effected only pursuant to orders of the magistrate. The Bombay High Court, approving the Kerala High Court’s reasoning, has held that investigating agencies cannot freeze bank accounts under Section 106 and that such freezing can only be ordered under Section 107.

In light of the rise in digital arrest scams in India, the Supreme Court of India has taken suo motu cognisance of the issue, which is presently pending adjudication along with a plea seeking uniform guidelines for freezing and de-freezing of bank accounts during cybercrime investigations.

Notably, the power of attachment under the BNSS comes with even fewer procedural safeguards than those provided under the PMLA. The constitutional validity of Section 107 has been challenged before the Supreme Court of India and is presently pending adjudication.

The PMLA

As stated in 1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts, the PMLA defines “proceeds of crime” broadly to include property directly or indirectly obtained through fraudulent activities, as well as well as its equivalent value held in India where such property is taken or held outside India. Notably, where the proceeds of crime generated from fraud as recognised in a scheduled offence are mixed with other funds, their value may still be identified and subjected to seizure or attachment, recognising that the tainted property may no longer be available.

The Directorate of Enforcement (ED) may attach or, where necessary, freeze properties derived directly or indirectly from the proceeds of crime. However, the Supreme Court of India recently clarified that mere use of a property in the commission of the predicate offence will not render said property a proceed of crime.

Recently, in Davy Varghese and Another v Directorate of Enforcement [WP (Crl) No 1354 of 2025, decided on 16 December 2024], the Kerala High Court set aside the attachment of properties, observing that such properties could only be attached under the narrow third limb exception under Section 2(1)(u) and that “value of such property” refers to the monetary worth of property derived from the offence, not to assets acquired bona fide. The Court further warned against retroactive application of attachment powers, holding that this would offend the constitutional principle against ex post facto penal consequences under Article 20 of the Constitution.

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

The Foreign Exchange Management Act, 1999

In 2015, Section 37A of the Foreign Exchange Management Act (FEMA) was introduced authorising the ED to seize equivalent assets within India where a resident holds foreign exchange, foreign securities or immovable property outside India in contravention of Section 4 of FEMA. The ED has recently invoked these powers in multiple cases to seize equivalent assets in India in cases where assets are allegedly held outside India in contravention of FEMA. Notably, the Karnataka High Court has recently held that this provision introduced in 2015 is not retrospectively applicable.

Criminal Proceedings

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

Civil Law Proceedings

Where a claimant files a civil claim relating to a fraud under a contract, they should issue a legal notice (usually a demand notice) or comply with any pre-action steps as prescribed under the dispute resolution clause of the contract.

Moreover, specific legislation or provisions may have their own particular rules of pre-conduct action. For example, under the Commercial Courts Act, 2015 (the “CC Act”), parties must undergo pre-institution mediation where no urgent interim relief is sought. Similarly, a civil action against the government or a public official may be instituted after serving a written notice two months in advance, unless waived by the court. Failure to comply with such pre-conduct action may be fatal to the claim where the statute so provides.

A victim of fraud pursuing civil claims may apply for a temporary injunction to prevent a party from alienating assets during adjudication. The application must satisfy the common law requirements for grant of an injunction:

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

Such injunction is in personam, but may also extend to third parties, where they interfere with or obstruct the course of justice.

Where a suit is instituted for seeking damages/permanent injunction, the court fees payable are computed as per the Court Fees Act, 1870 and the rules governing that specific court, which may be ad valorem (with or without caps, depending on where the action takes place). However, the fees for seeking an ad interim injunction are typically nominal and vary across courts.

A similar remedy is available under Section 9 of the Arbitration and Conciliation Act, 1996 (the “A&C Act”), which permits parties to seek an ad interim injunction for preservation of assets or the substratum of an arbitration, before, during or after the constitution of an arbitral tribunal but before execution of an arbitral award.

Further, as noted in 1.5 Proprietary Claims Against Property, the BNSS empowers police officers to seize property involved in a fraudulent offence. The magistrate may also issue attachment orders (including ex parte interim attachment orders), where property is believed to constitute proceeds of crime. These powers can be exercised at a pretrial stage and even before the accused has an opportunity to plead and establish their innocence in a trial. Criminal courts also have wide powers to secure the custody of any property produced before them during the pendency of trial and may order its release/restoration to the claimant either during the pendency of investigation/trial or after conclusion of the trial.

Civil Law Remedies for Violation of an Injunction

Violation of an interim injunction constitutes a contempt of court and is punishable with civil imprisonment and/or a fine. The court may also attach the property of the violating party and declare any transaction in violation of such injunction null and void. 

Criminal Law Remedies for Violation of an Injunction

Under the BNS, fraudulent removal or dissipation of assets to prevent forfeiture for the satisfaction of an order or a decree, whether passed or likely to be passed, is punishable with imprisonment of up to two years or a fine, or both.

Cross-Undertakings

There is generally no statutory requirement for a claimant to furnish a cross-undertaking in damages, except in patent suits filed in New Delhi. However, courts or arbitral tribunals may require such an undertaking to indemnify losses suffered by the opposite party if the injunction is later found unwarranted. Courts may also impose conditions, including deposit of an amount, while granting interim relief.

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

Criminal Proceedings

Under Section 94 of the BNSS (Section 91 of the CrPC), a court or a police officer may compel a person, through a written notice, to produce any “document or other thing” necessary or desirable in respect of the fraudulent act, during the stage of investigation, inquiry or trial. Notably, Section 94 has been amended to vest power with a law enforcement agency to seek production of communication devices containing digital evidence. A person may be compelled to disclose documents relating to assets held by themselves or through nominees. Failure to produce documents or electronic records before a public servant may attract simple imprisonment of up to one month and a fine of up to INR5,000. If such failure is before a court, it may be punishable with simple imprisonment of up to six months and a fine of up to INR10,000.

Civil Proceedings

In civil proceedings, a claimant may seek discovery, inspection and admission of certain documents in the control of the opposite party. Where assets are, in the usual course of business, held by a third party, the court may direct such third party to disclose them. The opposite party may also be required to answer specific questions (termed “interrogatories”) served by the claimant. Failure to answer such interrogatories or comply with an order of discovery may lead to dismissal of the defendant’s defence under Order XI Rule 21 of the CPC. Additionally, in the case of false information, the defendant may also be proceeded against for perjury. At the same time, courts may impose costs where interrogatories are unreasonable, vexatious or exceedingly lengthy.

Cross-Undertakings

As explained in 1.7 Prevention of Defendants Dissipating or Secreting Assets, a party can be put to terms and be directed by the court to deposit a certain amount. Further, under Section 144 of the CPC, a court may order restitution where an order is subsequently vacated or modified. This power includes the power of the court to award consequential costs to the party.

Criminal Proceedings

Law enforcement agencies often have their own internal manuals governing the preservation and storage of evidence. For example, the Central Bureau of Investigation (CBI) manual provides that all documents and material objects seized during an investigation must be promptly sealed in a scientific manner and deposited in the designated property room, with details recorded in the submodule of crimes or relevant register. Such items can be issued to the investigating officer as and when required for the purpose of investigation upon proper receipt and must be returned thereafter. The manual also states that every investigating officer shall be personally responsible for the safe custody of such documents/items at all stages of the investigation.

As mentioned in 1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts, 1.5 Proprietary Claims Against Property and 1.7 Prevention of Defendants Dissipating or Secreting Assets, the ED under the PMLA may attach any property that it reasonably suspects to be “proceeds of crime”. Attachment preserves such property for use as evidence at trial. The Prevention of Money Laundering (Receipt and Management of Confiscated Properties) Rules, 2005 further regulate identification, maintenance and custody of confiscated properties. Where an attached asset is depreciating in nature, courts may permit its sale in order to realise its maximum value, even during the pendency of the trial.

Following concerns raised by Financial Action Task Force (FATF) regarding use of cryptocurrencies in money-laundering activities, Indian enforcement agencies have also begun attaching cryptocurrencies and assets of such exchanges as proceeds of crime. As a measure of statutory recognition, in March 2023 the government of India (for the first time) formally brought “cryptocurrency” and “virtual digital assets” under the regulatory ambit of the PMLA, thereby making compliance with reporting requirements mandatory.

Moreover, the police and the courts are given the power to seize and attach any property that is governed by the procedure provided in the BNSS. Under these criminal statutes, “property” is defined very broadly to include movable or immovable property, corporeal or incorporeal property, and the instruments relating to such assets (and includes bank accounts).

Further, the BNS criminalises secreting or destroying documents to prevent their production in legal proceedings, punishable with imprisonment of up to three years or a fine of INR5,000, or both, thereby deterring destruction of evidence.

Civil Proceedings

Under the CPC, courts regulate and control the evidence placed before them. High Courts in India have their own specific rules in relation to maintenance of evidence. For example, the Delhi High Court Rules require old and delicate documents to be safeguarded, such as by using a protective covering or by using photocopies while sealing the original. The CPC also permits appointment of a receiver under Order XL to preserve property that is the subject matter of a suit for realisation, management or improvement of a property, or to collect rent and profits while the suit is pending. Additionally, under Order XXXIX Rule 7 of the CPC, a party may seek court orders for inspection, detention or preservation of property forming the subject matter of the suit. Similarly, under the A&C Act, the court or the arbitral tribunal may issue interim directions for preservation of evidence which is in the exclusive possession of a party, and which is necessary for protection of the subject matter of the arbitration.

Physical Search of Documents

The Bharatiya Sakshya Adhiniyam, 2023 (BSA) that replaced the Indian Evidence Act, 1872 from 1 July 2024 empowers courts to require production of any document at any time, as the court may deem fit (unless this falls under a recognised privileged communication). However, under criminal law, the rights of the victim are limited and do not extend to conducting a physical search of documents at the defendant’s residence or place of business. However, it may be noted that the provisions relating to privileged communications have been retained under the BSA.

In civil proceedings, a claimant may seek discovery and inspection of the evidence through application to the court. Inspection usually takes place at the office of the defendant’s pleader, or at the usual place of custody of such evidence. The application must be made on oath affirming relevance of the documents, but no undertaking is required. Such inspection is limited to documents referred to and/or relied on by the defendant in its pleadings, or to specific documents that the claimant affirms the defendant has, and does not amount to a general search of the defendant’s premises.

The CPC also allows appointment of commissioners under Order XXVI for local investigation/inspection or for ascertaining mesne profits or damages, or annual net profits. The commissioner records the evidence, prepares a report and submits it to the court, and may also examine witnesses on interrogatories or otherwise.

Criminal Proceedings

As stated in 2.1 Disclosure of Defendants’ Assets, Section 94 BNSS empowers a court or the police to summon any person to produce any document, communication device containing digital evidence or thing necessary for investigation or trial. The provision is not limited to the accused and may be invoked to seek a document or thing relevant for investigation from any person in whose possession or power such document or thing is believed to be.

Civil Proceedings

Under the CPC, courts have broad powers to seek production of any document or evidence from any party, either on its own or pursuant to an application filed by a claimant in this regard. One notable change regarding production of documents is that under the newly enacted BSA the definition of the word “document” has been expanded to include:

• electronic or digital records stored in emails;
• server logs;
• documents on a computer;
• messages;
• websites;
• the cloud;
• location evidence; and
• voicemail messages stored on digital devices.

Similarly, the definition of the word “evidence” has also been expanded to include any information given electronically, marking a significant statutory development.

Under the CPC, a claimant seeking a temporary injunction (such as to preserve any property or prevent any further injury) may be granted an ex parte injunction if the court believes that the delay in notifying the other party may defeat the purpose of the injunction sought. However, the claimant will be required to inform the opposite party of this and to send all documents forthwith. Such an injunction may be vacated upon an application filed by the opposite party if the claimant has knowingly made false or misleading statements. Further, once an ex parte interim injunction is granted, the court is required to hear and dispose of the application of the claimant for injunction within 30 days of passing the interim order.

Victims of fraudulent acts or fraud have two avenues through which they can seek redress against perpetrators:

• initiation of criminal proceedings; or
• the filing of a civil suit.

The victim can also pursue both civil and criminal remedies simultaneously for the same cause of action. Such proceedings take place before different courts and hence do not impact on the speed at which they are disposed. However, criminal proceedings can be initiated only when criminal offences are sufficiently made out in the cause of action, as courts have repeatedly cautioned against giving a criminal colour to purely civil/contractual disputes. 

In practice, the route chosen by victims depends on the relief sought. Indian criminal law provides limited scope for victim compensation, which is usually recoverable from the fine imposed by the court, and is subject to the discretion of the court. Hence, if the overarching goal of initiation of proceedings is recovery, a victim will be well advised to pursue civil proceedings; but, if the goal is to seek punishment for the perpetrator, criminal proceedings are more appropriate.

The standard of proof required to hold against the perpetrator is different in both cases. In civil proceedings, it is sufficient for the victim to show on “preponderance of probabilities” that the perpetrator is at fault, whereas in criminal proceedings it is the duty of the prosecution (for example, the State) to show that the perpetrator is liable “beyond reasonable doubt”.

While in theory both proceedings are independent and do not have a bearing on each other, in practice an adverse ruling in one may be prejudicial for the party in the second proceeding, depending on the facts dealt with and whether the conviction precedes the civil determination.

Criminal Proceedings

The BNSS does not provide for the obtaining of judgments without a full trial being conducted. However, if an accused is absconding and there is no immediate prospect of arrest, the court may record evidence in their absence, which may later be used against the accused when the trial can take place. The court may also dispense with the presence of the accused if it is satisfied that their presence is not necessary or that the accused has persistently disturbed the court proceedings. In fact, the Supreme Court of India has noted that absconding persons cause undue delay in adjudication of trials and the CrPC needed to be amended to allow for “trial in absentia”.

In view of such suggestions, the BNSS has (for the first time) introduced provisions relating to conducting a trial of an accused person in absentia. Under Section 356 of the BNSS, trial in absentia may be conducted if three conditions are satisfied, namely:

• the accused person is declared as a proclaimed offender under Section 84 of the BNSS;
• they have absconded to evade trial; and
• there is no immediate prospect of arresting them.

Thus, the BNSS provides for pronouncement of judgment in such trials, with the further stipulation that an appeal therefrom can only be preferred if the proclaimed offender presents themselves before the Court of Appeal.

Civil Proceedings

The courts can also issue an ex parte decree in a defendant’s absence, provided that sufficient opportunity has been provided to the defendant and despite which the defendant failed to appear before such court or has failed to file a written statement. However, in such cases also, a plaintiff is still required to prove their case to obtain an ex parte decree.

For civil cases, the CPC also allows filing an application seeking a summary judgment in certain commercial disputes. Under Order XIII-A of the CPC, read with the CC Act, the court may give a summary judgment where the defendant has no real prospect of successfully defending the claim and there is no other compelling reason for why the claim should not be disposed of without proceeding to trial. The CPC, read along with the CC Act, also empowers the court to pronounce judgment at the first hearing of the suit itself when it appears that the parties are not at issue on any question of law or fact.

Moreover, there is also a separate provision for institution of summary suits that involve the plaintiff seeking recovery from the defendant for an ascertainable amount. In such suits, the defendant may defend the claim only with the court’s leave; if leave is refused, the suit is decreed in favour of the plaintiff.

Courts in India have adopted an expansive and inclusive definition of fraud. The primary component that must be alleged and proved in such claims is establishing that the claimant was fraudulently or dishonestly induced to act in a certain manner by the perpetrator. While proving that a wrongful gain was caused to the perpetrator and a wrongful loss was caused to the claimant may not be necessary in every instance, the Supreme Court of India has repeatedly held that fraud must be pleaded with specific particulars and that the case can only be decided on the basis of those particulars. Mere bald allegations or pleadings of fraud are not sufficient. Order VI Rule 4 of the CPC similarly requires that pleadings relying on any misrepresentation, fraud, breach of trust, wilful default or undue influence must state detailed particulars, including dates and times where necessary.

Claims may also be brought against unknown fraudsters, especially when a claimant seeks ex parte interim injunction to protect its interests, where there is an imminent threat to such interests, and where the identity of the fraudster is unknown. India courts have frequently granted such “John Doe” orders (referred to as “Ashok Kumar” orders in India), especially in cases involving fraudulent misrepresentations or frauds in relation to intellectual property.

Criminal Proceedings

As stated in 2.1 Disclosure of Defendants’ Assets and 2.3 Obtaining Disclosure of Documents and Evidence From Third Parties, Section 94 of the BNSS empowers the police or a court to direct a person to produce certain specified documents in their possession as evidence. Courts in India also have broad powers to summon witnesses, either on their own motion or upon application by a claimant, and to compel production of any evidence or document.

Civil Proceedings

Arbitral tribunals can also seek court assistance in taking evidence under Section 27 of the A&C Act by exercising the stipulated powers. These powers have also been recognised under the BSA. Additionally, under Order XXVI of the CPC, courts may appoint a commission for deposing a witness or pursuing interrogatories in cases where:

• the witness is within local limits and cannot be compelled to appear before a court;
• there is apprehension of evading jurisdiction before such witness can be compelled to appear before a court; or 
• such witness is incapable of attending evidentiary proceedings.

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

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

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

Under the Companies Act, shareholders may institute oppression and mismanagement proceedings against the company and its director(s) where, inter alia, the affairs of the company have been or are being conducted in a manner that is prejudicial to public interest or shareholders’ interests.

The requirement for initiating such proceedings has been provided for under the Companies Act as not less than 100 members or one tenth of the total members (whichever is less), or any member(s) holding one tenth of the paid-up share capital of the company, in the case of a company that has a share capital. For a company that does not have a share capital, not less than one fifth of the total members of such a company can initiate such proceedings.

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

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

Recently, the National Company Law Tribunal (NCLT) admitted India’s first corporate class action suit under Section 245 of the Companies Act instituted by minority shareholders. The order of admission was challenged before the National Company Law Appellate Tribunal (NCLAT), which dismissed the appeal and upheld the maintainability of the class action.

Fraud Under the Contract Act

A suit for declaration of contract rendered void on account of fraud, or for claiming damages on account of such fraud committed by a private party, may require the joinder of an overseas party. Such joinder is governed by the CPC, which does not distinguish between joinders of an overseas party and a domestic party. Joinder is allowed on account of liability under the same contract (Order I Rule 6) or on account of a cause of action (Order II Rule 3). Courts may issue a notice/summons to an overseas party, and, if they fail to appear or defend, the courts may proceed ex parte to decide the suit.

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

Arbitrability of Fraud

Indian law allows fraud of a civil nature to be arbitrated between parties. Any allegation of fraud that affects the private dispute between parties is arbitrable, unless the allegation is that the arbitration agreement itself is vitiated by fraud. However, allegations involving criminal aspects of fraud, forgery or fabrication, and which hit at the very formation of the contract, fall within the domain of public law and must be adjudicated by the courts.

Indian law has evolved to permit joinder of non-signatories to an arbitration, be it domestic parties or overseas parties. Courts have also applied the “group of companies” doctrine for the joinder of parties to an arbitration. This doctrine was authoritatively recognised by the five-judge Constitution Bench of the Supreme Court of India in Cox & Kings Ltd v SAP India (P) Ltd, 2023 INSC 1051. In doing so, the Supreme Court has held that consent may be implied in some situations to include a non-signatory to an agreement as party to an arbitration if the circumstances show that the mutual intention of all the parties was to bind both the signatory and the non-signatory affiliate.

Fraud Under the Companies Act

While the Companies Act provides punishment for fraud under Section 447, its application to overseas entities is limited. A foreign company, under Section 2(42), refers to any company or body corporate incorporated outside India which:

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

Under Section 379 of the Companies Act, where not less than 50% of the paid-up share capital of a foreign company is held by one or more citizens of India, or by one or more companies or bodies corporate incorporated in India, whether singly or in aggregate, such company must comply with specified provisions of the Companies Act for its business in India as if it were incorporated in India.

Further, Section 380 of the Companies Act provides for service of any process, notice or other document required to be served on a foreign companies, while Section 228 permits inspection, inquiry or investigation into their affairs.

Criminal Proceedings

Indian courts may exercise jurisdiction over criminal acts committed with a fraudulent intent under the BNS when the act has been committed by:

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

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

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

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

The BNSS governs criminal procedure in India, including the issuance of summons by a court (or a police officer through the court) for the production of any document or material necessary for the purposes of any investigation, inquiry or trial. Such summons may be issued to any person believed to be in possession of relevant information.

The BNSS also prescribes procedures for service of summons or warrants in a contracting “state”, through an authority for transmission. As stated in 4.1 Joining Overseas Parties to Fraud Claims, India has entered into MLATs with various countries/contracting states to facilitate such co-operation. India also participates in multilateral frameworks such as the FATF and International Criminal Police Organization (Interpol), which enable member states to share and access data on crimes and criminals as well as offer a range of technical and operational support. Additionally, India has bilateral treaties providing for mutual legal assistance, information sharing and extradition.

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

Civil Proceedings

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

Foreign decrees may also be enforced in India provided they satisfy the test of finality under Section 13 of the CPC. Under Section 44A of the CPC, decrees of superior courts of a reciprocating territory are executable in India as decrees passed by an Indian district court. If the decree is passed by a non-reciprocating territory, the procedure under Indian law is to institute a civil suit seeking recognition and, thereafter, enforcement of the foreign decree.

Similarly, a domestic arbitral award under the A&C Act is enforceable as a court decree under Section 36, subject to challenges under Section 34. A foreign award may be enforced in India where the court is satisfied that it fulfils the conditions provided for in Sections 44, 48 and 57 of the A&C Act. Such an executable foreign award is deemed to be a decree of the court.

Criminal Proceedings

While cognisance of criminal fraud can only be taken by an Indian court exercising criminal jurisdiction, investigations may be conducted by agencies exercising powers under the BNSS, including state police, and officers of special divisions such as the Economic Offence Wing and CBI. Special multidisciplinary agencies have also been given powers to investigate fraud under specific statutes – ie, the SFIO to investigate fraud under the Companies Act, and the ED to investigate the predicate offence of fraud under the PMLA.

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

In a recent decision, the Karnataka High Court has held that two parallel investigations by the SFIO and CBI arising out of the same set of facts is permissible. This has been challenged before the Supreme Court, where the issue is presently pending adjudication.

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

Under Section 44A, a “reciprocating territory” refers to any country or territory outside India that has been declared by the central government as such, and “superior courts” refers to those courts specified in the relevant notification. India has designated 13 reciprocating territories under Section 44A – namely, the United Kingdom, Singapore, Bangladesh, Malaysia, Trinidad and Tobago, New Zealand, the Cook Islands (including Niue), Western Samoa, Hong Kong, Papua New Guinea, Fiji, Aden and, more recently, the United Arab Emirates.

A foreign judgment rendered by a superior court in a reciprocating territory may be enforced in India by filing an execution application before a competent Indian court, accompanied with a certified copy of the decree and a certificate from the relevant superior court of the foreign jurisdiction, indicating any amounts that have been satisfied under the decree. It is important to note that a foreign judgment is not subject to a review on the merits; rather, it must only satisfy the conditions outlined in Sections 13 and 44A of the CPC.

Upon the filing of the application, the court issues notice to the judgment debtor directing them to show cause as to why the decree should not be executed. If the judgment debtor fails to appear or provide an adequate explanation, the court will recognise and enforce the foreign decree as though it were an Indian judgment. The court will then permit the decree holder to execute the judgment against the assets of the judgment debtor. The decree holder may also apply to the court for directions requiring the judgment debtor to disclose any assets. If such assets are disclosed, the court will proceed with the attachment and sale of those assets.

The limitation period for enforcing a foreign judgment is governed by the limitation period of the “cause country” – the reciprocating territory from which the judgment originates. Therefore, the decree holder loses the right to enforce the judgment in India if they fail to initiate enforcement proceedings within the limitation period prescribed by the cause country. Additionally, if the decree holder has initiated enforcement proceedings within the prescribed limitation period in the cause country but the judgment is not fully satisfied, the right to apply under Section 44A will arise only after the execution proceedings in the cause country are concluded. The application may be filed within three years of the finalisation of the execution proceedings in the cause country.

In contrast, judgments from non-reciprocating territories cannot be directly enforced in India. Instead, the plaintiff must file a fresh suit in India. This suit may be filed in the court of first instance that has territorial and pecuniary jurisdiction to pass a decree based on the foreign judgment. Such an action is treated as any other suit filed before an Indian court, where the parties have the right to present evidence and make arguments on the merits of the case. The limitation for filing such a suit under the Limitation Act is three years.

Criminal Proceedings

A right against self-incrimination is innate in Indian jurisprudence; it has been guaranteed as a fundamental right by Article 20(3) of the Constitution of India, and is reflected in various other statutes, including the BNSS and the BSA. This protection applies to all forms of testimonial evidence, including oral testimony and production of documents, and is available both at the pretrial stage and during the trial. A witness may refrain from giving evidence that may result in self-incrimination, and, since the burden of proof is on the investigation agencies and the prosecution, adverse inference cannot be drawn from exercising this fundamental right.

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

Civil Proceedings

In civil proceedings, the right against self-incrimination does not apply in the same manner. Consequently, courts may draw adverse inferences where a party fails to produce evidence or refuses to testify in defence of their case, consistent with Section 119 of the BSA.

In India, privilege from disclosing communications between a lawyer and their client is statutorily recognised under Sections 132(1), 132(3) and 133 of the BSA, respectively, and under Section 227 of the Companies Act, protecting communication between a client and lawyer even after the relationship ends. However, privilege does not apply where:

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

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

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

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

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

In a recent significant ruling, the Supreme Court of India has held that compelling lawyers to disclose client communications undermines constitutional protections, including the right to legal representation and the right against self-incrimination under Article 20(3). The Court observed that summoning an advocate without proper basis reflects investigative overreach.

The Court therefore laid down a two-fold test for the rare circumstances in which an advocate may be summoned:

• explicit reasons must be stated in the summons explaining why the statutory exception applies, subject to judicial review; and
• prior written approval must be obtained from an officer not below the rank of Superintendent of Police, who must record prima facie satisfaction that the exception applies.

In Indian law, punitive or exemplary damages may only be granted in certain cases, such as tortious claims, IPR matters or where the relevant statute so allows such damages to be imposed. Such damages are often awarded in cases where the party in breach of an agreement has behaved in an outrageous, reprehensible or objectionable manner. In contractual disputes, damages are primarily governed by Sections 73 and 74 of the Contract Act, which generally do not permit punitive or exemplary damages.

Section 73 of the Contract Act provides for compensation for breach of contract which results in actual damage in the nature of unliquidated damages. Section 73 of the Contract Act itself provides that a party can claim compensation for any loss or damage caused to them which “naturally arose in the usual course of things”. Compensation cannot be given for any remote and indirect loss or damage sustained by reason of the breach. The aim is to allow for a party to be placed, as far as money can allow, in as good a situation as though the contract had been performed and a duty has been cast on the plaintiff to take all reasonable steps to mitigate the loss suffered by them. These principles do not allow the courts to grant exemplary or punitive damages in fraud claims.

Section 74 of the Contract Act provides that, if a sum is named in the contract as the amount to be paid in the case of such a breach, or “if the contract contains any other stipulation by way of penalty”, the party complaining of the breach is entitled (whether or not actual damage or loss is proved to have been caused thereby) to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named, or, as the case may be, the penalty stipulated.

However, Indian courts have consistently limited this to reasonable compensation where the stipulated sum represents “genuine pre-estimate of damages” agreed by the parties. Courts have clarified that the phrase “whether or not actual damage or loss is proved to have been caused thereby” does not dispense with proof where such loss can be proved. Only where damage or loss is difficult or impossible to prove may the liquidated amount named in the contract be awarded without proof of actual loss. Amounts stipulated in terrorem cannot be granted under Indian law. This principle therefore limits the scope of exemplary or punitive damages under the Contract Act.

These principles may not strictly apply in cases involving fraud, as fraud unravels all, and any contract obtained by fraud would make it voidable. In such cases, Section 65 of the Contract Act applies, which provides that any person who has received any advantage under such an agreement or contract is bound to restore it, or to make compensation to the affected party, thereby placing the innocent party in the position they would have occupied had the contract not been entered into. This principle has been further diluted by Indian courts to the effect that the primary aim of awarding compensation is restitution rather than punishment. Therefore, where compensation can be determined based on principles of computing damages under the Contract Act, there may not be any need to award compensation by restitution.

It may be noted that provisions relating to disgorgement of unlawful gains typically obtained through wrongful means (which is inclusive of fraud) have been incorporated under the SEBI Act and Section 212(14A) of the Companies Act. As stated in 3.3 Shareholders’ Claims Against Fraudulent Directors, the Companies Act already allows for seeking freezing of assets and disgorgement of property, as disgorgement is a civil action in the nature of an equitable relief, and not a penal action. Therefore, the SFIO would also be bound by the same principle for disgorgement.

Similar principles have also been accepted by the Securities Appellate Tribunal for directing disgorgement under the SEBI Act. It was noted that a repayment of ill-gotten gains imposed on wrongdoers is a monetary equitable remedy designed to prevent a wrongdoer from unjustly enriching themselves as a result of their illegal conduct, and is not a punishment. Therefore, the principle applied under the statutes is caveated by the fact that the disgorgement has to be limited to the unlawful gains obtained, and should never exceed them.

It is now a settled principle that disgorgement of ill-gotten proceeds can be directed under various expropriatory statutes; however, this is limited to attachment/confiscation of property to the extent of monies that have been appropriated illegally. These provisions therefore do not allow for exemplary damages for illicit acts committed by a party.

Indian law imposes a statutory duty of fidelity, confidentiality and secrecy upon various intermediaries such as banks, public financial institutions and credit information companies. However, these obligations are subject to certain exceptions. The obligation to maintain secrecy, fidelity and confidentiality applies to:

• banks under the Banking Regulation Act, 1949 (Section 34A);
• public financial institutions through the Public Financial Institutions (Obligation as to Fidelity and Secrecy) Act, 1983;
• credit information companies through the Credit Information Companies (Regulation) Act, 2005; and
• intermediaries processing payments under the Payment and Settlement Systems Act, 2007.

Breach of these obligations is punishable through various regulatory, monetary and criminal sanctions. The Bankers’ Book Evidence Act, 1891 also protects any banker from being compelled to produce any bankers’ book, and from being compelled to produce bankers’ books or testify regarding their contents unless specifically directed by a court for special cause.

The Indian Information Technology Act, 2000 also recognises financial information (such as a bank account, credit card, debit card or other payment instrument detail) to be sensitive personal data and prohibits any disclosure thereof unless personally consented to by the entity/person to whom it belongs, or without consent when sought by investigating agencies in accordance with the law. These obligations have been further bolstered under the newly enacted Digital Personal Data Protection Act, 2023 (“DPDP Act”).

On 13 November 2025, the government notified the Digital Personal Data Protection Rules, 2025 (“DPDP Rules”). This notification forms part of a series of measures issued by the central government to operationalise the DPDP Act, including staggered commencement of its provisions and the establishment and constitution of the Data Protection Board of India (DPB). The substantive compliance obligations under this framework are to take effect after a transition period of 18 months, allowing entities time to strengthen data governance practices, technological systems and compliance processes.

The Companies Act also safeguards against disclosure of third-party sensitive financial information, where such information is sought by bankers of any company under investigation (other than the information of the company itself).

However, banking secrecy is not absolute. Banks may be compelled, through summons and processes issued in accordance with the law, to disclose such information. This right is clearly recognised in favour of investigating agencies, either through periodic reporting requirements (such as those under the PMLA) or through a specific power to issue summons for disclosure of information vested with various authorities (such as the police, income tax authorities, ED, customs authorities, etc), who have been given power to compel a person to provide their books of accounts or face a penalty for non-compliance as specified under various statutes. Such statutes include:

• the Income Tax Act, 1961;
• the Foreign Exchange Management Act, 1999;
• the Customs Act, 1962; and
• the BNSS.

Additionally, the police, income tax authorities, ED, custom authorities, etc, have the power to search for and seize documents from banks in the course of their investigation. Banks and intermediaries are also subject to limited disclosure under the Right to Information Act, 2005 where information held by them qualifies as public information.

India presently has no dedicated legislation governing crypto-assets. Although the government of India introduced the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 to prohibit private crypto-assets and create a framework for a digital currency issued by the Reserve Bank of India (RBI), this has not materialised into substantive legislation. The government of India has stated that any regulation on crypto-assets will be finalised only after international consultation.

The Finance Act, 2022 (the “Finance Act”) recognised, for the first time, taxation of certain virtual digital assets (VDAs) as a basis for recognising the income generated from such VDAs. While this does not expressly legitimise VDAs, it taxes income from VDAs at 30% and every transaction involving such VDAs at 1% tax deducted at source.

Notably, the Finance Act introduced a new clause (47A) in Section 2 of the Income Tax Act defining a VDA as “any information, code, number or token (not being Indian currency or any foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value which is exchanged with or without consideration, with the promise or representation of having inherent value, or [which] functions as a store of value or a unit of account and [this] includes its use in any financial transaction or investment but [is] not limited to investment schemes, and [which] can be transferred, stored or traded electronically”. Non-fungible tokens and any other token of a similar nature are included in this definition.

The Finance Act recognised that the introduction of any cryptocurrency can only happen as a result of the Central Bank, namely the Reserve Bank of India (RBI), which alone has the power to issue a Central Bank digital currency as defined under the Finance Act. In light of this, cryptocurrencies are not presently recognised as legal tender under Indian law.

The RBI has repeatedly cautioned parties from dealing with cryptocurrencies, and through a circular dated 6 April 2018 has asked banks and entities regulated by the RBI to not allow use of the banking system for trade in crypto-assets. However, in Internet and Mobile Association of India v RBI, the Supreme Court of India struck down this circular, allowing banks to serve entities/persons dealing in crypto-assets. Nevertheless, through its circular dated 31 May 2021, the RBI has also advised its regulated entities to continue to carry out customer due-diligence processes for transactions in VDAs, in line with regulations governing standards for know-your-customer, anti-money laundering, and the combating of financing of terrorism obligations under the PMLA.

In March 2023, the government of India formally brought “cryptocurrency” and VDAs under the regulatory ambit of the PMLA. It is now mandatory for any person dealing with cryptocurrencies and/or virtual digital assets to comply with reporting requirements. There are increasing incidents of law enforcement authorities freezing crypto-assets where they are suspected of being involved in the commission of crime.

This nuanced area is becoming a topic of debate, as by their very nature “asset tracing” of crypto-assets presents a challenge. “Blockchain” technology does not allow complete asset-tracing, and, as recognised by the Supreme Court of India, every crypto-asset differs in nature, whether it is anonymous or pseudo-anonymous, and in light of the potential impact of attachment or confiscation of such property (given that a public ledger does not allow change of ownership in a traditional way).