Chapter XXIX - Miscellaneous
Section 447
Section 447: punishment for fraud
Section 447 is the punishment for fraud referred to throughout the Act. Where the fraud involves at least ten lakh rupees or one per cent. of the company’s turnover, whichever is lower, the guilty person faces imprisonment of six months to ten years and a fine of at least the amount involved, up to three times that amount.
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This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
Without prejudice to any liability including repayment of any debt under this Act or any other law for the time being in force, any person who is found to be guilty of fraud, involving an amount of at least ten lakh rupees or one per cent. of the turnover of the company, whichever is lower shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud: Provided that where the fraud in question involves public interest, the term of imprisonment shall not be less than three years. Provided further that where the fraud involves an amount less than ten lakh rupees or one per cent. of the turnover of the company, whichever is lower, and does not involve public interest, any person guilty of such fraud shall be punishable with imprisonment for a term which may extend to five years or with fine which may extend to fifty lakh rupees or with both. Explanation.—For the purposes of this section—(i) “fraud” in relation to affairs of a company or any body corporate, includes 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; (ii) “wrongful gain” means the gain by unlawful means of property to which the person gaining is not legally entitled; (iii) “wrongful loss” means the loss by unlawful means of property to which the person losing is legally entitled.
Introduction
If the fraud involves public interest, the minimum imprisonment is three years. A fraud below that threshold that does not involve public interest is punishable with imprisonment up to five years, or fine up to fifty lakh rupees, or both. The section operates without prejudice to any other liability, including repayment of any debt.
Section 447 commenced on 12 September 2013 under S.O. 2754(E). The threshold and the second proviso were inserted by the Companies (Amendment) Act, 2017 from 9 February 2018, and the Companies (Amendment) Act, 2019 raised the fine in the second proviso to fifty lakh rupees, deemed from 2 November 2018.
Key takeaways
Threshold
Ten lakh rupees or one per cent. of turnover, whichever is lower, separates the two punishment tiers.
Public interest
A fraud involving public interest carries at least three years’ imprisonment, whatever the amount.
Broad definition
Fraud covers acts, omissions, concealment and abuse of position with intent to deceive, gain undue advantage or injure, even without wrongful gain or loss.
Punishment tiers
For fraud involving at least ten lakh rupees or one per cent. of the turnover of the company, whichever is lower: imprisonment of not less than six months, up to ten years, and fine of not less than the amount involved, up to three times that amount. Where the fraud involves public interest, the minimum imprisonment is three years. Where the fraud involves less than that threshold and does not involve public interest: imprisonment up to five years, or fine up to fifty lakh rupees, or both.
- India Code — consolidated Companies Act, 2013, section 447
- Companies Act, 2013 as published in the Gazette of India, 30 August 2013 (NCLT copy)
- eGazette — Companies (Amendment) Act, 2017 (No. 1 of 2018)
- eGazette — MCA notification S.O. 630(E) (2017 Amendment Act provisions in force 9 February 2018)
- eGazette — Companies (Amendment) Act, 2019 (No. 22 of 2019)
- eGazette — MCA notification S.O. 2754(E), 12 September 2013 (commencement)
What counts as fraud
In relation to the affairs of a company or any body corporate, fraud includes any act, omission, concealment of any fact or abuse of position committed by any person, or any other person with connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of the company, its shareholders, its creditors or any other person, whether or not there is any wrongful gain or wrongful loss. Wrongful gain and wrongful loss refer to gain or loss of property by unlawful means to which the person is not, or is, legally entitled.
How other sections use section 447
Many provisions of the Act say that a person shall be punishable for fraud, or liable under section 447. For example, section 206(4) applies it to officers in default where business is carried on for a fraudulent or unlawful purpose. Under section 212(6), an offence covered under section 447 is cognizable and bail is subject to additional conditions. Because section 447 carries imprisonment and also fine in the main tier, section 441(6) bars compounding of that tier.
Practical preparation
Identify whether a provision breached refers to section 447; quantify the amount involved and compare it with ten lakh rupees and one per cent. of turnover; assess any public-interest element; preserve records; take legal advice early, given the bail conditions under section 212(6).
Practical checklist
Do
- Quantify the amount involved and the turnover figure when assessing exposure.
- Treat any provision that refers to section 447 as a serious-offence risk.
Avoid
- Do not assume the absence of wrongful gain or loss avoids section 447; the definition does not require it.
- Do not assume compounding is available for the main tier.
Illustrative example
Hypothetical: inflated invoices
A purchase manager colludes with a supplier to inflate invoices, causing the company a loss above the threshold.
Amount
The amount involved exceeds the lower of ten lakh rupees and one per cent. of turnover.
Tier
The main tier applies: imprisonment of six months to ten years and fine of one to three times the amount involved.
Connivance
The supplier who connived can also be covered by the definition.
Outcome
- Recovery of the loss can be pursued separately, because the section applies without prejudice to other liability.
Glossary
- Fraud
- An act, omission, concealment or abuse of position with intent to deceive, to gain undue advantage, or to injure the company, its shareholders, creditors or others.
- Wrongful gain
- Gain by unlawful means of property to which the person gaining is not legally entitled.
- Wrongful loss
- Loss by unlawful means of property to which the person losing is legally entitled.
Frequently asked questions
What is the minimum punishment under section 447?
For fraud at or above the threshold, imprisonment of six months (three years where public interest is involved) and fine of at least the amount involved.
What if the fraud is small and does not involve public interest?
Under the second proviso, imprisonment up to five years, or fine up to fifty lakh rupees, or both.
Must there be a wrongful gain or loss?
No. The Explanation covers fraud whether or not there is any wrongful gain or wrongful loss.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026