Companies Act 2013 Section 447: Punishment for Fraud (2026)
What Section 447 of the Companies Act, 2013 does: it defines fraud for company law and sets the punishment, which for serious fraud runs from six months to ten years in prison plus a heavy fine. Last verified October 2026.
Explainer · Company Law · Corporate Fraud
Section 447 of the Companies Act, 2013 is the main anti-fraud provision in Indian company law. It does two things. It defines what fraud means in relation to a company, and it sets the punishment, which for serious fraud runs from six months to ten years in prison, along with a fine that can be up to three times the amount involved. Section 447 matters because many other provisions of the Companies Act say that a person who does a particular wrong shall be liable for fraud under Section 447. So it is the punishment clause that many company law offences point to. This explainer sets out the definition, the thresholds, the punishment, and who investigates. Last verified October 2026.
- What it is: Section 447 of the Companies Act, 2013 defines fraud and sets the punishment for it.
- Serious fraud: where the amount is at least Rs 10 lakh or 1% of turnover (whichever is lower), imprisonment is six months to ten years plus a fine of one to three times the amount.
- Public interest: the minimum imprisonment rises to three years where the fraud involves public interest.
- Smaller fraud: below the threshold and with no public interest, up to five years, or a fine up to Rs 50 lakh, or both.
01What Section 447 covers
The marginal note to Section 447 is "Punishment for fraud". It provides that any person who is found guilty of fraud, as defined in the section, shall be punishable in the way the section sets out. The punishment depends on the amount involved and on whether public interest is affected.
A definition and a punishment in one
Section 447 is unusual because it both defines fraud and punishes it. Other sections of the Companies Act often say a wrongdoer shall be liable "for fraud under Section 447". So this section supplies both the meaning of fraud and the penalty for those other offences.
The offence is serious. For fraud at or above the threshold, imprisonment is mandatory, with a minimum term, and a fine is added on top.
02How fraud is defined
The Explanation to Section 447 defines fraud in relation to the affairs of a company or body corporate very widely. In plain terms, fraud includes any act, omission, concealment of a fact, or abuse of position, done by a person with the intent to deceive, to gain an undue advantage, or to injure the interests of the company, its shareholders, its creditors, or any other person.
Two features stand out:
- fraud can be by an act or by an omission, and it includes concealment and abuse of position, not only a false statement; and
- it does not matter whether there is any actual wrongful gain or wrongful loss. The intent to deceive or to gain an undue advantage is enough.
The Explanation also defines "wrongful gain" as gain by unlawful means of property to which the person is not legally entitled, and "wrongful loss" as the loss by unlawful means of property to which the person losing it is legally entitled.
03The punishment and the thresholds
The punishment is set by reference to the amount involved in the fraud.
| Situation | Imprisonment | Fine |
|---|---|---|
| Amount at least Rs 10 lakh or 1% of turnover, whichever is lower | Six months to ten years | Not less than the amount involved, up to three times that amount |
| As above, but the fraud involves public interest | Minimum three years, up to ten years | Not less than the amount involved, up to three times that amount |
| Amount below the threshold and no public interest | Up to five years, or fine, or both | Fine up to Rs 50 lakh |
So the structure is tiered. Large frauds, and any fraud that affects public interest, carry mandatory imprisonment. Smaller frauds that do not touch public interest can be dealt with by imprisonment up to five years, or a fine up to fifty lakh rupees, or both.
04Why so many sections point to it
Across the Companies Act, several provisions say that a person who does a particular wrong, such as furnishing false information at incorporation, making a false statement, or carrying on business to defraud creditors, shall be liable for action under Section 447. This makes Section 447 the common punishment clause for corporate fraud.
Because of this, an allegation that a transaction was fraudulent often brings Section 447 into play even where the primary provision is somewhere else in the Act. For a practical view of where fraud risk is checked in a transaction, see the company due diligence checklist.
05Who investigates and prosecutes
Serious corporate fraud is usually investigated by the Serious Fraud Investigation Office (SFIO), which is set up under the Companies Act and acts on the orders of the Central Government. The SFIO can investigate a company's affairs and file a prosecution. Fraud offences under Section 447 are generally tried by a Special Court.
An offence under Section 447 is treated as a serious one, and the nature of the offence, including whether it is cognizable or when bail can be granted, is governed by the special provisions of the Companies Act rather than by a general rule.
06Practical points
Two points help in reading Section 447. First, the definition of fraud is wide, but it still needs intent. A genuine mistake or an honest difference of view is not fraud. The deceit, the undue advantage, or the intent to injure must be shown.
Second, Section 447 is part of company law, not the general criminal codes. The Bharatiya Nyaya Sanhita replaced the Indian Penal Code in 2024, but Section 447 of the Companies Act continues as its own offence with its own definition and punishment. A single set of facts can sometimes attract both company law action under Section 447 and a separate case under the general criminal law.
07Where Claw fits
Claw is an all-in-one legaltech platform for Indian advocates, law firms, and corporate legal teams, combining AI-based case search, an AI legal assistant (Legal GPT), case management, and compliance automation across all Indian courts and tribunals.
How Section 447 is applied, from what counts as fraud to how courts treat the amount thresholds and sentencing, is built on case law. Claw lets you search more than 30 crore judgments and orders, with Supreme Court rulings from 1950 and High Court rulings from 1990, in under 5 seconds, so you can find how courts and Special Courts have dealt with Section 447 on facts close to yours. You can also track a live prosecution, with its orders and hearings, by party or advocate name across 9,102 courts, benches and forums.
Claw does not use the documents you upload to train its AI models. Create a free Claw account to research Section 447 and to follow a pending matter. To search the wider body of law, see case search across Indian courts.
08Sources and further reading
- Ministry of Corporate Affairs (Companies Act, 2013): mca.gov.in
- India Code (bare text of the Companies Act, 2013): indiacode.nic.in
- Serious Fraud Investigation Office: sfio.gov.in
- Claw: clawlaw.in
This explainer is general information, not legal advice. The law changes through amendments and judgments, so check the current text and take advice from counsel before you act.
09Frequently asked questions
What is Section 447 of the Companies Act, 2013?
Section 447 defines fraud in relation to a company and prescribes the punishment. For serious fraud it provides imprisonment of six months to ten years along with a fine of one to three times the amount involved, with a higher minimum where public interest is affected.
How does Section 447 define fraud?
Fraud includes any act, omission, concealment of a fact or abuse of position done with intent to deceive, to gain an undue advantage, or to injure the company, its shareholders, creditors or others. It applies whether or not there is any actual wrongful gain or wrongful loss.
What is the punishment under Section 447?
Where the fraud involves at least Rs 10 lakh or 1% of turnover, whichever is lower, imprisonment is six months to ten years, plus a fine of not less than the amount and up to three times it. If public interest is involved, the minimum is three years. For smaller frauds with no public interest, it is up to five years, or a fine up to Rs 50 lakh, or both.
Why do other sections refer to Section 447?
Many provisions of the Companies Act say a wrongdoer shall be liable for fraud under Section 447. This makes Section 447 the common punishment clause that many corporate offences point to.
Who investigates fraud under Section 447?
Serious corporate fraud is usually investigated by the Serious Fraud Investigation Office on the orders of the Central Government, and offences are generally tried by a Special Court under the Companies Act.
Can I find judgments on Section 447 in Claw?
Yes. Claw lets you search more than 30 crore judgments and orders on how Section 447 has been applied, in under 5 seconds, and track a live prosecution by party or advocate across 9,102 courts, benches and forums. It researches and tracks the matter but does not give legal advice.