Fraud detection and reporting requires the practicing Company Secretaries to focus beyond compliance. Discuss the statement and differentiate between Fraud v/s Non-compliance.

Yes, the statement is absolutely correct. In the matter of Globe Motors Limited v. Mehta Teja Singh & Company, the Delhi High court observed that although an agreement in which a director was interested could not said to be invalid in view of compliance with the requirements of the Act, yet it is only a formal aspect of compliance with the statutory provisions; the basic question is as to the conduct of the director and whether it satisfies the test considering their fiduciary relationship to the company. Directors are expected to display utmost good faith towards the company in their dealings with the company or on behalf of the company; they should not use the company's money or other property or information or other matters in their possession in order to gain any advantage to themselves. Therefore, a practicing company secretary should not be satisfied only with compliance during secretarial audit. He needs to look beyond and satisfy himself that the transactions which have taken place during audit period do not contain a fraud element. Fraud v/s Non-compliance The term fraud can be defined as act or course of deception, an intentional concealment, omission, or perversion of truth, to- gain unlawful or unfair advantage, induce another to part with some valuable item or surrender a legal right, or inflict injury in some manner. Willful fraud is a criminal offense which calls for severe penalties, and its prosecution and punishment. However, incompetence or negligence in managing a business or even a reckless waste of firm's assets (for example by speculating on the stock market) does not normally constitute a fraud. Non-Compliance: The term non-compliance refers to failure to comply with the laws, rules regulations etc., the term non-compliance is commonly used in regard to a failure to meet the compliance requirements be it the failure in following procedures, filing of information, eligibility conditions, reporting etc. The relationship between Fraud and non-compliance can be constructed as the non-compliance in the company may lead to a fraud, however it may also be noted that the fraud can also be made in the compliant company.