'Fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. To clearly understand the term 'fraud' in refere

Under the Indian law a penal offence of fraud, demands for successful prosecution, the twin elements of 'intent to defraud' of the offender i.e.: An intent to deceive another; and An intent to cause, by that deception, injury to some person. Now to clearly understand the term 'fraud' in reference of penalizing, preventing and regulating this act, one should clearly understand the elements of fraud. Few Essential Elements of Fraud are listed as below: False and Wilful representation or Assertion: To constitute fraud there must be some representation or assertion, which is untrue. In the absence of representation or assertion except in the following two cases, there can be no fraud. Where silence may itself amount to fraud, and Where there is active concealment of facts. The person making the representation should not believe it to be true, otherwise he/she will not be guilty of fraud. Moreover, to constitute fraud, the false representation must have been made wilfully or intentionally. For example, X, intending to deceive Y, informs him that his estate is free from encumbrance. Y thereupon buys the estate. The estate is, however, subject to mortgage. The contract is induced by fraud. Perpetrator of Representation: The false representation or misstatement must have been made by a party to the contract or by anyone with its connivance, or by its agent. If a stranger makes the misstatement to the contract, it cannot result in fraud. For instance, A suggests B to buy C's car, which according to A runs 15 kms per litre. Later on, B finds that the car runs only 8 kms per litre. A was, however, acting neither at the instance of C nor was his agent; he was a stranger. The contract that took place between B and C cannot be stated to be induced by fraud. Intention to deceive: Intention to deceive the other party is the essence of fraud. In order to commit a fraud, one person asserts or misstates the fact with the intention that it should be acted upon. As a matter of fact, misrepresentation elevates to the level of fraud when it is prefixed by the element of intention to deceive the other party. For example, A, intending to deceive B, falsely represents that 1,000 tons of sugar is produced annually at his factory, although A is fully aware that only 600 tons of sugar can be produced annually. B thereby agrees to buy the factory. A has resorted to fraud to obtain the consent of B. Representation must relate to a fact: The representation made by the party must relate to a fact, which is material to the formation of the contract. A mere statement of opinion, belief, or commendation cannot be treated as fraud. For instance, A states that the detergent produced at his factory washes whiter than whitest. The statement made by A is merely a commendation of the product and not a fact. But if A describes the ingredients, which the detergent contains, it becomes a statement of fact and if that is found incorrect, it amounts to fraud provided A knows it to be a false statement. Active concealment of facts: "Active concealment must be distinguished from passive concealment". Passive concealment implies mere silence as to material facts, which barring a few cases, does not amount to fraud. Whereas, active concealment implies 'when the party takes positive or deliberate steps to prevent information from reaching the other party and this is treated as fraud. For example, A sells a horse to B in an auction despite knowing that the horse is unsound. A says nothing to B about the horse's soundness. This is a case of passive concealment of fact and cannot tantamount to fraud. Promise made without intention of performing it: If a person while entering into a contract has no intention to perform his/her promise, there is an intent to defraud on his/her part, for the intention to deceive the other party is there from the very beginning. For example, an English merchant appointed an Indian woman as his personal secretary and promised that he would marry her. Later she came to know that he was already married and had made the promise without any intention to perform it. It was held that she could avoid the contract on the ground of fraud. On similar count, a purchase of goods without any intention of paying the price is a fraud and the contract can be avoided on this ground. Representation must have actually deceived the other party: The representation made with the intention to deceive must actually deceive. The party, induced by fraudulent statement, must have relied on it to accord its consent. Thus, an attempt to deceive does not amount to fraud until the other party is deceived thereby. A case in point is the following example. A had a defective cannon. With a view to conceal the defect, he put a metal plug on it. B without examining it bought it. The cannon burst when used by B. B refused to pay the price and accused A of fraud. It was held that B was bound to pay because he was not actually deceived, as he would have bought the cannon even if the deceptive plug had been inserted. Any other act fitted to deceive: The expression 'any other act fitted to deceive' obviously means any act, which is done with the intention of committing fraud. This category includes all tricks, dissembling, and other unfair ways, which are used by cunning and clever people to cheat others. For example, a husband persuaded his illiterate wife to sign certain documents telling her that by the papers he was going to mortgage her two plots of land to secure his indebtedness. But, in fact, he mortgaged four plots of land belonging to her. This was held as an act done with the intention of deceiving wife. Any such Act or omission that the law specially declares as void: This category includes the act or omission that the law specially declares to be fraudulent. For example, the Insolvency Act and the Companies Act declare certain kinds of transfers to be fraudulent. Similarly, under the Transfer of Property Act, the transferor of real estate is bound to disclose to the transferee the following details: Material defects: Material defects, if any, in the property such as, cracks in the wall or in beams, and/or Any defect or dispute as regards transferor's title, such as property is subject to encumbrance, i.e., mortgaged or is subject to some dispute pending in a court of law. An omission to make such disclosure on the part of transferor amounts to fraud. Wrongful Loss and Wrongful Gain is Immaterial: For the purposes of "Fraud" under the provisions of Sec 447 of the Companies Act, 2013, it is immaterial whether there has been some wrongful loss to one and/or wrong gain to another. The only important thing is intention to deceive and the act or omission actually deceiving the victim. Common corporate frauds for example are, if the CMD's husband benefits from a loan transaction sanctioned by her, it is a fraud. If a CEO takes bribe to approve a contract, that is a fraud. On the same principle, Indian Penal Code (IPC) too works, as for IPC to constitute an offence, two elements are required which are Mens Rea - Intention to Commit Offence and Actus Reus - The Wrongful Act. In view of the above discussion, it may be said that 'Fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. To clearly understand the term 'Fraud' in reference of penalising, preventing and regulating this act, one should be well versed with the elements of Fraud.