'The term 'fraud' has been defined for the first time in the Companies Act, 2013' Briefly, discuss the background and importance of the definition of 'fraud' under the Companies Act, 2013.

The JJ Irani Committee set up by the government in 2004 submitted its report in 2005 with far reaching recommendations. The recommendations of the committee have received shape in the Companies Act, 2013. One of the recommendations of the committee was that there should be deterrent penalties for companies that show irresponsible behavior or conduct fraudulent activities. Fraud consists of some deceitful practice or wilful device, resorted to with an intent to deprive another of his right, or in some manner to do him an injury. As distinguished from negligence, it is always positive, intentional (Maher v. Hibernia Inst. Co., 67 NY 292) The Hon'ble Supreme Court of India in the matter of Dr. Vimla vs. Delhi Administration (29 November, 1962) citing Haycraft v. Creasy (1) LeBlanc, noted that: "by fraud is meant an intention to deceive; whether it be from any expectation of advantage to the party himself or from the ill-will towards the other is immaterial." Till the commencement of the Companies Act, 2013, the term fraud was not defined in the Indian corporate laws. Even the Indian Penal Code, 1860, did not touch upon the fraud directly. Though, as per Section 17 of the Indian Contracts Act, 1872, the term "fraud" means an act committed by a party to a contract or with his connivance, or by his agent, with an intention to deceive another party thereto or his agent, or to induce him to enter into the contract: (1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; (2) the active concealment of a fact by one having knowledge or belief of the fact; (3) a promise made without any intention of performing it; (4) any other act fitted to deceive; (5) any such act or omission as the law specially declares to be fraudulent. Further, Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech. According to regulation 2(1)(c) of SEBI (Prohibition of Fraudulent and unfair Trade Practices relating to Securities Market) Regulation, 2003 "fraud" includes any act, expression, omission or concealment committed whether in a deceitful manner or not by a person or by any other person with his connivance or by his agent while dealing in securities in order to induce another person or his agent to deal in securities. whether or not there is any wrongful gain or avoidance of any loss, and shall also include: (1) a knowing misrepresentation of the truth or concealment of material fact in order that another person may act to his detriment; (2) a suggestion as to a fact which is not true by one who does not believe it to be true; (3) an active concealment of a fact by a person having knowledge or belief of the fact; (4) a promise made without any intention of performing it; (5) a representation made in a reckless and careless manner whether it be true or false; (6) any such act or omission as any other law specifically declares to be fraudulent, (7) deceptive behaviour by a person depriving another of informed consent or full participation, (8) a false statement made without reasonable ground for believing it to be true. (9) the act of an issuer of securities giving out misinformation that affects the market price of the security, resulting in investors being effectively misled even though they did not rely on the statement itself or anything derived from it other than the market price. And "fraudulent" shall be construed accordingly; Companies Act, 2013, formally defined the term "fraud" w.r.t. the corporate actions. As per sub-clause (i) to the Explanation to Sec 447 "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, wherein "wrongful gain" means the gain by unlawful means of property to which the person gaining is not legally entitled and "wrongful loss" means the loss by unlawful means of property to which the person losing is legally entitled.