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Insider Trading and Corporate Frauds

This page provides an overview of insider trading and corporate frauds in India, focusing on the legal framework, key concepts, and relevant case laws.

Companies Act, 2013​

  • Section 188: Prohibition of insider trading
  • Section 189: Penalties for insider trading

Securities and Exchange Board of India (SEBI) Act, 1992​

  • Section 12A: Powers of SEBI to regulate securities market
  • Section 12B: Investigation powers of SEBI

Prevention of Money Laundering Act, 2002​

  • Section 3: Punishment for money laundering

Key Concepts​

Insider Trading​

Insider trading refers to the buying or selling of securities by individuals who possess material, non-public information about a company.

Corporate Frauds​

Corporate frauds encompa various illegal activities committed by companies or their officers, including financial misrepresentation, embezzlement, and manipulation of financial statements.

Case Laws​

SEBI v. Harshad Mehta (1992)​

In this landmark case, the Supreme Court upheld SEBI's power to regulate insider trading and imposed severe penalties on stockbroker Harshad Mehta for his role in the 1992 stock market scam.

Legal Section: Companies Act, 2013, Section 188; SEBI Act, 1992, Section 12A

Directorate General of Income Tax Investigation v. Reliance Industries Ltd. (2019)​

The Bombay High Court ruled that corporate frauds can lead to tax evasion charges under the Income-tax Act, 1961.

Legal Section: Income-tax Act, 1961, Section 6050

CBI v. Vijay Mallya (2020)​

The Enforcement Directorate charged liquor baron Vijay Mallya with money laundering under the Prevention of Money Laundering Act, 2002, for allegedly diverting funds from his companies.

Legal Section: Prevention of Money Laundering Act, 2002, Section 3

Conclusion​

Understanding insider trading and corporate frauds i crucial for law students and professionals. This guide provides a comprehensive overview of the legal framework, key concepts, and relevant case laws in India. It serves as a valuable resource for those studying Law and LLB programs, offering practical insights into real-world scenarios and legal implications.

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