‘CIVIL FRAUD VS CRIMINAL FRAUD: BREAKING DOWN THE DIFFERENCES’

CIVIL FRAUD VS CRIMINAL FRAUD

Author : Tanvi Gupta

“The conduct at issue in criminal cases is generally more serious than civil cases and frequently involves intent,”                                                                           – Peter Anderson

Introduction

Fraud is any dishonest act by which one intends to gain advantage over another person. This can cause loss to victim directly or indirectly. According to Tomlin’s Law Dictionary, Fraud is deceit in grants and conveyances of land, bargains and sale of goods etc. to the damage of another person, which may be either by the suppression of the truth or suggestion of a falsehood.

In a common law, civil wrong is a tort. Proving fraud in a courtroom is usually said to be challenging as the intention to defraud someone is the key element in question.

Five essential elements of fraud are misrepresentation of material fact, knowledge of falsehood, intention to deceive, reasonable reliance by the victim and injury suffered.

Generally, in a civil suit, the other person is injured through either economic or non-economic means.

However, Criminal Fraud emerges through using something especially information to commit a crime which often entails the theft of money or data.

This can be done by using some innocent person’s identity for illegal work and even commit heinous crimes.

Laws governing Civil and Criminal Fraud:

Indian Contract Act, 1872 under Section 17 defines fraud as any act by a party to a contract or with his connivance or by his agents with the intention to deceive another party or his agent or to induce him to enter in a contract.

Mere silence is not fraud until there is any duty to speak or unless it is equivalent to speech. Fraud will not only render contract voidable[1] at the option of party whose consent was taken but also lead to action for damages.

Fraud has not been defined in Indian Penal Code, but it can be traced and interpreted in Section 421-424 of IPC.

Section 25 defines the term “Fraudulently”. It says that a person is said to do a thing fraudulently if he does that thing with intent to defraud but not otherwise.

Section 421 of IPC throws light on the fraud committed through insolvency. It is a bailable offence and covers benami transactions.

Furthermore, as per Section 422, if any person is capable of repaying loan amount but fails to do so causes fraudulent preventing of debts. Section 423 deals with Fraudulent execution of a deed with recital as to consideration or name of beneficiary.

Lastly, Section 424 deals with fraudulent removal or concealment of property. All these offences attract imprisonment up to 2 years or fine or both.

The Three W’s: Who, Where and Why?

In a civil fraud the case is filed by individual affected against the preparators in a civil court with an intention to receive compensation with damages.

However, in a criminal fraud the case is filed by a law enforcement body against the person guilty in criminal courts with an aim to enact justice.

The major difference between the two is in a civil suit one need to proof the injury to the plaintiff rather than convicting the preparator guilty.

It is not necessary in a civil suit to commit a fraud, a mere injury to the plaintiff makes the other one liable.

Burden of Proof:

In a civil lawsuit one need to prove the injury with the ‘balance of probabilities’ but in a criminal fraud the prosecution has to prove these points true and the fraud is committed beyond reasonable doubts.

The burden of proof is on a different party, and this can become a complex matter in determining liability in civil cases and guilt in criminal cases. In a civil suit it is not possible to bring establish tangible proof. Hence, it is fruitful if the evidence given lead to the inference that fraud is committed.

Damages:

In a civil case, defendant has to put plaintiff in a same situation before the fraud was committed. Hence, he is liable to pay compensation through punitive damages also he can be asked to pay additional compensation based on egregious pain and suffering.

However, in a criminal case one need to engage in restitution or the repayment of stolen money from the victim.

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[1] Section 19, Indian Contract Act, 1872

CIVIL FRAUD VS CRIMINAL FRAUD