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Can Data Protection Laws Curb Financial Fraud?


This story is compiled and curated by Shreya Bhadauria, a 4th-year student of Galgotias University.

The DHFL scam is being regarded as India’s biggest banking fraud and a total of 15 CBI raids have been imposed in relation to the case. According to the CBI, Kapil Wadhawan of DHFL confirmed the misrepresentation to lenders by stating that there are enough steps to be taken to ease the pressure on the company and maintain that they have enough money.

Further, one needs to note that financial fraud is a crime that affects the general public and has a devastating effect on the economy. Typically, these frauds involve the misappropriation of public funds by fraudsters for personal gain. With the advancement of technology, cases of financial fraud are on the rise. We have seen massive financial frauds perpetrated by fraudsters like Vijay Mallya, Harshad Mehta, and Nirav Modi, with DHFL being the next in queue.

Pivoting back to the case, the CBI has booked Kapil Wadhawan and Dheeraj Rajesh Kumar Wadhawan of DHFL for cheating a coalition of 17 banks at a cost of ₹ 34,614 crores. The organization conducted an investigation at 12 locations in Mumbai to find evidence against the suspects in this major bank fraud. An audit of the DHFL account books revealed that the company allegedly committed financial irregularities, misappropriation, fictitious books, and double investments in order to “create the assets of Kapil and Dheeraj Wadhawan” using public funds.

With this case grabbing the limelight, a question that remains unresolved, and ought to be discussed, is the underlying cause of such frequent and humongous financial frauds going undetected even with preventive laws such as the Money Laundering Act in place. Throwing light upon this in an interview with Indian Legal Reporter, Advocate Ashutosh Srivastava (Senior Advocate, Supreme Court of India) and a member of the Supreme Court Bar Association (Delhi), expressed his concern regarding the imbalance in the ratio between the growing population and the overburdened judicial system in India. According to him, this imbalance serves as a substantial cause of such undetected scams, since the courts are unable to take up these cases at the initial stage of default. 

Elaborating further, he also emphasized the issue of a failing executive system contributing to the overburdened judicial system in India.  

As a matter of fact,  in European countries and the royal court of London, each court deals with only 5 – 6 matters a day and the legislature and executive wings pose a collaborative effort toward effective administration. Only in cases where these mechanisms fail or are unable to provide a solution does the judiciary step in and takes cognizance. 

In India, however,  several cases are filed on a daily basis owing to the executive wing’s ineffective functioning, leading to an overburdened judicial system. 

And while both the state and central governments have been intimated from time to time, and with several amendments in place, a major loophole that the system faces in regulating and preventing such financial frauds is the lack of appropriate data protection laws similar to the ones implemented in European countries.  

Advocate Ashutosh Srivastava, Senior Advocate, Supreme Court of India

On whether it is high time to introduce such stringent laws in India too, Advocate Srivastava says, 

“As per my knowledge, the Bill has been made and soon it should be introduced in the parliament to make it a law in the country.”

And with the nation gearing to take over the upcoming G-20 presidency this December, it would be in our best interest to take a clear stance on the issue and work on implementing a data protection law sooner than later.

What are your thoughts on the growing need of implementing data protection laws to curb financial fraud in India? Leave a reply in the comment box below!

Shreya Rajan
Shreya Rajan


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