ONLINE SCAMS IN INDIA – LEGAL ACTION
Understanding the cyber crime of Online Scams and online frauds in India and the legal actions that can be taken under Indian laws
Meaning of Online Scam
Online scams or internet frauds in India can be understood as an illegal plan for making money, especially one that involves deceiving, defrauding and tricking people. It is a term used to define any fraudulent business practice or scheme performed by an individual or company so as to obtain money or something valuable illegally. In recent times, the most numbers of scams taking place are internet scams particularly online frauds in Banking. Especially during Covid-19, when almost all activities are taking place online, these scams are increasing with each passing day.
Some internet fraud examples taking place are as follows:
- Donation scams/Fake charities– Some people often claim that they need financial assistance for some medical reasons or even for basic necessities, many of these claims can be real but this has also become a way of scamming people by creating fake accounts on donation sites to collect money. Scammers impersonate genuine charity organizations and ask for donations.
- Auction Scam– Some scammers might claim to sell fake tickets for a match or a concert on online auction sites but actually the tickets might not be authentic.
- Fake prizes– A scammer claims that the victim has won a non-existent price, takes personal details from the victim by convincing the victims that such details need to be shared to claim the prize.
- Phishing– This is the most common type of scam which is being used widely lately. Scammers use deceptive e-mails and websites as a weapon to gather personal information. The aim is to trick the email recipient into accepting that the mail received is regarding something they want or need. Phishing is basically a cyber attack which steals user data, including login credentials, passwords and credit card numbers as soon as a trusted entity deceives a victim in opening the mail, instant message, text message or any spiteful link attached with these messages, it can lead to the installation of malware, the freezing of the system or the revealing of sensitive information.
- Fake Shopping websites– Scammers may create websites that look genuine or that replicate existing retailer websites. These fake websites might offer deals that are too good to be true, the deals appeal the customers to fall prey and they purchase the fake items.
- Threat Scam– A scammer might threaten the victim to embarrass o injure him or his family members unless a certain amount of money is paid. The scammers might gather personal details from social media websites.
Legal Provisions & Combating Online Scams in India
Types of Online Frauds in India
The Information Technology Act, 2000.
- Section 66D– Punishment for cheating by personation by using computer resource: “Whoever, by means of any communication device or computer resource cheats by personation, shall be punished with imprisonment of either description for a term which may extend to three years and shall also be liable to fine which may extend to one lakh rupees.” When an attacker by means of any computer resource or communication device cheats by personation, the abovementioned section will be attracted. The maximum punishment under this section is imprisonment of up to three years and fine up to Rupees One Lakh. For example- Phishing.
- Section 43– Penalty and compensation for damage to computer, computer system, etc: “If any person without permission of the owner or any other person who is in charge of a computer, computer system or computer network steal, conceal, destroys or alters or causes any person to steal, conceal, destroy or alter any computer source code used for a computer resource with an intention to cause damage shall be liable to pay damages by way of compensation to the person so affected.” This section provides that if any attacker accesses a computer system without the permission of the owner and conceals or destroys any data or important information in order to make financial gains, then the attacker shall be liable to pay damages by way of compensation to the person so affected.
- Section 74– Publication for fraudulent purpose: “Whoever knowingly creates, publishes or otherwise makes available a [electronic signature] Certificate for any fraudulent or unlawful purpose shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one lakh rupees, or with both.” If any person creates, publishes or makes an electronic signature certificate available for any fraudulent or unlawful purposes which can result in wrongful financial loss, then that person shall be punished with imprisonment of up to two years or with fine up to Rupees One Lakh.
The Companies Act, 2013
- Section 36– Punishment for fraudulently inducing persons to invest money: “Any person who, either knowingly or recklessly makes any statement, promise or forecast which is false, deceptive or misleading, or deliberately conceals any material facts, to induce another person to enter into, or to offer to enter into,— (a) any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting securities; or (b) any agreement, the purpose or the pretended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities; or (c) any agreement for, or with a view to obtaining credit facilities from any bank or financial institution, shall be liable for action under section 447.” Investment Scam is a type of financial fraud and is very common in today’s time. When an attacker makes any false or deceptive statement or promise with the motive of convincing the victim to investment, this section will be attracted. The maximum punishment for frauds as specified in Section 447 is imprisonment for a term which shall not be less than six months but which may extend to ten years and fine which shall not be less than the amount involved in the fraud but may extend to three times the amount involved in fraud. If the fraud is in anyway related to public interest, the term of imprisonment will not be less than three years. For example – Auction Scam etc.
- Section 448– Punishment for false statement: “Save as otherwise provided in this Act, if in any return, report, certificate, financial statement, prospectus, statement or other document required by, or for, the purposes of any of the provisions of this Act or the rules made thereunder, any person makes a statement,— (a) which is false in any material particulars, knowing it to be false; or (b) which omits any material fact, knowing it to be material, he shall be liable under section 447.” If in any return, report, certificate, financial statement, prospectus, statement or other document, the attacker makes any statement which is false in any material particulars or omits any material fact, he or she will be liable under section 447. Such false statement can lead to financial loss of the victim. For example- fake donation scam, etc.
The Indian Penal Code, 1860
- Section 405- Criminal breach of trust: “Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits “criminal breach of trust.” When a person who is entrusted with property or any dominion over property, fraudulently converts that property into his own use so as to gain wrongful profit at the cost of making the victim suffer will be liable for criminal breach of trust. For example- if an executor of will who is supposed to divide the property in accordance with the will appropriates the will to his own use in order to get wrongful financial gains. The punishment for criminal breach of trust is imprisonment of up to three years or with fine or both, as prescribed under Section 406.
- Section 415- Cheating: “Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to “cheat”. To attract this section, the attacker must deceive the victim and the victim should be induced to deliver any property to any person. The victim must be deceived to omit or to do anything which he would have not done otherwise and this act is likely to cause damage or harm to the body, mind, reputation or property of the victim. For example- the attacker puts a counterfeit mark on an item and convinces the victim that the item is of a reputed brand and fraudulently induces the victim to pay for the article and wrongfully gain financial profit from the victim(fake website scam). The punishment for cheating is imprisonment of up to one year or fine or both, as prescribed under Section 417.
- Section 416: Cheating by personation—“A person is said to “cheat by personation” if he cheats by pretending to be some other person, or by knowingly substituting one person for or another, or representing that he or any other person is a person other than he or such other person really is.” Most of the scams take place by using personation as a weapon. The attacker pretends to be the victim in order to gain wrongful profit. For example- A cheats by pretending to be a certain rich banker of the same name. A cheats by personation. The punishment for cheating by personation is imprisonment of up to three years or fine or both, as prescribed under Section 419.
- Section 418- Cheating with knowledge that wrongful loss may ensue to person whose interest offender is bound to protect: “Whoever cheats with the knowledge that he is likely thereby to cause wrongful loss to a person whose interest in the transaction to which the cheating relates, he was bound, either by law, or by a legal contract, to protect, shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.” This section states that whoever cheats with the knowledge that he is likely to cause wrongful loss to such a person whose interest in the transaction to which the cheating relates, he was bound to protect shall be punished with imprisonment of up to three years or with fine or both.
- Section 420- Cheating and dishonestly inducing delivery of property: “Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.” This section talks about the offence which is committed by the person who cheats another person and thereby induces the deceived to deliver any property or to make, alter or destroy any valuable security or anything which is sealed or is capable of being converted into a valuable security by falsely representing something so that the person is deceived. The maximum punishment under this section is imprisonment of up to seven years and fine.
Safeguards against Online Scams
As the number of scams are increasing, it is very important to stay aware and vigilant. As in most cases people are easily getting tricked because of the lack of knowledge and awareness among people. In order to protect oneself from becoming a prey to such online scams, it is very important to keep certain basic things in mind like one should always keep his/her personal details secure, the passwords and pins must not be shared with anyone, the personal information shared on social media sites must be limited. It is important to keep two factor authentication on all the ID’s. One should also beware of online shopping and should check the authenticity of the product and the site properly before purchasing. One should be careful before opening any suspicious texts, pop-up windows or click on links or attachments in emails.
 The Information Technology Act, 2000; https://www.indiacode.nic.in/bitstream/123456789/1999/3/A2000-21.pdf
 The Companies Act, 2013; https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf
 The Indian Penal Code, 1860; https://www.iitk.ac.in/wc/data/IPC_186045.pdf
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