INTRODUCTION
The term corporate criminal liability refers to a corporation’s responsibility for each unlawful act conducted by an individual. Corporate criminal liability primarily applies when a worker’s action fall within the scope of their employment; a corporation is not liable for its employee’s actions unless the moves are intended to advantage the corporation. In the blog, I covered the fundamental principles of criminal liability, delved into the concept of corporate crime, explored different theories of corporate criminal liability, examined the evolution of corporate criminal liability in India, and finally, I discussed the various methods through which corporate criminal liability can be established.
THE CONCEPT OF CORPORATE CRIME
The first and foremost thing for a nation is its social-wellbeing. Apart from the crime involving violence, the socio-economic crime is proving as a greater threat to the society. The corporate crime is also a type of socio-economic crime possessing a great challenge and threat to the society which need to be addressed immediately. Criminal liability is established whenever an individual engages in actions that go against the law, resulting in harm or damage to others or property. The general principle for determining criminal liability is the presence of two crucial elements: – mens rea (guilty mind) and Actus Reus (guilty act). This well known maxim “Actus non facit reum nisi mens sit rea” emphasizes that both a guilty mind and a guilty act must be present to constitute a crime. The masses are restricted to the crime involving violence basically street crime. The masses still think those traditional crimes as the real crimes. They are not aware of the alarming threats of the crimes related to corporations. They have this tendency in their mind that corporations perform businesses, meetings, marketing, construction etc. these all are legitimate activities and in some exceptional cases if they break some rules or regulations they don’t fall under the purview of a crime.
From the aforementioned general principle, it becomes evident that a corporation cannot be held accountable for criminal acts due to its non-personhood. However, this is where the principle of “lifting of the corporate veil” becomes relevant. As we are aware, a company cannot operate independently; it relies on individuals who act on its behalf. In order to identify the true perpetrators responsible for the company’s unlawful or fraudulent actions, it may be necessary to unveil the corporate facade, commonly known as lifting of corporate veil[1].
The concept of corporate crime is basically derived from a bigger term that is “White-Collar Crime”. The term White-Collar Crime was first coined by American criminologist ‘Edwin Sutherland’ in 1939. He termed it as a crime committed by a person of respectability and high social status in the course of his occupation. Basically the corporate crimes are committed by individuals for the benefit of their company. They neither consider themselves as criminal not they consider the act done by them as crime.[2]
A unique approach is to be taken while assigning the criminal liability with corporations. Although the corporations are separate legal entity but their position in reality is limited to a piece of legal fiction the rationale being the companies cannot be held liable for the criminal acts done. For all the actions undertaken by a company, the thinking is done by the directors / board members of the company. It means that the guilt cannot be directly allocated on the corporation but on the individuals acting on behalf of it. The present situation is such that a corporation can be attributed for an offence where mens rea is a requisite.[3]
THEORIES OF CORPORATE CRIMINAL LIABILITY: –
Vicarious Liability (Agency Theory)
This theory is basically taken from the law of torts. This theory is based on the principle “Respondeat Superior” which means let the master answer which further means that for the actions of the employees the organisation/corporation would be responsible. As we know that for commission of a crime Actus Reus and Mens Rea are the basic requisites. So on the basis of these requisite the company can escape itself from being liable. But this theory revolves around the same situation i.e. for the actions of the employees the employer/organisation/corporation would be liable. The punishment under this theory is basically imposition of fine or seizure of property. This theory is criticized because it overlooks the effort of the corporations for maintaining discipline and keeping a check on the employees to abide by the law.[4]
Attribution / Identification Theory:
Basically filled the gap created by the limited scope of the Vicarious Liability theory. This theory states that the corporations possess element of non-personhood, so it means that the actions are undertaken by some directors / board members. So for the actions of the board members the company cannot be held singly liable. The directors of the companies would be liable along with the company.[5]
Aggregation Theory
This theory basically determines the criminal liability by aggregating the knowledge of the wide range of officers within a corporation.[6] By this aggregation one can reach to the outcome that where the act is done individually or it is done by a group of people. This theory basically raises questions on wilful blindness and collective intent. [7]
Sanctioning Theory
This theory simply lays down that for the liability of the corporations, fine should be imposed on it. It is difficult to decide what amount should be imposed, but whatsoever would be imposed should be just and fair. [8]
DEVELOPMENT OF CORPORATE CRIMINAL LIABILITY IN INDIA
The courts faced challenge on imposing fines rather than imposing imprisonment because of the non-personhood of the company. This issue grabbed the attention of the parliament soon and they decided that because of the incomplete statute the companies cannot evade their liabilities. So to address this issue a bill was proposed in the year 1972 to amend the provisions of Indian Penal Code. Unfortunately, the bill did not pass and lapsed later.
In the case ofThe Assistant Commissioner, Assessment- II, Bangalore and Ors. v. Velliappa Textiles Ltd. and Ors. the court held that it is imperative to amend the provisions of IPC before imposing fines on the corporations, the rationale being that where the fine is below one lacks, the court is having a discretion as to impose fine or imprisonment but, as the fine surpasses one lacks, so the court do not have discretion as to impose fine or imprisonment which is somewhere safeguarding the corporations from being held liable.[9]
However, in the case of Standard Chartered Bank &ors. Vs. Directorate of Enforcement & ors.the court overruled the decision delivered in velliappa case stating that there is no blanket immunity for the corporations. If the penal provision is mandating imprisonment and fine both then, only fine can also be imposed because of the non-personhood of the company. The interpretation of the statute was stricter in this case rather being liberal. [10]
In the case of Iridium India Telecom Ltd vs. Motorola Incorporated & Ors the court held that the corporations can be punished for the common law offences and the statutory offences including those requiring mens rea. The court said that as we know that the corporation is an artificial person and it cannot posses the mens rea but, there must be someone who must be working on the behalf of the company. So that person or group of persons can be attributed for the offences requiring mens rea. [11]
ESTABLISHING CORPORATE CRIMINAL LIABILITY IN INDIA
For establishing corporate criminal liability in India, below mentioned are the following requisites: –
Criminal act has to be done within the course of employment:
This means that for arising the criminal liability out of the corporations it is must that the employee had done the offence within the course of his employment i.e. the act must have been done while performing the official duties authorized by the company itself. It is considered when the act is done while performing the official duties so the corporation and the employee retains a principal-agent relationship which would help in extracting out the corporate criminal liability.
Benefit to the corporation:
This means that the illegal act of the employee should have benefitted the corporation. It doesn’t mean that the corporation should have been directly benefitted. It is just that the act of the employee should not be contrary to the organisation. [12]
CONCLUSION
With the rapid growth in the technology the corporate sector is also advancing day by day creating greater threats to the society at large. The government should take precautionary measures in regard to this boom in the corporate sector. The government should keep a check on the industries who are undertaking hazardous activities for their company’s progress. The government should formulate stricter policies and penal provisions to bring an effect of deterrence on the companies carrying a thought of compromising humanity for monetary benefits.
Author(s) Name: Nalin Mashiwal (Advocate High Court of Uttarakhand)
Reference(s):
[1]Pradeep Kumar Singh, ‘Corporate Criminal Liability in India’ (2022) Athens Journal Of Law <https://www.athensjournals.gr/law/2022-8-1-2-Singh.pdf> accessed 21st February 2024
[2]Hagan, F. E , ‘Corporate crime’ , Encyclopedia Britannica (2023, July17)<https://www.britannica.com/topic/corporate-crime> accessed 22nd February 2024
[3]Ishant, ‘Corporate Criminal Liability: Tracings Its Origin and Development’ (2021) Legal Readings <https://legalreadings.com/corporate-criminal-liability-tracings-its-origin-and-development/>accessed 22nd February 2024
[4]Shruti, ‘Concept and Theories of Corporate Criminal Liability’ (2022) Legal Upanishad <https://legalupanishad.com/theories-of-corporate-criminal-liability/>accessed 22nd February 2024
[5]Dinesh Babu Eedi, ‘Doctrine of Attribution In corporate Criminal Liability’ (2013) Lakshmikumaran & Sridharan Attorneys <https://www.lakshmisri.com/insights/articles/doctrine-of-attribution-in-corporate-criminal-liability/>accessed on 24th February,2024
[6]Pallavi Nayyar, ‘Glimpses on Nature of Corporation Within Corporate Criminal Liabilities’ (2023) 8/(5) IJNRD <https://www.ijnrd.org/papers/IJNRD2305383.pdf>accessed on 24th February 2024
[7]Eli Lederman, ‘Models for Imposing Corporate Criminal Liability: From Adaptation and Imitation Toward Aggregation and the Search for Self-Identity’(2000)<https://www.jstor.org/stable/10.1525/nclr.2000.4.1.641> accessed on 24th February, 2024
[8]Cherie Dharmani ‘Criminal Liability of Corporate Bodies in India: An Analytical Study <https://dejurenexus.com/wp-content/uploads/2021/03/Criminal-Liability-of-Corporate-Bodies-By-Cherie-Dharmani.pdf> accessed on 24th February, 2024
[9]Aravind Prasanna, ‘Evolution of Corporate Criminal Liability in India’ <https://www.legalservicesindia.com/article/2005/The-Corporate-as-a-Criminal.html#:~:text=Corporate%20criminal%20liability%20has%20evolved,(Siegal%2C%202000%2Cp.> accessed on 25th February, 2024.
[10]Ashima Obhan, ‘The Development Of Corporate Criminal Liability In India (2021)<https://www.livelaw.in/law-firms/law-firm-articles-/corporate-criminal-liability-the-companies-act-2013-obhan-and-associates-183935>accessed on 25th February, 2024
[11]Prasanna; (n 9)
[12]Antim Amlam, ‘Corporate Criminal Liability in India’ (2018) <https://www.myadvo.in/blog/corporate-criminal-liability-in-india/> accessed on 25th February, 2024
