Author Name:   devarshi2

framework of corporate criminal liability and sentencing. The Indian courts have only restricted themselves to imposing fine which merely encourages the corporations to commit fraud and settle by paying fines.

Can mere fine compensate the wrongs done under the name of Corporations?

This essay deals with the framework of corporate criminal liability and sentencing. The Indian courts have only restricted themselves to imposing fine which merely encourages the corporations to commit fraud and settle by paying fines. By this work, it can be clearly laid down that how significant it has become to resolve various conflicts arising in Corporate regarding Criminal Liability, and a need to resolve them by new forms of punishments upon the Corporation such that the real purpose of punishment is deterrence or formation such as fine or a penalty is achieved. The author has tried to put forward these issues in an innovative manner, and how it came to in light and how it needs to be amended.

There has always been a squabble whether a corporation is liable for the criminal liability or not. It was always based on an ideology that Indian Law always has not imposed any blameworthiness upon the corporation or the requisite of mens rea . Other misconception which was also prevalent, rightly quoted by the Lord Chancellor Thurlow out of frustration that “no soul to damn and no body to kick” . The exceptions were highly restricted upon the question whether holding an entire corporation liable for the acts done by the employees, for the sake of compensating any third party. From early 20th century, the courts started to recognise the criminal liability amounting to the entire corporations and not only the employees. Indian courts were a bit hesitant to prosecute entire corporation without criminal intention. Courts were also of the opinion that they cannot prosecute corporations which have entailed a mandatory sentence of imprisonment against an offence.

In the case of Standard Chartered Bank & ors v. Directorate of Enforcement & ors [2005] , it was decided by the Supreme court of India that the question whether a corporation could be prosecuted for offences in which the punishment is imprisonment, which shall be a mandatory punishment by law. But then again it was held previously in the case of Assistant Commissioner, Bangalore and Others v. Velliappa Textiles Ltd. and Anr. [2004] , that when an offence of such a nature is committed under which only imprisonment and fine shall be awarded, then it shall become unworkable in case of juristic, as the court shall be bound to give a sentence of imprisonment with fine, and there shall not be any discretion on the part of the court that it shall impose only a fine. Then again referring to the case of Standard Chartered Bank & ors v. Directorate of Enforcement & ors [2005] , it showed an overruling effect. Overruling the above view, it was held by the Supreme Court of India that as far as juristic person was concerned, a discretion was given to the court to read into the section which are highly related to punishment and a sentence of fine could always be imposed, while the sentence of imprisonment could be ignored as it would be very difficult as in the case of a corporation. The court in such a respect also reasoned, and accepted the contrary views put forward, that a corporation may also be prosecuted for a graver offences, where as they can be prosecuted for a minor offence as the sentence prescribed under custodial sentence or fine. Thus it was laid down that there shall not be any immunity with respect to the corporations as merely because the prosecution was in respect of offences for which the punishment shall be compulsory imprisonment.

Thus again a question arises that whether a corporation be attributed with the requisite mens rea to prove guilt was decide by the Supreme Court in Iridium India Telecom Ltd. v. Motorola Inc. . In this case Iridium a corporation was charged with an offence of cheating and criminal conspiracy on the basis of fraudulent representation made by the company. The Supreme Court rejected the plea on the basis that a corporation cannot possess the requisite mens rea to commit an offence . The court also held down an important aspect that a corporation is virtually regarded as the same as an individual and may be convicted of common law, as well as statutory offences, which at times will also include mens rea.

The court observed that the criminal intention of the alter ego of the company or a corporate body which may be in regard to a person or a group of people that guide the business of the company will constitute a corporation. Therefore, there is an established position by law in India, that a corporation shall be convicted of any offence relating to possessing of criminal intention, as that company or corporation cannot escape liability for a criminal offence, merely because the punishment prescribed is ‘imprisonment and fine’.

The attribution of mens rea to corporation represents a new beginning to the jurisprudence of corporate criminality in India is concerned. The Supreme Court has also ensured that corporations shall no longer be put up the flimsy defence of lack of personality to getting awarded the criminal charges that involve mens rea, plugging the seeing the peculiar loophole in our criminal law.

It was also held by an apex court in CBI vs M/s Blue-sky Tie up Ltd. , that the position of law held that companies are liable to be prosecuted for criminal offences and fines as me imposed.
Main Context

As in the case of Bhopal gas Peedith Mahila vs. Union of India , several proposals of new legislation tackling criminal liability over corporation was proposed, and none of them ever saw the light of day. It was therefore all the commendable that the Supreme Court, painted a villain of justice in the consequences of the Bhopal tragedy, has put forth this progressive interpretation and subsequently provided a strong deterrent to corporate crime.

With regard to criminal liability of Corporations in India, Section 2of the Indian Penal Code 1860 says:
“Every person shall be liable punishment under this Code and not otherwise for every act or omission contrary to the provisions thereof, of which, he shall be guilty within [India] [***].”
Section 11 of the Indian Penal Code defines “person”, which includes any company or corporation whether incorporated or not. Indian Law has inherited the same from the England Law. The above mentioned Section 2 and Section 11 , clearly states that any Corporation which has committed any offence which is punishable under Indian Penal Code, 1860; shall be punished for such an offence.
Until recent changes, Indian Courts have refused to punish a legal person for an offence where the punishment required was imprisonment. . In 2005, the Supreme Court of India, reversed the position, holding that where a statute mandated imprisonment and a fine, the court shall impose fine instead. The Court also held that it did not deal with the circumstances where the only punishment was imprisonment, but as per the discussion given in Directorate of Enforcement , it seems likely that the Court shall hold companies liable could not be subject to prosecution for such offences.

Criminal Liability shall come into existence with those acts which are violative of Criminal Law; means there shall not be any liability without a criminal law that prohibits few acts or omissions. It basically revolves around the Latin maxim-actus non facit reum, nisi mens sit rea .

As observed in the case Zee Telefilms Ltd. vs. Sahara India Co. Corporation Ltd. , are all white collar and organized crimes which can come within the categories that require immediate concern. Despite of observing such crimes, the law was reluctant to impose the liability upon the corporation.

The developed jurisprudence does not find place in the Indian Law, as only the persons are held liable for the act which holds criminal liability and not the corporation itself.
With context to Section 45 , 63 , 68 , etc. of the Indian Companies Act, 1986 wherein only the persons of the corporations are held liable and not the corporation itself. This is regarded as a major loophole in the Indian system. Also with reference to Indian Penal code, that direct compulsory imprisonment does not take a corporation in accordance, since such a sanction cannot do well with the corporation. There are major statutes that are devoid of necessary legal aspects.

While looking towards brighter side, law has successfully developed to an extent with regard to certain laws, in which fines have been imposed on the corporations when they were found to be guilty. As in the case of Balaji Trading Company vs. Kejriwal Paper Ltd. and Anr. , the court found the corporation guilty under Section 141 of the Negotiable Instruments Act, 1862 and the punishment was imposed. Again in the case of State of M.P. vs. N. Singh , was liable and held guilty with respect to Section 7 of the Essential Commodities Act. And lastly, according to Section 276 B of Income Tax Act, the corporation was held liable. These statutes are reasonably satisfactory with reference to few mentioned above, which not only restrict merely to persons but also to Corporation itself.
Enlightening upon the provisions in the Indian Penal Code, that talks about kinds of punishments that can be imposed upon the convict, in context with Section 53 include death, life imprisonment, rigorous and simple imprisonment. In case of few Sections that merely speak only of imprisonment as a punishment like an case of Section 420, there arises an issue as to how those sections ought to be applied upon the companies since a criminal statute lay silent, there lay no scope of imprisonment upon the corporations. With the above position and with ongoing corporate criminality, the Courts in India have finally been able to know that even the corporations possess a guilty mind, but still are loath to punish them since the criminal law in India does not allow these actions.

As in the case of Assistant Commissioner, Bangalore and Others v. Velliappa Textiles Ltd. and Anr. [2004] , well said by a learned Justice that the corporate criminal liability cannot be imposed without adhering the legislative corrections. The court went according to the view that the corporation can only be prosecuted for an offence with one lakh or less and be punished as the court lay it’s on discretion to impose a sentence of imprisonment or fine. Even when amount exceeds one lakh, the court has no discretion to impose a fine or imprisonment and therefore, the company cannot be prosecuted as the custodial sentence is failed to be imposed.

Such a problem was given justice in the 41st Law Commission Report by adding few lines to Section 62 of the Indian Penal Code:
"In every case in which the offence is only punishable with imprisonment or with imprisonment and fine and the offender is a company or other body corporate or an association of individuals, it shall be competent to the court to sentence such offender to fine only."

But now the Parliament has righteously realized the problem and proposed to amend the Indian Penal Code, in the regard by imposing fine as an alternative to imprisonment where corporations are involved in 1972 . But again such a bill was lapsed. Such a change in the system is a legislative function and hence the Parliament shall perform it as soon as possible for the betterment of the system.
With reference to corporate punishments, Indian Laws are valid only up to fines and nothing else to the Corporations. The reason is due to inadequacy and lack of new reforms of punishments which could be imposed upon corporate.

While concluding from the above analysis, it shall be clearly seen that the criminal law jurisprudence relating to imposition of criminal liability on corporations is settled on the point that the corporations can commit crimes and hence be made liable. But looking into the statues in India, the only punishment imposed upon is fine and thus this may encourage corporations to make frauds every now and then. It shall be very important to say that amendments shall be carried out by the legislature as a priority, so as to avoid judiciary from defining the law and make statutes fit for strict interpretation by providing for infliction of criminal liability on the corporations as providing for various sanctions apart from fines.
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Bibliography
• Braithwaite J. & Geis, G. 1982, "On theory and action for corporate crime control",
• Crime and Delinquency, vol. 28, no. 2
• Balakrishnan. K; “Corporate Criminal Liability - Evolution of the concept” (1998) Cochin University Law Review
• Andharia, Prateek --- "Corporate Criminal Liability: Finding Settled Shores? - A Comment on Iridium India Telecom v. Motorola Inc." [2011] NALSARStuLawRw 5; (2011) 6 NALSAR Student Law Review 57
• Abhishek Anand, Holding Corporations Directly Responsible For Their Criminal Acts: An Argument
• Russell, W.O., Russell on Crime p.17-51

The  author can be reached at: devarshi@legalserviceindia.com

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