Author Name:   Aravind Prasanna

This paper aims to analyse, in depth, the landmark case laws which developed the concept of corporate criminal liability in India.

Evolution of Corporate Criminal Liability In India: An Analysis

Abstract:
As the advancement in science and technology has made the world borderless, the transactions and dealings of the corporate have become global with the help of communication systems, thereby paving a sophisticated way to commit crimes. The evolution of the concept of corporate criminal liability in India can be classified as a long processing effort from the judiciary to fix responsibilities on non-fictitious persons. This paper aims to analyse, in depth, the landmark case laws which developed the concept of corporate criminal liability. Thus, this research uses case law method to critically analyse the concept as such. The paper also aims to bring to the light all the relevant legislations pertaining to the corporate crimes and fraudulent activities. It concludes by making some recommendations for the fruitful development of the concept

Introduction
As we all know, the jurisprudence treats corporations distinct and separate from the members who represent it. And these corporations have turned out to be more dangerous criminals than the individuals. So, normally, the question arises as to how the courts could punish these corporations which commit crimes. Common law has various theories which determine the liability of the corporations and the best example would be the doctrine of vicarious liability under the tort law which asserts that the corporations would be held liable for the torts committed by its employees. India, being a country which adopted the common law remedies, was able to answer the questions concerning the tort liability of the corporations. But, the concern as to whether the corporations can be charged for the crimes committed, created uncertainty in the minds of the adjudicators. The reason can probably be, unlike the tort law, the nature of Indian criminal law which takes its source from a statute i.e. Indian Penal Code.

Interpretations with IPC
Section 11 defines that the ‘person’ would include “any Company of Association or body of persons, whether incorporated or not". Hence, corporations can be prosecuted under IPC for the crimes committed. It is an undisputed fact that the corporations cannot be prosecuted for crimes done by human beings like rape, where the only punishment as contemplated in IPC, is imprisonment. Then, the grey area was to determine the position of the cases when the corporations commit offences where the IPC demands a mandatory punishment of both imprisonment and fine. Some landmark decisions settled the issue and helped in the development of corporate criminal liability. In the case of Assistant Commissioner v. Velliappa Textiles Ltd. the Supreme Court by a majority of 2:1 held that since corporations could not be imprisoned they could not be prosecuted for an offence where IPC mandates an imprisonment. The dissenting judge observed that just because a corporation cannot be imprisoned can never be a reason for an observation that the corporation can not at all be prosecuted in that case. The judge further added that the court had two functions to perform. The first one is to determine whether the accused is guilty of having committed the crime and this conclusion has to be made on the basis of the evidence produced before the court. And the second function is to award a sentence for the offence for which the accused is found guilty. He explained

“Courts would be shirking their responsibility of imparting justice by holding that prosecution of a company is unsustainable merely on the ground that being a juristic person it cannot be sent to jail to undergo the sentence. Companies are growing in size and have huge resources and finances at their command. In the course of their business activity they may sometimes commit breach of the law of the land or endanger others’ lives. More than 4,000 people lost life and thousands others suffered permanent impairment in Bhopal on account of gross criminal act of a multinational corporation. It will be wholly wrong to allow a company to go scot-free without even being prosecuted in the event of commission of a crime only on the ground that it cannot be made to suffer part of the mandatory punishment.”

Analysing these functions along with concerns, the judge observed that the corporations could be punished with a sentence of fine if the court finds them guilty.

Stricter Interpretations:
The same issue was heard in the case of Standard Chartered Bank v. Directorate of Enforcement where the Supreme Court overruled theV elliappa case and held that there is no blanket immunity for any corporation from the prosecution of offences just because the prosecution demands a mandatory imprisonment. And the court decided that in cases of offences which mandate both imprisonment and fine, the corporations should be punished with a fine.

The element of mens rea has played an important role in the development of corporate criminal liability in India. In the case of Iridium India Telecom Ltd. v. Motorola Incorporated the Court held that the corporations can be punished for both the common law offences and statutory offences including those require mens rea. The Court emphasized:

“[…] a corporation is virtually in the same position as any individual and may be convicted of common law as well as statutory offences including those requiring mens rea. The criminal liability of a corporation would arise when an offence is committed in relation to the business of the corporation by a person or body of persons in control of its affairs. In such circumstances, it would be necessary to ascertain that the degree and control of the person or body of persons is so intense that a corporation may be said to think and act through the person or the body of persons.”

It also added that the corporations may be said to act and think through the body of persons controlling it and so the mens rea of the body of persons in control should be ascertained, which is virtually considered to be in the same position as the corporations.

Fixing the Liability
The Indian Courts have tried to identify the controlling and the directing mind of the corporations and this principle is used in various statutes. The issue in this area will be whether the directing person authorised to act on behalf of the firm could be prosecuted when the corporations are not charged. In the case of U.P Pollution Control Board v. Modi Distillery, the respondent- industrial unit has been discharging its highly noxious and polluted trade effluents into the river through a local drain. This discharge, done by the industrial unit, composed a breach of the Water (Prevention and Control of Pollution) Act of 1974. The Court held that the managers and the persons responsible for the company’s act could be prosecuted even if the company was not prosecuted. The court also added that there was a “technical fault on the part of the company to furnish the requisite information called for by the Board directed for making a formal amendment by the applicant and substitute the name of the owning industrial unit”. The complaint was defective but was curable and the persons responsible for the conduct of the corporation should be prosecuted. This ratio was reaffirmed in Anil Hada v. Indian Acrylic Ltd.. But in the case of Aneeta Hada vs M/S Godfather Travels & Tours, the Supreme Court overruled the decision held in Anil Hada case and stated that the decision which was given in the Modi Distillery case is “treated to be restricted to its own facts” since it is decided on its own factual matrix. After stating so, the court held that if the company is arraigned as an accused then the proceedings against the director or the company cannot be maintained. In other words, there can be no vicarious liability unless there is any prosecution against the company.

There are other provisions in IPC which can be used to charge corporations for joint liability, criminal conspiracy, aiding and abetting illegal activities etc. The corporate criminal liability in India has grown rapidly with the pronouncement of the landmark decisions from the judiciary and it is to be noted that corporate criminal liability is just one among many branches of law which is used to make corporations accountable for their illegal activities.

Recommendations
The legislature should take due steps in the form of new punishments to curb the criminal activities done by the corporations in the country. The following recommendations may be taken:
·The Courts should able to pass some supplementary order punishing the corporate along with the fine imposed on them
·Stricter punishments like corporate dissolution. In such cases, courts should be able to oversee whether any kind of reincorporation happens with the penalised corporate.
·While dealing with crimes badly harming the society, social sanctions should be given.
·International networks between countries should act in such a way that the criminals do not escape the liability with their connections with other countries
·The courts should be in a position to appoint technical and professional experts to make assessment reports on the corporate, if situation demands.

Conclusion
In today’s world, the corporate are readily disturbing the social life for their benefits and this has grown rapidly with emergence of newer technological advancements. The Government should take drastic measure to bring down the crime rates by policies and other means as such crimes always has large scale impact on the society. The main concern, as far as the society is concerned, would be the effect of all the kinds of hazardous activities, the companies undertake to make its progress. Voices are raised from other branches of legal studies, especially from the advocates of human rights and environmental law, against such exploitation which end up in crimes against the entire state. The Government, nowadays, though professes the concept of ‘sustainable development’, has failed substantially in its efforts to control such crimes affecting, largely, on the society.

Therefore, in order to meet today’s expectation of a ‘welfare state’ the Government should bring in stricter policies pertaining to the issues above mentioned. Imposing new form of punishments is largely believed to bring an effect of deterrence on the companies which run a thought of compromising humanity for monetary benefits. As a part of this democracy let us wait to see the initiatives and policies which the State will undertake to induce the companies comply with the laws of the country.

End-Notes
IVth Year, B.A., LLB (Hons.), VIT School of Law, VIT University, Chennai
# Section 11 of the Indian Penal Code, 1860
# Incidentally, the IPC also protect companies. For instance, Section 499 (Explanation 2) makes defaming a company a criminal offence
# Y v. Chandrachud (chief ed.), Ratanlal & Dhirajlal’s The Indian Penal Code, Wadhwa & Co. – Agra, 28thEdition, Agra, 1997, p. 2.
# Assistant Commissioner v. Velliappa Textiles Ltd., (2003) 11 SCC 405.
# Standard Chartered Bank v. Directorate of Enforcement, (2005) 4 SCC 530: AIR 2005 SC 2622.
# Supra 4
# Iridium India Telecom Ltd. v. Motorola Incorporated, Criminal Appeal No. 688 of 2005 (decided on 20 October 2010), para. 38.
# UP Pollution Control Board v. Modi Distillery, (1987) 3 SCR 798.
# Anil Hada v. Indian Acrylic Ltd. (2000) 1 SCC 1.
# Aneeta Hada vs M/S Godfather Travels & Tours CRIMINAL APPEAL NO. 842 OF 2008
# Supra 8

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