CORPORATE CRIMINAL LIABILITY IN INDIA AND GLOBAL IMPLICATION OF

WHITE COLLAR CRIME

By:

Rachit Ranjan, 2014085

&
Rahul Kr. Dubey, 2014087
5 Year Integrated B.A. LL.B. (Hons.) Course

WHITE COLLAR CRIME

Under the supervision of
Dr. P. Vara Lakshmi

DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY NYAYAPRASTHA,

SABBAVARAM, VISAKHAPATNAM-531035
ANDHRA PRADESH, INDIA
Date of Submission- 22/04/2019

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 CERTIFICATE

This is to certify that the dissertation entitled “CORPORATE CRIMINAL LIABILITY IN

INDIA AND GLOBAL IMPLICATION OF WHITE COLLAR CRIME” for the Seminar Paper
WHITE COLLAR CRIME to Damodaram Sanjivayya National Law University,
Visakhapatnam is a record of original work done by Mr. Rachit Ranjan and Mr. Rahul Kr.
Dubey under my supervision and guidance to my satisfaction.

Visakhapatnam SIGNATURE OF THE GUIDE

Date:

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 ACKNOWLEDGEMENT

The present paper on the topic “CORPORATE CRIMINAL LIABILITY IN INDIA AND
GLOBAL IMPLICATION OF WHITE COLLAR CRIME” has been able to get its final shape
with the support and help of people from various quarters. My sincere thanks go to all the
members without whom the study could not have come to its present state. I have taken this
opportunity to thank those who genuinely helped me. With immense pleasure, I express my
deepest sense of gratitude to Dr. P Vara Lakshmi, faculty, Damodaram Sanjivayya National Law
University for his invaluable support, guidance and advice.

I have made every effort to acknowledge credits, but I apologize in advance for any omission
that may have inadvertently taken place. Last but not the least; I would like to thank the above
Almighty whose blessing helped me to complete the paper.

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 ABSTRACT

In recent decades there has been an increase in the number and scope of white-collar and non-
violent crimes around the world (Kane and Wall, 2005). Criminals who commit these illegal acts
have become more sophisticated, there actions more calculated, there approach more strategic
and meticulously carried out. While collar crime is a serious problem and has a profound adverse
financial impact on individuals, communities, corporations and government agencies, those
convicted of these crimes tend to receive relatively shorter sentences when compared to those
convicted of similar criminal acts. There are a number of factors which may have contributed to
the increase in white collar criminal acts world wide. The global economic recession has
certainly forced many to seek unorthodox means to generate revenue. The primary objective of
this chapter is to examine factors which have lead to an increase in white collar crimes. This
chapter also evaluates the social, economic and political consequences of white collar crime.
Historically, white collar crime has been viewed as non violent and in many cases victimless
crimes. It is clear that white collar crime has serious social, economic and political implications.
As such, this paper will outline viable, cost effective actions, particularly by government, which
can be employed to reduce white collar crime globally.

The general belief in the early sixteenth and seventeenth centuries was that corporations could
not be held criminally liable. Legal thinkers did not believe that corporations could possess the
moral blameworthiness necessary to commit crimes of intent. It was the common intent of the
people that a corporation has no soul; hence it cannot have “actual wicked intent”. It cannot,
therefore, be guilty of crimes requiring “malus animus.” Treason, felony, perjury, and violent
crimes against the person could be committed only by natural persons. Courts in England drew
some distinctions, however, between crimes requiring specific intent and those for which general
intent would suffice. In one sense the acts of the corporation are the acts of its officers, directors,
and employees. During the early twentieth century courts began to hold corporations criminally
liable in various areas in which enforcement would be impeded without corporate liability.
Indeed, courts were soon willing to hold corporations criminally liable for almost all wrongs
except rape, murder, bigamy, and other crimes of malicious intent. The old school of thought
was that the corporate acts through its directors and officers, and should not attract criminal
liability.

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 TABLE OF CONTENT

ACKNOWLEGMENT…………………………………………………………………………3

ABSTRACT……………………………………………………………………………………..4

INTERNATIONAL PERSPECTIVE OF CORPORATE CRIMINAL LIABILITY………6

WHITE COLLAR CRIME AND WHITE COLLAR CRIMINALS………………………...9

CONSEQUENCES OF WHITE COLLAR CRIME…………………………………………20

CASE ANALYSIS………………………………………………………………………………27

CONCLUSION & SUGGESTIONS…………………………………………………………..35

BIBLIOGRAPHY………………………………………………………………………………36

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 CHAPTER- 7

INTERNATIONAL PERSPECTIVE OF CORPORATE CRIMINAL LIABILITY

In the modern day world, the impact of activities of corporations is tremendous on the society. In
their day to day activities, not only do they affect the lives of people positively but also many a
times in a disastrous manner which come in the category of crimes. For instance, the Uphaar
Cinema tragedy or thousands of scandals especially the white collar and organized crimes can
come within the categories that require immediate concern. Despite so many disasters, the law
was reluctant to impose criminal liability upon corporations for a long time. A basic principle of
German law is societas delinquere non potest, which means that a corporate body cannot be
liable for a criminal offence. The argument is that the human element is missing and that the
creation and operation of slush funds, as well as giving bribes, are all human acts and not the acts
of the company itself. But Germany has developed an elaborate structure of administrative
sanctions, which includes provisions on corporate criminal liability. These are handed down by
administrative bodies. The key provision for sanctioning the corporation is Section 30 which
calls for the imposition of fines on corporate entities. The criminal sanctions are quite high and
criminal liability of a company is recognized by the Australian Legislation. Moreover, the
Australian legislatures have introduced criminal liability of directors. For more than fifty years,
most criminal law and corporate scholars in the United States have been opposed to corporate
criminal liability, arguing that it should be eliminated or at least strictly limited. In the US and
the UK, it has been a settled principle that corporate can be held criminally liable. Companies
have been open to manslaughter proceedings since 1965. Until then, English law abided by the
principle laid out by a 17th century judge, who deemed, “Companies have a soul to damn, but no
body to kick”. Way back in 1909, in New York Central and Hudson River RailRoad Co v. United
States, Supreme Court in the US had held that a corporation is liable for crimes of intent and
stated: "We see no good reason why corporations may not be held responsible for and charged
with the knowledge and purposes of the respected, as are the rights of natural persons, the Court
nonetheless stated that the law “cannot shut its eyes to the fact that the great majority of business
transactions in modem times are conducted through these bodies, and particularly that interstate
commerce is almost entirely in their hands.” In HL Bolton (Engg) Co Ltd vs TJ Graham & Sons,
Lord Denning stated that, “The state of mind of these managers is state of mind of company, and

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it is treated by law as such. So, in cases where the law requires personal fault as a condition of
liability in tort, the fault of the manager will be the personal fault of company.” Beginning in the
1970s, nations throughout western European began creating or expanding corporate criminal
liability, rather than contracting or eliminating it. France had also not recognized corporate
criminal liability since the French Revolution, the new Code Penal of 1992 makes specific
mention of this concept in section 121(2). The resistance to not including corporate criminal
liability in the criminal code had increased over the years, and in 1982 the “Conseil
Constitutionnel” had made it clear that the French Constitution did not prohibit the imposition of
fines on a corporation. Corporate criminal liability is an integral part of Japanese law. There are
currently more than 700 criminal provisions on the national level alone, which can punish
entities other than individuals, and this number is likely to increase in the coming years. China’s
Criminal Code, which was first introduced in 1979, did not contain a provision on corporate
criminal liability until 1997. Prior to the introduction of “unit crime” into the Criminal Code in
Article 30. The Concept of Criminal liability of Corporation is also mentioned under various
International documents. A number of conferences have dealt with the same issues since the end
of World War II. Among them is the 8th International Conference of the Society for the Reform
of agents, acting within the authority conferred upon them. Recognizing that the rights of
corporations Criminal Law in 1994 in Hong Kong and the International Meeting of Experts on
the Use of Criminal Sanctions in the Protection of the Environment in Portland, in 1994. The
Seventh United Nations Congress on the Prevention of Crime and the Treatment of Offenders of
1985 in Milan mentioned that “due consideration should be given by Member States to making
criminally responsible not only those persons who have acted on behalf of an institution,
corporation or enterprise, or who are in a policy-making or executive capacity, but also the
institution, corporation or enterprise itself, by devising appropriate measures that could prevent
or sanction the furtherance of criminal activities.” In 1998, the Council of Europe passed the
Convention on the Protection of the Environment through Criminal Law, which stipulated in
Article 9 that both “criminal or administrative, sanctions and measures” could be taken in order
to hold corporate entities accountable.

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DEFINITION

The term “white collar crime” was first introduced by sociologist Edwin H. Sutherland in 1939.
Sutherland defined white collar crime as a crime committed by a person of respectability and
high social status in the course of his occupation (Sutherland, 1942). In the contemporary
perspective there are differing views regarding the most accurate way to define white-collar
crime. Most contemporary definitions suggest that white collar crime is a crime committed by
business and industry professionals, non- violent in nature, with the sole purpose of achieving
personal financial gain, business advantage for their corporation, or financial gain for investors.
There are serious limitations to this contemporary definition. The problem is that this definition
fails to account for those white collar criminals who do not work in a particular industry yet
commit similar non-violent crimes for personal financial gain, or to secure an advantage in an
industry in which they are not working in at the time the act is committed. For example, a person
may engage in false advertisement to convince people to invest in a bank that doesn’t exist at the
time of the initial investment. The criminal may actually start a bank and use the revenue
acquired through deception to fund bank activities, and may even produce profits for investors.
However, at the time the criminal began soliciting investments they were not actually working in
the banking industry. By the contemporary definition this person would not be a white-collar
criminal. White collar crime is examined in this chapter as a series of crimes which are
committed by persons who may not work in a specific industry but do commit crimes that are
non violent for personal gain.

It must also be noted that while white collar crimes, generally, are not violent and do not cause
direct or immediate physical harm to their victims, these crimes can and often lead to injury and
even death. The contemporary definition also fails to explain the level of sophistication and
planning needed to carry out white collar crimes. The individuals and organizations who commit
white collar crimes are often well educated, technologically literate, are well respected in their
communities and at times well connected socially and politically.

SCOPE OF THE PROBLEM

Data compiled by the United Nations Millennium Project estimates globally, white collar crime
accounts for more than $1 trillion in annual revenue (Millennium Project, 2008). This is in all

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likelihood a conservative estimate. Crime in general is prevalent in every country and region of
the world. There is no industry that is totally immune from criminal elements and criminal
exploits. If an industry generates revenue and can be exploited in some way, there are criminals
who are willing to exploit these organizational, systemic and institutional weaknesses for
personal gain. It is also important to point out that these are revenue that may never find its way
back into local economies and taxes are not paid on this money. As such, this is clearly an
opportunity loss for local, national and regional governments. These are revenue which would
have been used to fund various government social and economic programs. More specifically,
numerous sources indicate that hundreds of millions of dollars acquired from white collar
criminal activities globally are diverted to secret bank accounts in various countries each year
(Mintz and Cohen, 1972).

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 CHAPTER-8

WHITE COLLAR CRIME AND WHITE COLLAR CRIMINALS

There are a number of unique characteristics specific to white collar crime. These attributes have
a direct impact on public perception of white collar crime. These attributes also influence public
perception concerning the seriousness, detriment to society and the extent to which the public
believes resources should be allocated to aggressively detecting, deterring and prosecuting white
collar criminals and white collar crime (Allison and Mack, 1991).

The public has always perceived white collar criminals as a unique population demographic
among criminals. The reason is that the acts are often non confrontational. Essentially, white
collar crime generally does not involve a violent physical confrontation between a criminal and a
victim. White collar crimes are often committed against people who have enormous means. As
such, the general public often does not view the crime as an offense against someone similar to
themselves. This is not to imply that white collar crimes are not committed against people who
are less affluent. However, realistically, most white collar crimes are designed to gain access to
enormous resources, as such; people at the bottom of the socioeconomic pyramid generally are
not the primary targets of white collar criminals. Steve Tombs explains that this phenomenon is
similar to blaming a worker who is injured at work for not being knowledgeable of safety
procedures (Tombs, 1999). Essentially, the public may believe that there are some victims who
actually deserve to be victimized. A person who decides to undergo plastic surgery and is
permanently scarred in the process may be viewed as deserving to be a victim in this case.

In recent years, there has been a slight change in the perception the general public has with
respect to the seriousness of white collar crime and its social and economic impact (Holland,
1995). The problem is that this change in perception has not significantly altered the extent to
which resources are not allocated to this problem, nor does it dramatically alter the priority
governments give this problem. Admittedly, this may be an unfair assessment given the current
global economic recession in which the resources for detecting, deterring and prosecuting white
collar offenses simply are not available.

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PSYCHOLOGY OF WHITE COLLAR CRIME

White collar criminals are treated far different than the typical criminals in the legal system
(Ayers and Frank, 1987). This occurs for several reasons. First, white collar criminals almost
never carry weapons and thus are not viewed by law enforcement as a violent or typical criminal.
This fact makes it difficult for the average person or law enforcement to treat them the way they
would treat the average criminal. In addition, white collar criminals are more likely to have
access to enormous resources and influential members of the community. The fact that they often
have ties to influential members of the community and the financial means to hire elite defense
teams compels the average person and law enforcement to view them as an upstanding citizen
who may have a had a bad business deal, made some business mistakes or simply did not
understand the law regarding certain activities specific to their profession.

THEORETICAL FRAMEWORK

Social scientists will always question and try to better understand why human beings engage in
various forms of deviant behavior. The body of literature which addresses factors which compel
people to commit criminal acts assumes that all human beings are, on some level, rationale.
Thus, all human beings will examine the benefits and drawbacks to committing a criminal act.
This is the argument presented by rationale choice theorists (Homans, 1961).

The contemporary literature does not effectively address the issue of economics on fluctuations
in white collar crime. One could certainly that the current global economic crisis will have some
effect on the scope and veracity of white collar criminal activity worldwide. The reason for this
inference is straightforward. An economic recession leads to limited employment opportunities,
results in a reduction in profits realized by businesses of all sizes, increases poverty levels and
adversely affects the prospect of long-term upward mobility for people in every sector of society.
As such, people will certainly explore various means of wealth accumulation, and white collar
crime is clearly an option for some.

WHITE COLLAR CRIMES

There are numerous types of white collar crime. The types of white collar crime includes and
certainly is not limited to: identity theft, mail fraud, blackmail, bank fraud, computer fraud,

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counterfeiting, credit card fraud, embezzlement, forgery, insider trading, insurance fraud,
investment schemes, kickbacks, racketeering, securities fraud, income tax evasion, telephone
marketing fraud, property fraud, and pyramid investment schemes. This is by no means a
comprehensive list of the types of white collar crimes committed.

The type and scope of white crimes committed is always evolving and the list continues to grow.
Advanced fee crimes involve convincing a person to pay an upfront fee in order to acquire a
good or service at a discounted rate. Once the fee is paid the victim expects to have a good
delivered or a service rendered neither of which occurs. These crimes are often directed at the
elderly and people of lower socioeconomic status and less educated. The reason this population
demographic is targeted with advanced fee crimes is that they often have poor credit and limited
ability to acquire goods and services on credit with low interest rates. Advanced fee crimes often
use these opportunities in the criminal act as a means to encourage their victims to take
advantage of the opportunity. Advance fee crimes clearly have victims and these crimes
adversely impact the social predicament of poor and elderly populations. These crimes reduce
disposable income; can limit the ability of poor and elderly populations to acquire essential
goods and services due to the extensive loss of capital.

BLACKMAIL

Blackmail is a crime in which a person demands payment to ensure that damaging, illegal or
simply embarrassing facts will not be divulged. These crimes are generally directed at persons
with some degree of wealth or perceived wealth. In some cases victims are targeted and placed in
compromising situations and the criminal documents this event. The information is then used to
force the victim to pay a fee to ensure the information is not released to law enforcement, family
and in some cases to the general public. The initial request for payment often comes with a
promise that the payment is a onetime payment and that the victim will never be contacted again.
This is almost never the case. Once the criminal receives payment, additional request are almost
always made and the requests for money never stop. In addition the payment may not always be
in the form of money. A victim, if they happen to be a public official may be asked to support a
piece of legislation. Victims may be required relinquish property or other valuable assets.

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BANK FRAUD

Bank fraud involves actions taken by a person to acquire funds which they are not legally
entitled. There are many ways in which thieves successfully defraud banks of funds. A common
technique is called check kiting. Check kiting occurs when thieves deposit a check into an
account and the funds are made available before the banks internal audit system verifies the
depositor actually has money in an account to cover the check. For example, a thief may deposit
a check from an account which has very limited funds. In some instances, the account has just
enough money to keep the account open. A large check is written on that account, or deposited to
the account from another account which is set up for this very purpose. As soon as the check is
deposited, even at night and after normal banking hours, the funds are made available and the
thieves can withdraw funds moments after depositing the check from an account does not have
funds to cover the check (National Fraud Center, 2000).

Banks are also targets of wire fraud. Each year banks use various electronic systems to transfer
funds quickly, in most cases over night. In addition, bank customers make requests to banks to
transfer funds from their accounts to various creditors. Thieves, often with the help of bank
employees forge documents which essentially appear to be a legitimate request for wire funds
transfer. Once the funds are transferred to another account it is virtually impossible to track who
received the funds or to reverse the electronic funds transfer.

Banks are also targeted by individuals and businesses with falsified loan applications.
Essentially, individuals and businesses often submit loan applications which have falsified
information. The information is altered to hide delinquent loans, poor credit scores, bankruptcies
and any information which may compel a bank to deny their application.

BANKRUPTCY FRAUD

Bankruptcy occurs when a person or company declares bankruptcy and fails to disclose all or a
portion of their assets to the courts or attorneys. Individuals and corporations will also
aggressively hide assets to ensure they are not dispersed to creditors or seized by the courts in the
bankruptcy proceedings. Bankruptcy is actually a costly phenomenon for the public because it
increases the cost of doing business for any which extends credit. When a creditor experiences a
loss of revenue they rely on various techniques to recoup the loss. One measure employed is to

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simply raise the interest rate on lines of credit extended to future customers, essentially requiring
new customers to pay off bad accounts.

BRIBERY

Bribery is a pervasive problem worldwide. It is the use of money or goods to influence the
actions or decisions of a person who is receiving the goods and services. The person receiving
the goods or services could be an elected official who is responsible for or influential in enacting
legislation which could benefit the person offering the goods and services.

TELECOMMUNICATIONS FRAUD

Telecommunications fraud occurs in various ways. A person, for example, may steal a cell
phone and use the service to commit criminal acts. Generally, cell phone fraud involves the theft
of a cellular phone which is then re-programmed with a valid electronic serial number. The
phone is then used by the criminal and charges are billed to the person the phone was stolen
from. There are various types of telecommunications fraud and the data compiled by the
National Fraud Center concluded that telecommunications fraud accounts for illegal revenue
which ranges between $3 billion and $12 billion annually (National Fraud Center, 2000).

COUNTERFEITING

For some criminals, a face-to-face confrontation with their victims to commit a crime is too
much work, has some degree of danger and increases the chances of being caught and receiving
a longer jail sentence. As a result, a relatively small criminal demographic prefer to actually print
illegal money. The ability to print money makes it possible for a criminal element to make as
much money as they want and to limit the interaction with any person during the offense. There
are many who prefer to make the actual currency themselves. This is a major problem for most
developed nations for several reasons. First, it can lead to inflation. When there is more money
available and in circulation, producers and distributors generally charge more for their goods and
services. Secondly, it reduces public trust in a currency. Data released by the United Nations
indicates that counterfeiting is a $533 billion business globally (Millenium Project, 2008).

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CREDIT CARD FRAUD

Credit card theft and fraud involves the theft and use of a credit card by a person who is not
authorized to do so. In the United States it is estimated that credit card theft costs citizens more
than $500 million annually (U.S. General Accounting Office, 2002). The theft and illegal use of
a credit card certainly has immediate adverse financial consequences for the person who is
victimized. It also has long-term adverse consequences. If the victim can not prove they are not
responsible for certain charges, and in some cases even if they can prove they are not
responsible, credit card companies hold the victims of credit card theft responsible. In 2002,
there were close to 95,000 credit cards reported stolen in the United States. Approximately 25
percent of all credit card theft victims reported they took off significant time from work in order
to resolve the stolen credit card problem. Another 22.2 percent reported they were harassed by
debt and credit card collectors as a direct result of the charges made by credit card thieves. There
is generally an extremely low arrest and prosecution rate for credit card theft. In 2002, in the
United States less than 10 percent of credit card thieves were arrested and convicted of their
crime (U.S. General Accounting Office, 2002).

One of the major factors contributing to the increase in credit card crimes is the ability for
consumers to make purchase and pay for goods and services over the internet. When a purchase
is made using the internet, a consumer at some point must divulge critical financial information.
This is an opportunity for thieves to acquire the information for their own use. If the information
is not stolen during the actual purchase process, a thief may be able to access the information at a
later date. The reason is that once a purchase is made using a credit card that information is
usually stored on the computer’s hard drive. A thief who accesses a computer remotely may be
able to access the hard drive and thus retrieve the financial information.

CYBER CRIME

Cyber crime occurs when individuals or criminal organizations infect computer systems with
viruses in order to disrupt their activities. Cyber crimes are often directed at governments as a
form of political protest. Criminals generally do not engage in cyber crime for financial gain.
Criminals attack computers systems and entire networks with malicious software. This poses a

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serious threat to corporations and governments. Cyber attacks will make computer hardware
unreliable, alter data processing logic or steal sensitive and confidential data.

It is estimated that check fraud alone accounts for more than $ 600 million in losses annually in
the United States. The National Fraud Center concluded that cyber crimes generate
approximately $3 trillion in revenue annually worldwide. There are various forms of cyber
crimes, some of which are addressed later in this chapter, and include; credit card crimes,
healthcare fraud, insurance scams, securities violations, telecommunications crimes and identity
theft to list a few.

The National Fraud Center in the United States has identified several steps which should be
taken to combat cyber crimes globally. These actions include the enactment of laws which will
help improve crime reporting. This is a particularly important component of an effective system
for combating credit card and identity theft. When a credit card is stolen, the thief will begin
making expensive charges almost immediately. A system which allows for faster reporting and
the cancellation of a credit card will certainly reduce the overall cost of the crime annually.
Next, the report found there a need for a uniform reporting system. In addition there is a need for
more public and private partnerships to combat cyber crime. Finally, resources must be made
available at all levels for this and similar efforts (National Fraud Center, 2000).

EMBEZZLEMENT

Embezzlement occurs when a person is entrusted with money for the purpose of investing and
managing it. Instead, the person acquires the funds for personal use. It’s estimated that
embezzlement costs individuals, governments and corporations more that $1 trillion annually
worldwide (Global Monitoring Report, 2006). Embezzlement is a particularly difficult crime to
detect and prosecute when it is government officials who engage in these illegal acts. Aside from
the enormous resources lost due to embezzlement of funds, these illegal acts have additional
negative consequences. Embezzlement, particularly when it is committed by public officials
creates public distrust. It also takes valuable and limited resources away from government
programs. Many of these programs are designed to reduce poverty, increase employability,
provide essential skills training to low skilled and poorly educated citizens, address healthcare
issues, provide housing to the homeless and a multitude of essential social services.

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ENVIRONMENTAL FRAUD

Environmental fraud occurs when a company, corporation or non-profit organization which

undertakes environmental cleanup activities. These organizations will over bill for these services
and in some instances not perform the cleanup activities at all. Some companies, corporations
and non-profit organizations will solicit funds through various means for the purpose of initiating
or engaging in future environmental cleanup activities. Once the funds are acquired, the
organization may close secretly and quietly close its doors and move to another location and
begin new operations under a new name.

FORGERY

Forgery is a crime which involves thieves using an illegally acquired or false financial
instrument to acquire money from individuals and businesses. The instrument usually involves
an altered check. Thieves will first steal a blank check from an individual or business. Once a
thief has the check in their possession, they fill in the necessary information and replicate the
authorizing signature. This is accomplished by acquiring any document which has the actual
signature of the person who is authorized to sign the checks. Another way to accomplish the
same objective is to alter information on a check. A thief for example may do some work for a
company or individual. They are paid with a check which is made out in the amount of $90.00.
That amount is then changed to reflect $900.00 or $9000.00. There are no agencies that compute
the cost of forgery for the entire world. It is far too complex and their literally millions and
varying types of documents which can be forged to help thieves gain access to money and
property. The documents range from making property documents or replicating signatures on
corporate and personal checks.

HEALTH CARE CRIMES

Healthcare fraud is a process by which criminals exploit flaws a healthcare system to defraud
health care programs, the government and individuals of money. Healthcare fraud unfortunately
is not limited to criminals outside the healthcare profession; medical professionals also on
occasion act to steal funds from healthcare systems, individual and governments. The crimes
committed by industry professional include over billing, creating false bills for services and
patients who were never seen or treated, and ordering tests and procedures which are not

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necessary. It is estimated that health care fraud generates more than $100 billion annually in the
United States (National Fraud Center, 2000).

IDENTITY THEFT

Identity theft is a problem in almost every country in the world. In the case of identity theft,
criminals assume the identity of an unsuspecting person and opens various account in that
persons name. White collar criminals may secure credit cards, bank loans and automobile loans
in the victims name and continue to do so until banks and creditors will no longer make loans to
that individual. When this occurs, criminals move on to secure the identity of another person and
continue the same activities (U.S. General Accounting Office, 2002).

INCOME TAX EVASION

Income tax evasion occurs when a person or company files a false income tax statement. The
literature on tax evasion generally focuses on individuals. Tax evasion by large corporations is a
significant problem worldwide. In the United States alone, corporate under reporting on tax
forms accounts for more than $ 40 billion annually (U.S. General Accounting Office, 2008).

INSURANCE FRAUD

Insurance fraud occurs when a person engages in various illegal actions to acquire money from
insurance company. Insurance fraud may not always be classified as a white collar crime because
it can involve murder for the purpose of collecting life insurance. In other cases it may involve
the staging an automobile accident to collect insurance money Chapman and Deniss, 2003).

INVESTMENT SCHEMES

Investment fraud involves coercing individuals, companies and even governments into investing
in a business or corporation with the assurance that they will receive a higher than average return
on their investment (Harris, 2003).

SECURITIES FRAUD

Securities fraud involves the act of illegally inflating the value of stocks by brokers. Securities
fraud occurs when investors are compelled to invest money in a publicly traded company based

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primarily on falsified documents or untrue statements (Harris, 2003). Securities fraud is a
particularly difficult crime to prove unless a person can document the fact that they were
compelled to make a stock purchase or trade based solely on information which was clearly
false.

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 CHAPTER-9

CONSEQUENCES OF WHITE COLLAR CRIME

While white collar crime, generally is non-violent, there are significant adverse consequences.
Counterfeiting, for example, can undermine public confidence in a nation’s currency. This can
certainly lead to a decrease in the willingness of businesses, and individuals who are willing to
do business in a specific currency. The most significant and obvious consequence of white collar
crime is the enormous loss of revenue.

ORGANIZATIONAL EFFECTIVENESS

Organizational effectiveness is a critical component in the assessment and evaluation of the

impact of white collar crime. The international community relies heavily on various types of
organizations to accomplish their global social, economic and political objectives.

The ever present and constantly evolving threat of theft and various forms of crime and criminal
activity directed at public, private and nonprofit organizations have a profound impact on the
way these organizations conduct business. White collar criminal activity can and often does
weaken public and private institutions.

SOCIAL IMPLICATIONS

White collar crimes, while generally non violent, do contribute to adverse social conditions
particularly in poor and developing countries. The reason for this relationship is due in part to the
limited opportunities for upward social and economic mobility for many people around the
world. Sociologists assert that people are products of their environment. In some regions of the
world white collar crime is pervasive and often tolerated if not altogether accepted. In these cases
young people often view criminal activity as a means and vehicle to a better life for both
themselves and their families. It’s also difficult to convince a young people that a life of crime is
not a good career path when many of their peers are involved in white collar crimes.

White collar crime also contributes to adverse social conditions by reducing the available
resources. Nations which have made a decision to aggressively combat white collar crime have
to fund these activities. By funding deterrence, detection and prosecution efforts against white

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collar criminals, governments often reduce funding for various social programs. This eventually
adversely impacts the adoption and implementation of effective social programs.

ECONOMIC IMPLICATIONS

White collar crime can adversely impact economic growth and development. An institution, for
example, which has experienced a widely publicized breach of security in their computer system,
may find it difficult to regain the trust of their clients. This decline in trust may be compounded
when the security breach involves the loss of client personal financial information. In cases
where a corporation is a major employer in a city or region the economic impact can be
enormous.

POLITICAL IMPLICATIONS

Government computer networks are often the target of attacks. This decreases the ability of
international organizations investing resources in smaller countries. An increase in white collar
criminal activity can lead to an increase in funding for warlords and anti government regimes.
This makes it possible for criminal organizations to be better equipped than police and
government forces.

White collar crime influences the extent to which national and regional stability can be achieved.
Poor and developing nations rely on public and private organizations to invest and grow their
economies. This creates jobs and tax revenue. When white collar crime increases and is directed,
particularly, at private organizations, these organization reduce investments, hire fewer people,
generate less tax revenue. In some cases businesses that become targets of white collar crime are
forced out of business. This decreases the likelihood that similar businesses will invest in the
region. This in turn gives greater power and influence to warlords and criminal elements as they
become the primary source of employment opportunities (United Nations Report, March 2007).

FACTORS CONTRIBUTING TO THE INCREASE

There are a multitude of factors which make it easier for criminals to illegally and quickly
exploit individuals, businesses, companies and governments for personal gain. In recent decades
advances in technology which were initially designed and implemented to help individuals,
businesses and governments transfer data, funds and information faster and more efficiently have

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provided opportunities for white collar criminals to engage in various criminal activities. These
new technologies have also made it possible for white collar criminals to engage in the
exploitation of public and private sector financial databases from anywhere in the world.

SOLUTIONS

The first and most significant step which can be taken to reduce or eliminate white collar crime
against major companies and corporations deals with accounting systems. Major companies have
complex financial reporting systems. The problem with this is that these complex reporting
systems which are often designed to ensure that no major financial transaction can take place
without multiple approvals by managers at various levels within the organization. The problem is
that employees within these major corporations, in some cases over a period of many years will
learn how the system works and identify critical weaknesses and flaws in the system. A second
problem is that major companies and corporations have to purchase many goods and services. In
many instances, if the price of a good or service is relatively small, there are fewer steps and
little oversight for these transactions. As such, white collar criminals find ways to create false
invoices for relatively small items which are not monitored closely by the corporation. While this
may not be a major problem when very few false invoices are created, it can be a major problem
when thousands of false invoices, in some cases up to $10,000 can add up to millions of dollars
over many years.

Major companies and corporations are vulnerable and have to take appropriate action or they will
continue to be exploited. Major companies and corporations must implement more stringent
accounting controls which effectively track the dissemination of funds for smaller purchase.
Companies and corporations must implement the same system of checks and balances for the
purchase of lower priced goods and services as they do for the larger financial transactions. The
level of approval may change, obviously, a board or president of a corporation cannot be
expected to sign off on every low priced good or service. That would clearly be an inefficient
and ineffective use of time and resources. However, a company can have the same number of
people be involved in the approval process. Companies and corporations can also limit the
number of vendors they purchase goods and services from. This will make it possible for these
corporations to purchase goods and services from vendors who are well established, have a
tremendous track record, who have stringent control over the invoices they produce making it

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more difficult for false invoices to enter the approval system of the targeted corporations. Major
corporations can also implement electronic invoice approval systems. These data obviously
would have to encrypt and accessible only to those who are part of the invoice review and
approval process. Companies and corporations must conduct both internal and external audits of
their financial reporting and resource allocation process.

INTERNATIONAL RESPONSIBILITY

Before white collar crime can be affectively addressed globally, there must be a consorted effort
on the part of public, private, non-profit and legal entities to better understand the scope, impact,
as well as, regional and global implications. If there is only one entity held responsible for
detection, deterrence and prosecution in each region of the world, white collar crime will never
affectively be addressed. White collar criminals are is sophisticated, technologically savvy, well
trained and organized. More importantly, their crimes cost governments, private and non-profit
sectors hundreds of billions of dollars annually worldwide. If left unchecked or poorly addressed,
the adverse financial impact will continue to increase.

The United Nations must be willing to support the actions of governments willing to
aggressively work to detect, deter and prosecute white collar criminals and white collar criminal
organizations. The reason for this is that the fighting white collar crime has global implications
and can adversely impact economic growth and development particularly among poor and
developing countries.

GOVERNMENT RESPONSIBILITY

Governments around the world certainly cannot address the ever increasing problem of white
collar crime alone. They do, however, have the responsibility to do everything their limited
resources will permit to address this threat. At minimum governments must accomplish the
following in order to build and strengthen the essential infrastructure needed to combat white
collar crime;

1. Identify the Threat:

Governments must first identify the threat white collar crime poses to their financial systems,
social conditions, revenue base and specific industries. Essentially, governments must

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determine the extent to which white collar criminals exploit banks and various financial
institutions for financial gain. Depending on how pervasive the problem is, there could be
serious adverse implications for regional and national financial and fiscal economic growth
and development. This could certainly destabilize financial markets and deter international
investments. This in turn leads to a reduction in employment opportunities reduces revenue
generated for social programs and various capital projects.

2. Understand the White Collar Crime Environment:

Governments must be cognizant of the environment created by lax policies and programs.
Essentially, white collar criminals operate in regions of the world where they feel most
comfortable. If there are limited efforts for example in the Asia, for example to detect, deter
and prosecute white collar crimes, then white collar criminals will certainly view Asia as a
place where they can aggressively apply their trade. As such, governments have to examine
and better understand the environment their policies, programs and laws create for future
white collar criminal activities.

3. Adopt Stringent Penalties:

Assuming that white collar criminals consider the benefits and drawbacks to committing a
criminal act, mandatory prison time for a person convicted of committing a white collar
crime may deter many from engaging in these illegal acts. There are important factors to
consider with this approach. First, it costs very little to adopt these new penalties and the
deterrence factor may be invaluable. The drawback to this approach is that it is expensive to
house prisoners. This approach may only be feasible in countries where a lengthy parole is
possible and the embarrassment to the individual and their family resulting from the
conviction is enough to deter the perpetrator from committing future crimes.

4. Strengthen Computer Security Systems:

Governments, at a minimum must strive to have the most secure computer systems available.
This must also be the case for companies, corporations and individuals who do business with
or on behalf of governments. Those who do business with governments must also be required
to quickly report when they believe their computers have been hacked or when critical
confidential information may have been compromised. The greatest threat in this area may be
when private contractors download sensitive, confidential or secret information to laptop

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computers with outdated security software. The information is then taken home and the
internet is accessed from a location outside the organizations secure environment. These
computers must be required to access the governments’ computer system daily whereby their
security software is automatically updated when updates become available.

5. Strengthen Employee Screening Systems:

Governments must do a better job at screening prospective employees. This must be
required of large corporations as well, particularly those corporations which do business with
the government.

6. Educate the Public:

The literature suggests that the public generally perceives white collar crime and white collar
criminal activity as non-threatening and non violent. The problem is that white collar crime
has a far more detrimental impact financially and socially than the public expects.

7. International Reporting Protocol:

Governments must share information with the international community. This approach to
addressing white collar crime will limit the ability of white collar criminals and crime
organizations to move their operations freely. It may not eliminate their ability to operate in
various regions of the world, however, it will certainly create a more restrictive and
uncomfortable global environment. This will certainly be the case when more countries agree
to extradite white collar criminals to countries where they are being sought for criminal acts.

8. Assist with Apprehension:

In cases where a country reports a white collar criminal or criminal organization which has
fled their country, all nations must be willing to assists in the apprehension and prosecution.
This should not be a major problem for most nations as white collar crime is almost never a
crime punishable by death. It does, however, send a clear message to white collar criminals
and organizations that the international community will work together, regardless of their
political differences, to apprehend and bring white collar criminals to justice.

9. Adopt best Accounting Practices:

Governments must adopt accounting practices which make it impossible for their financial
systems and sensitive information to be compromised. Governments must also encourage

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private and non-profit organizations to do the same. Larger organizations which can afford
to hire certified accountant must either be compelled or required to do so. Certified
accountants have a number of attributes which make it difficult for rogue employees to
exploit weaknesses in financial and general organizational accounting systems. Certified
accountants generally take their commitment to the profession very serious and are required,
in most cases, by law and threat of loss of their licensed to report questionable or outright
illegal accounting and financial practices.

10. Require Multiple Verification for Monetary Transfers:

All too often, white collar crime culminates with the transfer of funds from one account to
another. In many cases the financial transfer is fictitious and made possible by a person
working inside a financial institution. This problem would be significantly reduced all public,
private and non-profit organizations were required to have persons within organizations
verify the legitimacy of each transfer request at several levels within the organization. Most
importantly, the verification must be done by different individuals in each case at each level.

11. Monitor Activity of Convicted Criminals:

There are clear benefits and drawbacks to this action. In some countries the issue of privacy
and individual rights may become a civil concern. In addition, this action certainly is not
without cost. Even in cases where this activity is performed by law enforcement already in
place it takes away from their ability to direct people and resources to other activities. The
benefit to this action is that white collar criminals will find it difficult if not impossible to
continue applying their trade. Another benefit is that the activity will undoubtedly lead to the
identification and in some cases the prosecution of additional white collar criminals.

12. Ban Corporations:

In cases where corporations engage in illegal activity governments must be willing to ban
them from doing business in their country. This means the officers and person associated
with that corporation as well. In order for this to be affective, governments, particularly poor
and developing nations must have the support of the international community and various
critical international organizations.

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 13. Mandatory Audits:
All government agencies or organizations which do business with the government must be
required to undergo random audits conducted by independent external auditors. This will
accomplish several very important objectives. First it will certainly make it difficult for funds
to be directed from the organization illegally for a long period of time. As such, even in cases
where funds have been acquired by white collar criminals, it will not be compounded by
permitting this type of theft from the organization to occur over a prolonged period of time.

14. Hire Local Citizens:

Governments, particularly in poor and developing countries, must require corporations that
do business in their country to hire local citizens whenever possible. This will decrease the
likelihood that citizens, with few economic opportunities will be recruited and used by
criminal elements. This requirement will certainly require the corporation to incur additional
cost. People have to be recruited and trained, and this can be costly. As such government
may have to create tax abatement programs and various incentives to encourage corporations
to hire and train its citizens.

CORPORATE RESPONSIBILITY

Future plans and programs designed to address white collar crime must include large
multinational corporations. Corporations clearly have enormous resources and must be
compelled to use their resources to affectively address white collar crime specific to the sector in
which they conduct business. The problem is that corporations have not made the connection
between white collar crime in their specific industries and profits. This is due in part to the fact
that corporations are fixated on short term financial goals. When corporate executives begin to
understand the correlation between crime, regional stability, education, poverty, and various
social and economic indicators specific to the countries where they recruit workers and conduct
business, they may realize that reducing white collar crime may be in their best interest for long
term financially growth. To be more specific, corporations certainly want a well educated
workforce. In regions of the world where white collar industries flourish, there may be
tremendous incentives for young people to drop out of school and go to work in criminal
organizations. This certainly reduces the ability of large corporations to hire well educated
persons.

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It is also important to point out that corporations are not just the victims of white collar crime
but are often the perpetrators. Even in cases where individuals working within a corporation
commit crimes to help the corporation gain an advantage without the consent of corporate
executives, the corporation is still culpable. The reason for this inference is that a corporation
can create a culture and environment in which certain questionable and in some cases illegal acts
by employees are encouraged yet not officially sanctioned by the corporate executive officers.

INDIVIDUAL RESPONSIBILITY

Technological advances in just the past decade have helped improve the quality of life for
millions of people around the world. Data and information can be transferred now in a matter of
minutes instead of several days. A person can review, compare and purchase goods and services
from anywhere in the world. Medical professional can get expert medical advice in seconds to
help save patients lives even in cases when a person is located in a remote village in Africa or
Central America. While the new technologies have made valuable information available and
accessible to a greater cross section of humanity, the average person must be ever cognizant of
the fact that a this information and data is also available to a relatively small portion of people
who want to exploit these new technologies for personal gain. These new technologies require
that individuals take the necessary and essential precautions when using these new and ever
changing advances.

CASE ANALYSIS

STANDARD CHARTERED BANK CASE: A JURISPRUDENTIAL ANALYSIS

From the limited lights shed on them, the material facts that can be gathered from the judgment
are that Standard Chartered Bank (the Appellant Company) was sought to be prosecuted for
violations of certain provisions of the Foreign Exchange Regulation Act, 1973 [FERA] under
Section 56 of the Act and various notices were served to them under Section 50 read with
Section 51 of the Act. The appellant filed a writ petition before the hon’ble High Court of
Bombay challenging the notices and their prosecution. The Appellant approached the Supreme
Court against the judgment of the Division Bench of the Bombay High Court (dated 7.11.1998)
by way of Special Leave.

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 The matter was decided by the Supreme Court on 5.5.2005. The judgment was delivered by a
five judge constitution bench by a split verdict of 3:2. The Majority opinion consisted of K.G.
Balakrishnan, D.M. Dharmadhikari, Arun Kumar JJ., all giving separate opinions. In dissent
B.N. Srikrishna, J. gave the opinion on behalf of himself and N. Santosh Hegde J.

ISSUE RAISED

As has been aptly worded by Arun Kumar J., the question for consideration in the appeal is:

 “Whether a company or a corporation, being a juristic person, can be

prosecuted for an offence for which mandatory punishment prescribed is
imprisonment and fine?”

JUDGMENT
The bench by a majority of 3:2 held that a corporation can be punished and is criminally liable
for offences for which the mandatory punishment is both imprisonment and fine.

ARGUMENT ADVANCE

The Appellants on their behalf contended that:

1. In a case where the offence is punishable with a mandatory sentence of imprisonment
i.e. punishment to be meted out is both imprisonment and fine - and here being used in
the conjunctive sense - the company cannot be prosecuted as the sentence of
imprisonment cannot be enforced against the company. The Appellants for their part
relied on the case of Assistant Commissioner, Assessment-II, Bangalore and Ors. v.
Velliappa Textiles Ltd. and Anr.
2. The second contention - though not exclusively independent of the first contention -
was that the Court did not have discretionary powers to severe the punishments and
award only a fine, where the Statute clearly used and in the conjunctive sense.
The Respondents on the other hand contended that:

1. The company is criminally liable even though the punishment to be meted out is both
imprisonment and fine, and that the Court has the discretion to impose only a fine and
not to let the offence go unpunished for mere physical impossibility of imprisonment.

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JUDICIAL REASONING

K.G. BALAKRISHNAN, J.

Balakrishnan J., at the very outset reiterated that a company is liable to be prosecuted and
punished for criminal offences and there is no dispute regarding the same, the general rule of
exception being crimes where personal malicious content needs to be proved and the same is
not possible in case of corporations, they being only juristic in existence. Further, to include a
corporation under the definition of a ‘person’, even when the statute does not explicitly define
the same, he placed reliance upon S.11 of the Indian Penal Code, 1860.

He identified two questions that sought to be answered: whether a company or a corporate

body could be prosecuted for offences for which the sentence of imprisonment is a mandatory
punishment And further that where an accused is found guilty and the punishment to be
imposed is imprisonment and fine, whether the court has got the discretion to impose the
sentence of fine alone an area of overlap between the two being quite apparent.

In response to the Appellants contention that all penal statutes need to be strictly construed,
Balakrishnan K.G., J. held a view to the contrary and emphasized the applicability of the
doctrine of legislative intent and not the rule of strict construction. He opined:

“All penal provisions like all other statutes are to be fairly construed according to
the legislative intent as expressed in the enactment. Here, the legislative intent to
prosecute corporate bodies for the offence committed by them is clear and explicit
and the statute never intended to exonerate them from being prosecuted. It is sheer
violence to commonsense that the legislature intended to punish the corporate
bodies for minor and silly offences and extended immunity of prosecution to major
and grave economic crimes.”

For determining the legislative intent he took a deductive and comparative approach. In
comparing sub-section (ii) and (i) of the FERA and thus proposing a hypothetical intention he
was of the view that in case a company was being prosecuted for an offence below rupees one
lac the punishment entailed was not of mandatory imprisonment and fine, but of either

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imprisonment or fine or both. But where the offence was of a value greater than rupees one
lac the punishment to be served was inclusive of both imprisonment and fine and the court
had no discretion to award the fine alone, and thus the company would be absolved from
criminal liability due to mere physical impossibility of imprisonment. He clearly rejected the
above hypothesis as the intention by stating that “It is not reasonably possible to assume that
amendment to the Section was carried out to give immunity to corporate bodies from
prosecution for serious offences.”

To further support his view, he drew an analogy from the I.P.C. comparing Section 420
providing that for cheating and dishonestly inducing delivery of property, the punishment
prescribed is imprisonment of either description for a term which may extend to seven years
and shall also be liable to fine; and Section 417 providing that in case of simple cheating, the
punishment prescribed is imprisonment of either description for a term which may extend to
one year or with fine or with both. He opined that following the Appellants contention: in
case a company committed the offence under S.417 of the I.P.C. it would be criminally liable,
however if it committed the offence under S.420 which is a more serious and aggravated form
of the offence under S.417 it would not be liable due to the mere application of a rule and
semantics.

Invoking the doctrine of legislative intent and explicitly excluding the applicability of the rule
of strict construction he rebutted the contention of the Appellants that fine alone cannot be
imposed where the punishment entails both imprisonment and fine.

In his second argument, he referred to the maxim of impotentia excusat legem (meaning
powerlessness excuses or dispenses with law). Quoting BENNION as cited by Balakrishnan,
K.G., and J.: "If an enactment requires what is legally impossible it will be presumed that
Parliament intended it to be modified so as to remove the impossibility element.”. He thus
further buttressed his opinion that the intention of the legislature cannot be to exonerate the
company from liability because of mere impossibility of performance of punishment. Relying
on the applicability of the doctrine of impossibility of performance in the case of State of
Rajasthan v. Shamsher Singh, and Special Reference No. 1 of 2002 he finally summed up his

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view, in that the court has the discretion to impose the punishment of a fine and not
imprisonment even when the statute entails imprisonment and fine as the company cannot be
sentenced to imprisonment.

In para.35 of the judgment Balakrishnan, K.G., J., perorating opined thus:

“As the company cannot be sentenced to imprisonment, the court cannot impose
that punishment, but when imprisonment and fine is the prescribed punishment the
court can impose the punishment of fine which could be enforced against the
company. Such discretion is to be read into the Section so far as the juristic person
is concerned. As regards company, the court can always impose a sentence of fine
and the sentence of imprisonment can be ignored as it is impossible to be carried
out in respect of a company. This appears to be the intention of the legislature and
we find no difficulty in construing the statute in such a way. We do not think that
there is blanket immunity for any company from any prosecution for serious
offences merely because the prosecution would ultimately entail a sentence of
mandatory imprisonment.”

ARUN KUMAR, J.

Arun Kumar, J. though concurring with Balakrishnan, K.G., J. preferred to advance a slightly
different view.

In regard to a corporation being a ‘person’ for the purposes of Section 56 of the FERA, he was
of the view that even though a ‘person’ is not defined in the FERA, The definition of the word
‘person’ is available in Section 11 of the Indian Penal Code as well as in Section 3 (42) in the
General Clauses Act. Both the definitions are similar and show that the word ‘person’
includes any company or association or body of persons whether incorporated or not. This
makes it clear that a company or a corporation can be subjected to penal liability under
Section 56 of the FERA.

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Unlike Balakrishnan, K.G., he did not exclude the applicability of the rule of strict
construction to criminal statutes a priori. Instead, he held that the principle is very much
applicable to criminal statutes. In rebutting the contention of application of strict construction
of the Applicants he opined that though applicable, the principle of strict construction must
not be misapplied. He further went on to discuss the applicability of this principle.

In discussing the applicability of the principle of strict construction to the present matter he
went on to anatomically divide a criminal trial into prosecution, conviction and sentencing21.
Further, he was of the view that Section 56(i) of the FERA in using the phraseology: .upon
conviction by a court, be punishable”, it recognizes the two subsequently different stages of
conviction and punishment. He thus held that though the principle of strict construction has
been time and again applied in cases where there was ambiguity or doubt regarding
ingredients or elements of an offence as stated in a statute, in sentencing courts have always
enjoyed a certain amount of discretion. He further cited the example of a statute prescribing
punishment for an offence the courts have been empowered to grant probation to a person
found guilty in certain cases.

With regards to legislative intent, and the 1973 FERA he drew attention to the fact that the
original FERA of 1947 did not prescribe a mandatory punishment of imprisonment and fine in
case of offences greater than Rs. One lac. And that the 1973 Act merely envisaged a greater
punishment for graver offences. In his view:

“The 1973 Act sought to make the penal provision more severe and, therefore,
prescribed that in case of high valuation cases punishment by way of
imprisonment and fine, both will be necessary. When the statutory intention was to
make the graver offences punishable more severely, are we justified in holding
that in such a situation the offender totally escapes liability? The law cannot be
allowed to result in such absurdity. Such a view in my judgment will neither be
just nor fair nor in accordance with the law. By a purely technical process of
reasoning Corporations should not be allowed to go scot free.”

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 He further buttressed the doctrine of legislative intent with further authorities. Special
reference may be made to the case of Balram Kumawat v. Union of India referred to by Arun
Kumar, J. in his judgment wherein it was held that:

“Furthermore, even in relation to a penal statute any narrow and pedantic, literal
and lexical construction may not always be given effect to. The law would have to
be interpreted having regard to the subject- matter of the offence and the object
of the law it seeks to achieve. The purpose of the law is not to allow the
offender to sneak out of the meshes of law. Criminal jurisprudence does not say
so.”(Emphasis supplied)

He further relied on the case of M.V. Jawali v. Mahajan Borewell & Co. and Ors. wherein
interpreting Section 278B of the Income Tax Act it was held that: “we are of the opinion
that the only harmonious construction that can be given to Section 276-B is that the
mandatory sentence of imprisonment and fine is to be imposed where it can be imposed,
namely on persons coming under categories (ii) and (iii) above, but where it cannot be
imposed, namely on a company, fine will be the only punishment.

CONCLUSION OF THE CASE

The Supreme Court has reflected its sturdy independence, objectivity, realism and fairness
by the judgment in the Standard Chartered Bank Case. The judgment in the instant case,
has further crystallized the Court’s interpretative power with regards to a penal statute, by
departing from the traditional view and endorsing that for the punishment of the crime the
court should go beyond the strict word, and not let offences go unpunished due to
application of too technical an interpretation that is restrictive, strict and constricting to the
very intent of the statute.

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 CHAPTER-10

CONCLUSION AND SUGGESTIONS

India is hunting to curb the incessant pace of corruption in its governance, which is generally
being hit by a spate of large-scale corporate scandals. In this context, to fix liability for
corruption and bribery offences, it becomes relevant to examine criminal liability, not just of
individual directors or agents of a corporation, but also of the company itself. Although
considerable debate surrounds society’s increasing reliance on criminal liability to regulate
corporate conduct, few have questioned in depth the fundamental basis for imposing criminal
liability on corporations. Accordingly Courts is based on the maxim lex non cogit ad
impossibilia, which tells us that law does not contemplate something which cannot be done. The
statutes in India are not in pace with these developments and the above analysis shows that they
do not make corporations criminally liable and even if they do so, the statutes and judicial
interpretations impose no other punishments except for fines. It is apparent from the current
action that some serious measures must be taken in relation to the criminal liability of
corporation of India so that it could be stopped from the multiple dimensions of the court’s
decision.

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