Liability of a Corporate Criminal in India

An organization canjust act through individuals and a person who confers an offense because of orfor the advantage of an organization will be in charge of that offense himself.The significance of consolidation is that it makes the organization itself atrisk in specific circumstances, and additionally the people Glanville Williams


Area 11 of IndianPenal Code, 1860 (the Code) characterize individual. It peruses "the wordindividual incorporates any Company or Association or an assortment of persons,whether joined or not." Further segment 2 of the Code gives that"Each individual should be subject to discipline under this Code."Thus, area 2 of the Code with no exemption to body corporate, accommodatesdiscipline of each individual which clearly incorporates a Company.Consequently, by perusing of these two procurement idea of corporate criminalobligation can be determined, however it is not the sole enactment whichaccommodates the discipline of corporate body, Companies Act, 2013, Income TaxAct, and so forth.


Partnerships havenow turned into an essential piece of our general public, and with improvementof organizations they have ended up critical performing artist in our economy,our general public keeps running in the danger of getting deceived by thesecompany, and in this way they ought to be discouraged as well. Burden of, tonsof any sort, can be comprehended by different reason of criminal law, yetdiscouragement is the basis that is material to such monetary elements ascorporations. Corporations have their own particular character, they haveseparate legitimate identity and they are not quite the same as their members, andthis is adequate to makes it conceivable to held them at risk and scold them.


Criminal Liabilityis the quality or condition of being lawfully committed or responsible;legitimately dependable to another or to society which is enforceable bycriminal punishment. And along these lines, Corporate Criminal Liabilityimplies the degree to which a Corporation as a lawful individual can be heldcriminally at risk for its demonstrations and oversights and for those of theregular persons utilized by it. This paper is expected to inspect differentsubtleties identified with corporate criminal obligation, and toward the end togive different proposal which ought to be consolidated in enactments.


Twin Model of Corporate CriminalLiability


A. Subordinate Model


This model isindividual focused model. It determines to append the obligation to the partnershipsimply because an individual associated with the enterprise caused some riskfor which the individual is to be rebuffed, yet since it is associated with thecompany the risk is put on the organization to having that person with it andletting it brought about some liability. Derivative model can be comprehendedin two sub-sorts: a) Vicarious Liability; b) Identification Doctrine.



Vicarious Liability


The idea ofvicarious risk depends on two latin proverbs to start with, qui facit per aliumfacit in essence, it implies that he who acts through another should consideredto have followed up on his own, and second, respondeat predominant whichimplies let the expert answer. In Bartonshill Coal Co. v. McGuire[6], LordChelmsford LC said: 'each demonstration which is finished by a worker over thespan of his obligation is viewed as done by his boss' requests, and hence isthe same as though it were his boss' own particular demonstration.'


Vicariousobligation by and large applies to common risk however Massachusetts court inCommonwealth v. Valuable Finance CO., held three enterprises criminally subjectfor a scheme to fix, the principal organization, for the demonstrations of itsrepresentative, the second, for the demonstration of its Director, and thethird, for the demonstrations of the Vice-President of an entirely possessedauxiliary. The Court appeared to trust that corporate criminal obligation wasessential since, an organization is a legitimate fiction containing just ofpeople. US courts are not by any means the only courts which have joined theidea of vicarious obligation in the instances of criminal risk, however nowthis model has been rejected considering it to be unjustifiable to censure oneindividual for the wrongful behavior of another.


Distinguishingproof Doctrine


This principle isan English law tenet which tries to distinguish certain key persons of anorganization who acts for its benefit, and whose behavior and perspective canbe ascribed to that of the partnership. If there should be an occurrence ofSalomon v. Salomon and Co. House of Lords held that corporate substance ispartitioned from the persons who follows up for its benefit. The Courts inEngland had in different judgments like DPP v. Kent and Sussex ContractorsLtd., R v. ICR Haulage Ltd. decided that the corporate substances could besubjected to criminal obligation and the organizations were held at risk forwrongdoings requiring aim. Judgment like these prompted the declaration of'recognizable proof principle'.


With regards to theobligation of these key persons who follow up for the benefit of organization,it was held in Moore v. Brisler that the persons who are related to theorganizations must be acting inside of the extent of their vocation or power.The behavior must happen inside of an allocated zone of operation despite thefact that particulars might be unapproved. It will be savvy to induce thatrecognizable proof principle is smaller in degree than the vicarious risk teaching,rather than holding organization subject for demonstration of any worker,distinguishing proof tenet river it down to certain persons.


B. Hierarchical Model


Dissimilar tosubsidiary model which concentrates on individual, authoritative model thinksabout organization. Offenses require mental state (mens rea) to carry out awrongdoing alongside physical act (actus reus), yet the issue that emergeswhile holding companies criminally at risk is the means by which anorganization which is juristic individual could have imperative mental state toperpetrate a wrongdoing.


Subsidiary modelwas one approach to credit mental state to partnership. Other way could be bydemonstrating that there existed a situation in the enterprise whichcoordinated, endured, drove on, and even supported the rebelliousness ofparticular law which made it offence. Moreover, physical act that too isrequired to finish the prerequisite of commission of an offense can be gottenrather demonstrated from the demonstration of its workers, officers,executives, and so forth. Accordingly, culture of an organization is to be seenwhile deciding its criminal obligation.


Corporate societymight help for commission of an offense requiring mental state by-firstly,giving the earth or essential consolation that it was accepted by the wrongdoerworking in the company that it was impeccably okay to carry out that offense,or organization has mentally upheld the commission of offense; besides, it isvery conceivable that the enterprise made a situation which prompted commissionof wrongdoing. Both ways it was the company and its working culture that letthe offense conferred.


III. Gridlocks of Corporate CriminalLiability


A. Detainment


As has been talkedabout over that an organization is perceived as a juristic individual, andbeing a man it needs to confront the discipline that has been given by thedifferent demonstrations. There are different procurements in Companies Act,2013 itself which hold an organization at risk for its wrongdoing. Be that asit may, there are procurements which gives obligatory detainment to a manincluding organization, for example, Section 447 of Companies Act, 2013 Act,Section 420 of The IPC, 276B of The Income Tax Act and so on.


The Courts ended upin deadlock in these sort of circumstances where an organization is chargedunder areas which accommodates vital detainment, as the organization being alawful individual can't be detained for its criminal demonstrations, it must berebuffed with fine and not something else. The Supreme Court needs to confrontcomparative trouble in the event of M.V. Javali versus Mahajan Borewell and Co.furthermore, Others, The Company was discovered blameworthy under Section 276Bread with 278B of The Income Tax Act, which gives compulsory discipline of noless than 3 months, however the Court ended up in a fix about how to detain anorganization. J. Mukhrjee said that, "Despite the fact that in perspectiveof the above procurements of Section 278B, an organization can be arraigned andrebuffed for an offense conferred under Section 276B the sentence of detainmentwhich must be forced there under can't be forced, it being a juristicindividual and we are of the conclusion that the main concordant developmentthat can be given to Section 276B is that the obligatory sentence of detainmentand fine is to be forced where it can be forced to be specific on persons goingunder classes (ii) and (iii) above, however where it can't be forced,specifically on an organization, fine will be the main discipline."


Hence, thearrangement starting now is that a man is juristic individual then disciplineidentifying with detainment would not have any significant bearing to it ratherhe will be subject for fine. The court can do one thing however, in the eventthat it can't detain a corporate body yet it can charge more prominent measureof fine in such cases in contrast with what it charges to the individual whoare equipped for being detained for the same offense.


B. Mens rea


Another problemfaced by the Judges was how to try a company for the offences where mens reawas an essential. How can a juristic person have a mental element to commit acrime? The trend was such that the company was only tried for cases where mensrea was not an essential and it was accepted that it cannot be tried foroffences where mens rea is required.

In the case of MotorolaInc. vs. Union of India the Bombay High Court quashed a proceeding against acorporation for alleged cheating, as it came to the conclusion that it wasimpossible for a corporation to form the requisite mens rea, which was theessential ingredient of the offense. Thus, the corporation could not beprosecuted under section 420 of the IPC, but this idea of company not possessingmens rea came to an end Lord Denning’s view in the case of H.R. Bolton (engg.)Co. Ltd. vs. T.J. Graham was accepted that “A company may in many ways belikened to a human body. They have a brain and a nerve centre, which controlswhat they do. They also have hands, which hold the tools and act in accordancewith directions from the centre. Some of the people in the company are mereservants and agents who are nothing more than hands to do the work and cannotbe said to represent the mind or will. Others are directors and managers whorepresent the directing mind and will of the company and control what they do.The state of mind of these managers is state of mind of company and it treatedby law as such. So you will find that in case where the law requires personalfault as a condition of liability in tort, the fault of the manager will be thepersonal fault of company.”

The concept ofalter ego was evolved subsequently in India to tackle with the problem. Thealter ego doctrine revolves around the concept of personification of the legalbody. The Corporation is considered to be the alter ego of the individual.Therefore, the corporation can be rendered liable for the criminal act of theindividual done in his scope of work. Mens rea of the individual is consideredto be the mens rea of the corporation itself. In the case of The AssistantCommissioner, Assessment-II, Bangalore & Ors. vs. M/s. Velliappa TextilesLtd. & Anr, the Supreme Court has held that, “Though, initially, it wassupposed that Corporation could not be held liable criminally for offenceswhere mens rea was requisite, the current judicial thinking appears to be thatthe mens rea of the person in-charge of the affairs of the Corporation, thealter ego, is liable to be extrapolated to the Corporation, enabling even anartificial person to be prosecuted for such an offence.”

Thus, this doctrineof alter ego allowed the courts to frame corporate houses for the offenceswhich had mens rea as an essential ingredient, and it is now less tiresome forthe court to hold a corporation criminally liable.





The 47th lawcommission report has recommended various solutions to deal with such problem:

Some discretion isto be given to judges to impose penalties as they deem fit for the case.

Para 8(3) ofthe47th law commission report recommended that, “in every case in which theoffence is punishable with imprisonment only or with imprisonment and fine, andthe offender is the corporation, it shall be competent to the court to sentencesuch offender to fine only.”

In every case inwhich the offence is punishable with imprisonment and any other punishment notbeing fine and the offender is a corporation, it shall be competent to thecourt to sentence such offender to fine.

Unfortunately, thelegislatures have ignored these recommendations by law commission and failed toincorporate these provision, and thus the problem is where it was earlier. Itis still very difficult for court to punish the offenders. Therefore, it can besaid that even though Corporate Crimes are much in vogue today, but the methodsto tackle them are still in their pre-mature stage.