Corporate Criminal Liability

In the early sixteenth and seventeenth centuries, the prevailing assumption was that companies could not be held criminally accountable. Legal scholars believed corporations could not possess the moral blameworthiness necessary to commit crimes of intent. The general notion was that a corporation has no soul and cannot have "actual wicked intent." Consequently, it cannot be guilty of crimes requiring "malus animus

1 ". However, some distinctions were made by courts in England between crimes requiring particular intent and those for which general intent would suffice. Indeed, the courts began to hold corporations legally responsible for nearly all wrongs, except rape, murder, bigamy, and such malicious offences.

Thus, leaving behind the old school of thinking that Via its directors and staff, corporate activities should not attract corporate criminal liability. "Corporate bodies are more corrupt and profligate than individuals, because they have more power to make mischief, and are less amenable to disgrace or punishment. They neither feel shame, remorse, gratitude, nor goodwill.

2, " Criminal liability's root finds its place in judiciary's relentless struggle to resolve the crisis of assigning criminal responsibility to fictional entities. Through, communication technologies and developments in information corporate activities have become global, making it easier, more complex and at the same time more challenging to understand to the of commission corporate crime. In a legal framework focused solely on the moral responsibility of individuals, this has become especially important.

3. A company can only act through human beings, and a human being who commits an offence on account of or for the benefit of a company will be responsible for that offence himself. The importance of incorporation is that it makes the company itself liable in certain circumstances and human beings

4 . The fundamental principle of criminal liability is based upon the Latin maxim actus non facit reum; nisi mens sit rea. It translates to 'make one liable it must be proven that an act or omission forbade by law and has been performed with a guilty mind/intent'. Thus, every crime has two elements: actus reus and mens rea. This is the rule of criminal liability in a technical sense.

The general principle states that an individual's burden of responsibility flows naturally from the freedom to make rational choices about actions and behaviour. Under early common law, a company was not responsible for any offence. Still, the broad general rule is now well known that a company can be sued for breaching a statutory or common-law obligation. Many countries generally accept that, under civil and administrative authorities, companies may be sanctioned.

The criminal responsibility of businesses, however, has become more contentious. The criminal accountability of companies, however, has become more complicated. Although the principle of corporate criminal responsibility under different models has been embraced and applied by many jurisdictions, other law structures have not been able or willing to implement it.

Only those actions in which there is a breach of criminal law, i.e., because there can be no fault without liability, are added to criminal liability.

INDIA'S STANCE ON CORPORATE CRIMINAL LIABILITY:

India, as far as corporate crimes are considered, is not an unknown territory. It is currently a serious contemporary one, Concern about the multidimensional dimensions of certain forms of corruption, considering the number of corporate crime Scams occur regularly and endanger the state's overall economy and healthcare. Although the country is mostly dependent on the corporate sector, the economy's stability must not rely on the corporate sector.

Given its existence and effect on most facets of social and cultural life and the number of people it affects, corporate crime seriously undermines society's wellbeing. Corporate responsibility must be reinforced in the current sense. The corporate crime phenomenon originated mainly in the 20thcentury. In India, corporate liability legislation, particularly after the Bhopal Gas tragedy case5 , is being strengthened. However, it remains in a nascent phase. The conventional outlook on Corporate criminality has never been included in crimes.

The corporate sector has been a popular part of the city. It is all the more necessary to assess the company's criminal responsibility in the various spheres of social existence and the market outlook in our value systems, given the company's penetrative scope in the different spheres of social reality.

JUDICIAL RESPONSES ON CORPORATE CRIMINAL LIABILITY:

All Penal liabilities are usually regulated in India under the IPC, 1860. 6 It is this rule that needs to be pondered in the event of corporate criminal liability. Corporations play an essential role in the development and management of companies, and most people's shared lives. That is why most current criminal law frameworks anticipate the risk of criminalizing the business.

Companies are legal entities and, thus, the common opinion was that due to procedural problems of detention, etc., a corporation should not be charged with offences. No criminal responsibility may be applied to them because of the lack of the necessary intention to commit a crime. The SC has accepted the alter ego theory in Assistant Commissioner, Bangalore v. Messers Velliappa Textiles Ltd.

However, the majority held that a corporation should not be sued for offences involving incarceration alone or a mandatory period of imprisonment combined with a fine. The Supreme Court has inched ahead in deciding corporate criminal liability following the ruling in Standard Chartered Bank v.

Directorate of Compliance 8and has given jurisprudential value through Iridium 9and Sunil Bharati Case. 10 The problem of corporate criminality has often been contentious. Over the years, the legal status of corporate criminal liability has grown. With time, courts in India have adopted a stricter approach when assessing a corporate body's liability for actions committed by its directors and other agents.

The importance of Iridium lies in the fact that it clarifies the law as to whether for offences requiring mens rea, a corporation may be prosecuted. In the present case, Iridium lodged a criminal complaint against Motorola according to sections 120 (Conspiracy) and 420 (Cheating) of the Indian Penal Code, based on which proceedings were instituted against Motorola by the Pune magistrate.

Motorola then appealed to the High Court of Bombay, trying to quash the judicial Magistrate's proceedings. The High Court permitted the petition to stop the proceedings at the Magistrate's level, giving many reasons, one of which is that a business is unable to have a guilty mind, so it does not commit any offence of cheating. Iridium, by way of appeal, addressed the SC.

For its consideration, the SC framed the following two issues: firstly, it is possible to assign mens rea to companies for criminal liability; secondly, it is possible to attribute mens rea to companies for criminal liability and, what is the criminal penalty for errors in the form of stock offers made on a confidential basis to individual investors. Essentially, the Supreme Court was worried about the company's corporate criminal liability.

This was achieved by employing the attribution theory. This theory is invoked when the issue arises as to the mental aspect of which the corporation is credited for the commission of criminal liability. The Court ruled that the individual who is in direct control and charge of the company's affairs and the degree of power is so strong and rigorous that the company is said to be working through the individual, is instrumental in attributing the company to criminal liability.

The two critical points on which the Court ruled were: firstly, that a company can possess the necessary mens rea, and secondly, in deciding the required metal element, the strict test of the identification of the company's guiding mind must be followed. In the Sunil Bharti case11, a converse scenario is addressed about the ruling laid down in the Iridium case. This case addresses the proposal as to whether the directors (or someone representing the company's alter ego) should be charged on the company's account of illegal actions.

Standard Chartered Bank v Compliance Directorate 12 , changed the Indian courts' stance and outlook concerning corporate criminal liability. The corporation was accused of breaching the rules of the Foreign Exchange Regulations Act 13in this case. The Court denouncing the literal interpretation of the law, stated that in a case where the punishment prescribed is both imprisonment and fine the company is found guilty, can be imposed of fine.

Further, there is no ambiguity because it was never the legislature's intention to let the corporates escape criminal liability. This is portrayable from the definition of 'person' as provided for in the Indian Penal Code, 186014 , which includes "a company, an association, or a body of persons whether incorporated or not." Therefore, the courts have the power to impose a fine in situations where both the imprisonment and the fine are punishable by a mandatory penalty, as far as juristic persons are concerned, since it is not practicable to impose a sentence in prison.

However, whether an organization should be imprisoned for the execution of a crime raises completely different problems. It is clear that an organization is just a fictional entity and cannot be forced behind bars in a real sense. Indeed, the directors, shareholders, and staff categorized as average person’s running the business are capable of being imprisoned.

There is no current statutory law that expressly allows for the incarceration of a corporation. Still, it can perform severe offences referred to in separate Acts in its power. As a means of deterrence, incarceration's sole motive is to prevent the criminal from committing crimes in the future. A company's legal character defeats this very purpose.

Until recently, Indian courts believed that for crimes involving mens rea, corporations could not be criminally prosecuted because they could not possess the necessary mens rea. Mens rea is an integral component of the majority, if not all, of offences that would suggest incarceration or other punishment for their infringement.

Adopting excessively generalized reasoning, pre-standard Chartered ruling15, and Indian courts held that companies could not be punished because they could not be incarcerated for offences involving a mandatory imprisonment sentence16 . In A. K. Khosla v. S. Venkatesan 17 , two corporations were charged with fraud under the IPC. The Magistrate issued a process against the corporations.

The Court subsequently pointed out that there were two pre-requisites for the prosecution of corporate bodies, (a) mens rea and (b) ability to impose the mandatory sentence of imprisonment. Under these conditions, corporate criminal liability is hard to set as corporate bodies do not possess the necessary mens rea, nor can they be sentenced to imprisonment as they are not physical bodies.

Furthermore, there existed uncertainty over whether a company can be convicted for an offence where the statute's punishment is imprisonment or fine. This dispute was first discussed in MV Javali v. Mahajan Borewell & Co and Ors10, 18where the Supreme Court held that the mandatory sentence of imprisonment and fine should be enforced where it can be imposed. Still, if it can not be set, the only penalty would be the fine, namely on a corporation.

It is clear from the above-stated cases that Indian Court never felt about its inclusion on specific criminal liability.19 Even post the Standard Chartered Bank case20, there is no exemption from prosecution for businesses simply because the trial is involuntary incarceration regarding crimes for which punishment is prescribed.

The apex court held that a company is virtually in the same place as any person in Iridium India Telecom Ltd. v. Motorola Incorporated and Ors and may be convicted under common law as well as statutory offences, including statutory offences. A company's criminal responsibility would occur if an offence is committed by an individual or body of individuals in charge of its affairs concerning the corporation's business and relies on the ratio in the Standard Chartered Bank Case21 .

In Iridium case22, the Supreme Court held: "The criminal liability of a corporation would arise when an offence is committed concerning 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 are so intense that a corporation may be said to think and act through the person or the body of persons."

The apex court held that, based on the fact that they are unable to possess the requisite mens rea for the execution of criminal offences, companies could no longer 18 (1997) 8 SCC 72 19 Supra n 16 20 Supra n 7 21 Ibid 22 Supra n 8 claim immunity from criminal prosecution. By following the theory of attribution and imputation, the concept that a company should not be held responsible for the commission of a crime was dismissed.

ANALYSIS:

The above review conclusively indicates that corporate criminal liability jurisprudence has evolved extensively over time, but slower than corporate civil liability. This slow progress is justified because of the various complexities involved, which have extended beyond the plain legislative text's limits to the test of judicial interpretation. In terms of attribution of mens rea, corporate entities can no longer take the ambiguous defence of missing a personality.

A large portion of corporate criminal responsibility, irrespective of the crime committed, circumvents the imposition of fines as the sole penalty and remedy. The impossibility of imprisoning legal entities is an unavoidable fact, which is a very significant obstacle.

One constructive solution can be adherence to the principle of respondent superior. However, the doctrine of identification proposes a broader set of rules. It is more detailed in that it defines and attributes the guiding minds' actions as the actions of the organization itself, and can thus be seen as a more precise theory than the vicarious liability principle.

In the landmark case of Iridium India, this idea was well enunciated. If the idea of special vicarious liability, which has no statutory backing, grows. Thus, it can be inferred that there is a desperate need for a variety of changes to be made which, if not created, would lead to a miscarriage of justice and a breach of the principle of equity.

The Sunil Bharti Mittal 23case is infamous for the very reason that the principle of vicarious liability could not be applied in its reverse form. 23 Supra n 9 CONCLUSION: India is hunting to curb its governance's constant corruption rate, commonly hit by many large-scale corporate scandals. In this context, it is essential to investigate criminal responsibility for individual directors or agents of a corporation and for the company itself to assess liability for corruption and bribery offences.

While considerable controversy surrounds society's dependency on criminal accountability to control corporate activity, few have deeply challenged the underlying justification for corporate criminal liability being enforced. The courts are also founded on the principle lex non-cogit ad impossible, which informs us that anything cannot be achieved is not contemplated by the statute. The laws in India are not in line with these developments.

The above review shows that companies are not criminally responsible and, even though they do so, no other penalties other than fines are levied by the statutes and judicial interpretations. It is clear from the present action that specific serious steps must be taken concerning the criminal liability of the Indian company to be able to escape the various aspects of the Court's decision. For More Law Blog, Law Journal, Law Notes. Please Visit our Website

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Created on Mar 5th 2021 06:53. Viewed 293 times.

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