In this article, Sagnik Chatterjee who is currently in IInd Year pursuing BA.LL.B, from Symbiosis Law School, Pune, discusses about the Corporate Criminal Liability in India.

INTRODUCTION

While determining Corporate Criminal Liabilities the Latin maxim played a huge part which is Actus non facit reum mens sit rea which means that to make a person or any entity liable it must be shown that there is an act or omission which is forbidden by law and with Mens rea which is legally understood as having a guilty mind. Since the concept of Criminal offence or criminal liability evolved throughout the world it has been made pretty clear that for one person to commit a crime and later to be held responsible for the same act it is very important that the two major elements of the crime are present. The first one is Actus Reus which means the actual commission of such act. In other words, for a person to be charged with the liability of committing a criminal act that person has to do the same act in person. And the other essential element is Mens Rea which means the intention to do some act. In other words, this means for a person to be charged with the liability of committing a criminal act not only that person has to do the same act in person but also with the intention of doing the act, that is to say with full knowledge of the kind and circumstances of the act. If these two elements are not found in a particular case the person charged can not be held responsible for a criminal act. Now the main problem was a Company or a Corporation is a separate legal person but a Company or a Corporation can not have a mind of its own and hence it can never have any Mens Rea. So it was very difficult to charge a company with Criminal liability. A Corporation or a Company is also not regarded the same as it’s shareholders or the owners of the company as it has its own separate legal entity.

A corporation is considered as a separate legal entity distinct from its shareholders. It can be described to imply as an association of persons for some common object and it has no strictly any legal or technical meaning. It is understood that criminal liability is attached where there is violation as per criminal law.

Definition

In simple words, Corporate crimes are those crimes which are committed by corporations or members of corporations where liability is imposed for performing any acts or omissions which are punishable by law.

Corporate criminal liability can be defined as a crime which has been committed by individual or association of individuals who for pursuing a common purpose or make a business gain in course of their occupation commit such acts or omission which is forbidden by law and with the guilty mind where it is for the benefit of the corporation or any individual out of the association of individuals.

Development of the concept of Corporate Criminal Liability

However, the initial concept of Corporate Criminal Liability changed over the due course of time and mainly due to this newly evolved doctrine and principles in the field of law. The doctrines and Principles which played a major part in holding the directors or the owners of the company criminally responsible for the criminal acts performed under the name of the company are mentioned hereunder;

The Doctrine of Vicarious Liability

This Doctrine finds it’s origins in the law of torts, it states that in a master-servant relationship, when a master authorizes his/her servant to do a certain act criminal or illegal in nature and then the servant actually performs such act with knowledge and authorization from his master, then the servant who is doing that act will definitely be criminally responsible for the act committed by him/her directly but also the master who authorized or ordered such act will also be held liable criminally for such act vicariously.

Similarly, in the case of Ranger v. The Great Western Railway Company[1] it was held by the court that the company is vicariously liable for the acts committed by its employees as those acts were performed by them during their course of employment which implies the authorization of such act by the Company itself. it is done in the course of its employment.

The Doctrine of Identification

If we follow this particular Doctrine it says that when a senior partner or director or owner of a company in his/her own capacity commits a criminal act but being under the name of the Company, those individual acts are identified with the whole company and not just with the individual person committing the act. Notable part in this Doctrine is that for this doctrine to be applicable in Cases the person committing the cat has to be in the controlling position of the Company to make decisions for it, else this Doctrine won’t apply.

The Doctrine of Collective Blindness

This Doctrine in simple words, means that if it is found that a particular company or a corporation is liable for criminal acts and it is later on found that any particular employee of such company is not at fault where as a considerable amount of the employees of the company is at fault, the company will be regarded as a whole unit and it will be held liable criminally.

The Doctrine of Willful Blindness

This Doctrine states that if the directors or the owners or the people at the controlling position of the company know that a certain illegal or criminal act is committed and still choose not to take any action or measures to prevent such acts then the application of this doctrine of willful blindness will kick in.

The Doctrine of Alter Ego

Doctrine of Alter Ego states about the personality that one has but yet others can not see. In the current scenario this means that although a Company or a Corporation has a separate legal entity than the directors or the owners of the same, but also at the same time a company can not function on it’s own. The directors or the owners of the company are the people who in reality runs the company and makes the decisions under the company’s name and hence when some illegal or criminal act happens under the name of the company these are the people who will be held liable. Although there is one limitation to this principle which is the acts done by the managing partners or the directors of the company can be attributed to the name of the company but not vice versa as this doctrine always works in reverse.

Important Legislations and Case Laws

There has been a lot of case laws in this country by which the concept of Corporate Criminal Liabilities has evolved and is still evolving in this country. Unfortunately, though a several times various proposals and recommendations have been made to the existing laws but in this country the only remedy for Criminal acts under the Company names is still only penalty depending upon the circumstances.

In State of Maharashtra v. Syndicate[2] the High court pronounced that a Company or a Corporation can not be tried for offences that will lead to definitive Corporal punishment or Imprisonment because even if the Company is found to be guilty of the charge they were tried for they can’t be punished with corporal punishment or imprisonment because neither can be done to a Company.

In the case of Zee Tele films Ltd. v. Sahara India Co. Corp. Ltd[3], it was decided that a Company can not be held liable for criminal activities like defaming a person or other such companies as though a company is separate legal person in the eyes of law but it does not have any mind and hence the element of Mens rea is missing.

But as we progressed as a society and faced new problems at our way the laws and concepts also changed to suit the changing needs of the people of the society. Hence, in Iridium v. Motorola[4] a different viewpoint was taken by the court as it that a company could be held liable for statutory offences as well as common law offences including those offences where the mental element or Mens Rea is essentially required.

Limitations

Although the Doctrine of Corporate Criminal Liability has evolved in all these years but there are still certain limitations of the same. The first one being whenever certain crimes are committed for which there is mandatory imprisonment as punishment if found guilty. For example, in case of Fraud under section 447 of the Indian Penal Code, there is mandatory punishment of imprisonment whereas companies are an artificial legal person and thus they cannot be imprisoned, and can be only be punished with fine and not otherwise.

The second limitation of this Doctrine is Mens Rea. As mentioned earlier, for the Commission of the Crime there has to be requisite Mens rea for committing the Crime, however in case of Companies there is absence of Mens rea to hold a Company liable for crime. Although in present cases the court applies the Alter Ego Doctrine to and hold the managing partners or the directors of the company liable for the criminal acts performed under the name of the Company.

[1] [1859] 4 De G & J 74. 33

[2] AIR 1964 Bom 195

[3] (2001) 1 CALLT 262 HC

[4] AIR 2011 SC 20

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