Introduction and Historical Evolution

Offences, in general, and crimes, in particular, are characterized into various subgroups (under different chapters) by the Indian Penal Code, 1860, based on the nature of the offence, such as offences affecting the human body, offences against property, offences affecting public health and safety, and so on. Moreover, persons from varied backgrounds can commit an offence, such as a poor person, middle-class employee, lower-incomed or working class, and a top-most and affluent professional. Therefore, for classifying offences based on the person committing them, scholars have suggested unique names, including the pertinent category of White-Collar Crimes committed by, as the name suggests, handsomely paid and high-classed businessmen being in the top-most ranks of their occupation or companies. It was way back in 1939 when an American Criminologist, Edwin Sutherland, coined this unique term to draw a completely new profile of offences, as crimes are usually committed, at that time, by indigent persons in want of satisfying their hunger due to lack of earning power. Later scholars like Marshall Clinard, Paul Tappan, and Frank Hartung, among others, gave a well-structured definition to these crimes as offences committed by a person, which can either be an artificial person (firm) or agents of the firm acting on its behalf, which is specifically in high-profiled and social status, having the wide-ranging power of management over the business’s affairs of the company.

The first white-collar crime in the modern world was reported in 15^th century England in the famous Carriers Case, where the agent of a wool business attempted to steal the wool consignment while in transit. However, these classes of crimes are not new to India and date back to the ancient kingdoms. This fact is evident from the texts of Manu Smriti and also from Kautilya Arthashatsra, wherein strict punishments were prescribed for offences such as indulging in counterfeited currency, fraud, cheating, improper weights and measures for attaining unlawful gain, etc.

Forms of White-Collar Crimes and Indian laws

White-Collar Crimes are no specific offence but a class among many, which mainly concern economic offences committed in multiple forms, which inter alia include public corruption, money laundering, tax evasion, banking frauds, insider trading, antitrust violations, computer and internet fraud, environmental law violations, government fraud, bribery, counterfeiting, trade secret theft. The aim behind these offences is to secure unlawful gain from either a lawful or unlawful transaction. Similarly, there is no particular enactment dealing with all the white-collar crime in one place, but, multiple laws in India deal with multiple of these offences. The principal enactment for any offence in India- The Indian Penal Code, under numerous chapters and section, define and penalize various white-collar crimes. A list of all the white-collar crimes under the penal code includes:

1. Chapter IX- Offences by or relating to Public Servants u/s 167 to 171, including, among others, a public servant framing an incorrect document with intent to cause injury, unlawful engaging in trade, buying or bidding property, personating s servant
2. Chapter XII- Offences relating to Coin and Government Stamps, included u/s 230 to 254. It includes offences ranging from making, selling, importing or exporting, and possessing counterfeit coins.
3. Chapter XIII- Offences relating to weights and measures included u/s 264 to 267.
4. Chapter XVII- Offences against property- much of this category of offences can be considered white-collar crimes as they mainly involve attaining unlawful gain. These include more specific offences such as-
5. Extortion, u/s 383 to 389- Involving intentional inflicting of fear of any injury to dishonestly induce the person so put in fear to deliver to any other person any property, valuable security or anything signed or sealed which may be converted into a valuable security.
6. Criminal Breach of Trust u/s 405 to 409- Dishonestly misappropriating property for his/her own use or using it in any other manner which is forbidden by law or any specific contract. More specifically, this offence deals with unlawful actions by an employer in breach of his employees’ rights and by professionals like bankers, brokers, and agents.
7. Cheating u/s 415 to 420- Is the most common and obvious element to constitute a white-collar crime as it inculcates the core element of dishonest and unlawful gain.
8. Chapter XVIII- Offences relating to documents and property marks u/s 463 to 477A. This class of offences ultimately involves forgery in multiple forms, such as record forgery of a Court or public register, valuable security or a will, forgery for cheating, for harming reputation, and so on.
9. Criminal Intimidation u/s 503- Threatening a person, living or dead, to cause injury to a person, reputation, or property, with the criminal intent to enable that person to do any act that he is not legally entitled to do.

Apart from IPC, multiple specific legislations also inculcate provisions dealing with white-collar crimes, which include:

1. Public officials are the most debatable and highly criticized for their involvement in white-collar crimes, being the most influential authorities in India. As a result, to combat this specific class of offenders, section 13 of the Prevention of Corruption Act 1988 punishes criminal misconduct by a public servant that involves habitual acceptance of gratification from third parties, including businessmen, misappropriation or conversion of public property entrusted to them for management as their property.
2. Indulgence in criminal activities per se does not constitute a white-collar crime. However, the occurrence of crimes on a large scale, that too for a specific purpose of conducting a racket or operating an illegal business line, having possession and being part of such illegal trade, amounts to money laundering. Section 3 of the Prevention of Money Laundering Act, 2002 (PMLA) describes multiple forms to constitute money laundering, such as concealment, possession, acquisition, use, projecting as untainted property, or claiming as untainted property, of proceeds from unlawful activities.
3. The growth of telecom services and the accessibility of computer gadgets has resulted in the tremendous growth of IT services usage for diverse purposes, including essential usages like e-commerce. This further led to the growth of computer fraud, termed Cyber Crime. Chapter XI of the Information Technology Act 2000 deals with various computer-based crimes, including sections 65 to 78.
4. A typical outcome after the commission of a white-collar crime is evading the offender to a foreign land to escape the process of law in India. This not only results unable to prosecute or at least try the person with Indian laws but also the loss of crores of money to a foreign land. This trend is simply evident from the fact that white-collar crimes are committed by already wealthy and professional persons who have already secured travel visas and possess huge money and connections in a foreign land to flee away easily. To prevent this outcome, the Indian parliament recently enacted the Fugitive Economic Offences Act 2018.
5. Tax evasion is the most widely known and practised form of white-collar crime not only within India but also across the world. Offenders within this category constitute the highest bracket of taxpayers, being in the highest ranks of businesses, thereby rendering it a white-collar crime. The income Tax Act 1961 is the apex legislation in India governing tax-related issues. Therefore, chapter XXII of the act specifically deals with the provisions on tax evasion, prescribing punishments and penalties for numerous offences such as incorrect reporting of income u/s 270A, concealment of income u/s 271, and not collecting tax directly at source (u/s 271C). Chapter XXII deals with further offences and prosecution, including section 276C- wilful attempt to evade tax, falsification of accounts (u/s 277A), abatement of false returns (u/s 278), and various others.
6. Further statutes dealing with similar economic offences include-
7. Section 138- Dishonour of cheque for insufficiency, or otherwise of funds in the account- of the Negotiable Instruments Act 1881.
8. Section 3 of the Prohibition of Benami Property Transactions Act, 1988.
9. Section 12A- Prohibition of manipulative and deceptive devices, insider trading, and substantial acquisition of securities or control- of the Securities and Exchange Board of India Act, 1992.
10. Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
11. Section 132(5) of the Central Goods and Services Tax Act, 2017.
12. Chapter IV of the Foreign Exchange Management Act 1999.

Impact on Society and other areas

The diversified and elaborated laws on white-collar crimes themselves depict the gravity and need to tackle such crimes. This is specially to combat the negative consequences the country as a whole must face. The consequences are primarily economic and gradually turn into societal externalities that include-

1. Loss of Government revenue:

The most basic and well-known outcome of the commission of a white-collar crime is the loss of a hefty amount that is otherwise under the government’s exchequer. Though there is no specific finding on the total accumulated loss of revenue to the Indian government due to these crimes, the numbers of a few biggest scams in India, including the Satyam Computers Scam (2008) worth ₹14,000 crores, Saradha chit fund case (2013) worth ₹ 20,000 crores, 2G spectrum scam (2007) worth ₹176,000 crores, Commonwealth games scam (2010) worth ₹35,000 crores, Telgi Scam (2003) worth ₹20,000 crores, Harshad Mehta Securities Scam (1992) worth ₹5000 crores, goes on to show how many lakh crores of rupees have got diverted from the government treasury which otherwise needs to get diverted to the welfare of the poor. Furthermore, reports by government authorities show that India lost over ₹100 crores every day over the past five years in the form of bank frauds and scams, though the value of such crimes came down to ₹648 crores in FY 2021-22 from as high as ₹61229 crores in 2016¹. In FY 2021, the Directorate General of GST Intelligence (DGGI) reported 22,300 instances of fake GST identification numbers, reporting frauds worth ₹55,575 cr, and arrested around 700 persons, which included 20 CA/CS professionals².

2. Increased Costs- leading to depletion of savings:

White-collar crimes always involve default of payment to the victims, be it the widely known case with banks and financial institutions, or to the government in case of tax evasion, or any regulatory authority such as SEBI in case of securities transactions. When such a large-scale default involving a tremendous sum of money (which exceeds the SGDP of numerous smaller states) occurs, the victims who are to receive their lawful money fall short of their requirements to continue their operations. In such situations, the only alternative is to raise the prices of those products or services. Such situations are especially prevalent in cases of default to financial and insurance companies wherein, to compensate for the default, a rise of lending interest rates, insurance premium rates, and banking service charges is inevitable. Even in case, the victim is directly the government, in case of tax evasion and FERA violations, a future tax rate rise becomes inevitable. All this adds undue negative externality in the form of increased costs to the future and existing law-abiding customers, further leading to a gradual reduction of their savings.³

3. Bankruptcy and Unemployment:

Offenders in these crimes, as the definition itself, states, is one among or only a group of top-most ranked professional of a large company. Due to the infringement of law by this small group of offenders, the entire reputation of the company tarnishes⁴, and once prosecuted, especially when that particular offender(s) holds a majority share in the company, liquidation or bankruptcy forms the inevitable outcome. When the entire company collapses or gets merged or acquired by another existing company, all the employees who are dependent on the company’s operations need to lose their jobs in the lay-off process, leading to unemployment⁵, which is already a significant problem for the densely populated Indian economy.

4. Ruing families due to economic hardships:

As pointed out earlier, it is primarily the poor and middle class who depend on the white-collar offenders, either by being employees of the bankrupt company or being a trustworthy follower of the offender, viz., usually the case with scams pertaining to Ponzi scheme investments and securities transactions. In such cases, while the offender cheats and passes off with the proceeds of the crime, innocent victims not just lose their hard-earned savings but also may get falsely implicated in the case, unknowingly, by further fraudulent acts of the offender. When these innocent and middle-class victims in these forms get negatively impacted, this impact is not just restricted to economic terms but to their personal sphere by ruining their family lives due to the adverse economic impact of losing jobs, repayment of credits, and depletion of savings.⁶

Conclusion

It is a very positive sign for a developing country like ours to witness the growth of digital literacy, increased institutional financial access, Indian businessmen securing ranks as Asia’s richest person or securing top 10 positions and the everyday rise in the direct and direct tax collections. Nevertheless, at the same time, there is a rise in the commission of white-collar crimes, not by professionals or industrialists, but by the leaders and rulers of the country and states. The very identification of a white-collar crime is in itself a tedious task. However, the presence of solid investigative agencies like the Central Bureau of Investigation (CBI), Enforcement Directorate (ED), and Income Tax department, among others, provide India with a solid framework to combat such crimes. Even the Indian courts have laid down explicit norms that clever tax planning and availing tax exemptions to reduce tax liability is very much legal as long as the legal framework is not overcome.⁷ But the recent incidents over the years have raised doubts about the independence of these agencies and being a caged parrot in the hands of the ruling party⁸. All this discussion, therefore, follows the simple logic that earning money is not one’s ambition in life but to earn money within the legal framework. Especially to white-collar job holders who already earn handsomely and enjoy due respect in Society by earning within the legal framework, one must curtain their greed and stay away from unhealthy and unlawful competition over peer professionals, thereby avoiding white-collar crimes commission and living as a respectable citizen of the nation by discharging primary duties such as proper and correct payment of taxes. Here lies the goodness to everyone, the white-collar professional, middle-class, and every citizen of the nation, and the nation itself, as a whole.

References

1. Chetan Kumar, India loses Rs 100 crore to banking fraud every day, The Times of India (Mar 29, 2022, 09:48 IST), https://timesofindia.indiatimes.com/business/india-business/india-loses-rs-100-crore-to-banking-fraud-every-day/articleshow/90509071.cms
2. Press Trust of India, GST evasion of Rs 55,575 crore detected in last two years, 719 persons arrested, The Economic Times (Nov 10, 2022, 11:16 AM IST), https://economictimes.indiatimes.com/news/india/gst-evasion-of-rs-55575-crore-detected-in-last-2-years-719-persons-arrested/articleshow/95418723.cms?from=mdr
3. Wayne Waweru, Impact of White-Collar Crime on Society, Acadmia.edu (2019), https://www.academia.edu/40135705/IMPACT_OF_WHITE_COLLAR_CRIME_ON_SOCIETY
4. Indian National Bar Association, White-Collar Crime Survey 2019, https://www.indianbarassociation.org/wp-content/uploads/2020/01/White-Collar-Crime-Survey-2019.pdf
5. Fredericks KA, McComas RE, Weatherby GA. White collar crime: recidivism, deterrence, and social impact. Forensic Res Criminol Int J, Jan 2016 at 6.
6. Supra Note 4.
7. CIT v. A. Raman and Co., [1968] 67 ITR 11 (SC); Union of India v. Azadi Bachao Andolan, (2003) 263 ITR 706 (SC).
8. Comments made by the Supreme Court of India in the Coalgate Case- Manohar Lal Sharma v. Principal Secy., (2014) 2 SCC 532.

This article is written by Mokshith Venkata Shiva Bhyri, a 2nd-Year Law Student (BA., LLB [Hons]) student from the National Academy of Legal Studies and Applied Research (NALSAR), Hyderabad.