The corporate culture in India is a booming trend for the marketplace in the country. India’s GDP had the highest contribution from Agriculture. However, the aftermath of the New Economic Policy introduced in 1991 gave effect to a lot of corporations in the territory sector, and eventually, the development of the Corporate setting in India was initiated and is still in process.
The corporate setting gives effect to a number of Legislations, procedures and duties to adhere to, Corporate Criminal Liability is one of them. In this article, we will be looking at the evolution and meaning of the same. We will also look at the Indian Legal Perspective pertaining to corporate criminal liability and its practical applicability as well.
WHAT IS CORPORATE CRIMINAL LIABILITY?
Criminal Liability encompasses two elements Actus Reus (guilty act) and mens rea (guilty state of mind). The question posed hereby mentions if the company holds a criminal liability or not. The answer to this is undoubtedly, Yes the company can be held criminally liable. The liability thus posed on the company/corporation is called ‘Corporate Criminal Liability’.
PROSECUTION OF A ‘JURISTIC PERSON’
The inherent problems in this case are the difficulties in prosecuting Corporations under Criminal Liability. Earlier this problem was not that relevant as the concept of Corporate Criminal Liability was ‘notional’. The reasoning for the same is that there were very few corporations in existence and the need to polish this concept was not felt at that point in time. The issue is deeply concerning as the process of criminal prosecution is traditionally viewed in a setting of the physical appearance of the individual. The company holding an artificial perception in the eyes of the law can be prosecuted or not and if yes, then how was the question booming? In Iridium India Telecom Ltd v. Motorola Incorporated and others and Sunil Bharti Mittal v. Central Bureau of Investigation (CBI)[i], the apex court has tried to define and provide clarification on the meaning of Corporate Criminal Liability. The absurd challenge to determine the presence of ‘mens rea’ (a guilty state of mind) is also one of many to be considered. The apex court in the case of Iridium India Telecom Ltd v. Motorola Incorporated and others stated that there is no immunity for corporations from criminal prosecutions based on the contention that criminal ‘mens rea’ was missing when the act was committed.
Subsequently, this compels one to think about what type of crimes constitute to imply the concept of criminal liability in a company – Workplace Death, Injury to a person, and Damage to the property of consumers are some of the crimes where this concept comes into existence [ii].
However, This is to be noted that the struggle between the judiciary and legislature in order to determine who is to be blamed for the crime was ‘implacable’. Conclusively, they decided to determine it through the moral accountability of individuals. This task also included the categorisation of who is to be blamed – the individual, the company or both. This depends upon the nature of the case and the scope of the judiciary during the case proceedings.
The laws related to corporate criminal liability in India are still at a ‘nascent stage’. The development of these laws majorly started after the tremendous ‘Bhopal Gas Tragedy’. The liability rested upon the US company as their negligent act cost the poor labourers and their families to an extent that nobody had imagined. The consequences of the 1984 tragedy are being faced to date and no compensation can cure the damage.[iii]
The provision of corporate criminal liability in the Companies Act, 2013 states that the liability of a crime committed by an individual or number of individuals pursuing a common purpose or intending to make a business gain in the course of their occupation to commit such acts or omission which are prohibited by law and with guilty mind whether it is for the benefit of the corporation or individual or the association of individuals. [iv]
The Indian legislations like the Essential Food Commodities Act 1955, The Environment Protection Act 1986, and The Negotiable Instruments Act 1881 also state that along with the company the employees can also be held liable for the offence and can be imprisoned as per the criminal laws mentioned.
Section 385 of the Code of Criminal Procedure, states the procedure when a corporation or registered society is accused, similarly, Section 38 of NDPS Act, 1985 mentions the offences done by a corporation like a conspiracy, maintaining public nuisance, violation of consumer protection laws, the illegal practice of medicine, Antitrust Laws violation.
As per the P C Amendment Bill of 2013, Section 9(1) talks explicitly about the criminal liability of companies with respect to malicious intention as well. Section 10 (1) states the punishment if found guilty.
The corporate industry in India has now begun to understand these concepts significantly. This is reflected in the criminal legislations related to the environment and big fintech companies and others as well are pursuant towards realising the need to rectify their actions as they affect society at large.
THE PRAGMATIC FUTURE
There is a need to promote the corporate culture with professional ethics and responsible behaviours. Corporations owe an obligation to realise their social responsibility and how their actions are subject to societal welfare and drastic changes in the community. The country starves proper laws to implement, scrutinise and govern the unicorn companies as well the start-ups in the sense that the criminal harm to the society is served with just and fair decisions and non-denied justice. The World Trade Organisation also needs to have a bold stand on the same promoting a global influence for the industries as well as the nations to abide by it. Not only penalizing the wrongdoings of the companies should be practised but also, the presence of incentives to practice the ethical considerations important for the society can make a huge impact. Therefore, let’s unite not for a greater loss, but to have a cure for a greater cause.
[i] AIR 2015 SC 923 or (2015) 4 SCC 609
This article is written and submitted by Sanya Bhandari during her course of internship at B&B Associates LLP. Sanya is a 2nd year B.A. LL.B (hons.) student at Christ university, Pune.