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Corporate Criminal Liability - An Analysis

Written by: Sowmya Suman - B.A. LL.B (Hons.) - 5th Year, Faculty of Law, Jamia Millia Islamia, New Delhi
Constitutional Lawyers in India
Legal Service
  • A generous and elevated mind is distinguished by nothing more certainly than an eminent degree of curiosity; nor is that curiosity ever more agreeably or usefully employed, than in examining the laws and customs of foreign nations.

    Large-scale corporations are the defining force on the globe. They are everywhere, in almost every aspect of our lives. Parallel to this subtle and sometimes not so subtle dominance, corporations have become dangerous criminals as well. However, Corporations being non-human entities, their criminal behaviour is also out of the ordinary.

    Corporate criminality challenges or nags at our sense of reality. It is this characteristic that makes corporate crime a tricky issue. The development of corporate criminal liability has become a problem which a growing number of prosecutors and courts have to deal with at the present time. In the common law world, following standing principles in tort law, English courts began sentencing corporations in the middle of the last century for statutory offenses. On the other hand, a large number of European continental law countries have not been able to or not been willing to incorporate the concept of corporate criminal liability into their legal systems. The fact that crime has shifted from almost solely individual perpetrators only 150 years ago, to white-collar crimes on an ever increasing scale has not yet been taken into account in many legal systems. At the same time, crime has also become increasingly international in nature.

    Criminal Liability is what unlocks the logical structure of the Criminal Law. Each element of a crime that the prosecutor needs to prove (beyond a reasonable doubt) is a principle of criminal liability. There are some crimes that only involve a subset of all the principles of liability, and these are called crimes of criminal conduct.

    The question of imposing criminal liability to a corporation for criminal offences committed by directors, managers, officers and other employees of the corporation while conducting corporate affairs has gained a lot of importance in the jurisprudence of criminal law. The very basis for the possibility of imposing criminal liability to a corporation is its independent legal personality.

    Now the question is whether a corporation as an artificial person is capable of committing a crime and is criminally liable by the law or not. The traditional view was that a corporation could not be guilty of a crime, because criminal guilt required intent and a corporation not having a mind could form no intent. In addition, a corporation had no body that could be imprisoned.

    Courts are especially likely to impose criminal liability on a corporation when the criminal act is requested, authorized, or performed by the board of directors, an officer or another person having responsibility for formulating company policy or high level administrator having supervisory responsibility over the subject matter of the offence and acting within the scope of his employment.

    Assessing Common Law Theories of Corporate Criminal Liability

    The endorsement of criminal liability of corporations has largely been a twentieth century judicial development, influenced by the "sweeping expansion"[1] of common law principles. The majority of theories of corporate criminal liability are typical of common law developments; they have been constructed on a case-by-case basis. Despite their importance, these theories have proved to be ineffective, for their lack of strong theoretical basis and their individualistic roots.
     Examples of these models are the agency theory and, in a more elaborate form, identification and aggregation theories.

    Agency Theory
    The agency theory was first developed in tort law and gradually was carried over into the criminal arena.[2] According to this theory, the corporation is liable for the intents and acts of its employees.

    Vicarious liability (or respondeat superior) is commonly employed in the United States. In other jurisdictions, this theory is restrictively established in relation to some strict liability and hybrid offences that deal with matters such as pollution, food, drugs, health and safety at work but not to mens rea offences.

    The agency theory is based on the premise that criminal violations normally entail two elements, actus reus and mens rea. Since corporations are considered to be purely incorporeal legal entities, they do not posses any mental state and the only way to impute intent to a corporation is to consider the state of mind of its employees. The theory encompasses a simple and logical method of attributing liability to a corporate offender, if corporations do not have intention, someone within the corporations must have it and the intention of this individual as part of the corporation is the intention of the corporation itself. Courts in the United States, where the theory is widely used, have developed a three-part test to determine whether a corporation will be held vicariously liable for the acts of its employees. First, the employee must be acting within the scope and course of his employment. Secondly, the employee must be acting, at least in part, for the benefit of the corporation, yet it is irrelevant whether the company actually receives the benefit or whether the activity might even have been expressly prohibited. Thirdly, the act and intent must be imputed to the corporation.[3]

    Scope of Employment
    The requirement that an employee must be acting within the scope of his or her employment is met if the employee has actual or apparent authority to engage in the act in question.[4] Actual authority exists when a corporation knowingly and intentionally authorizes an employee to act on its behalf. In New York Central Railroad,[5] the first Supreme Court case holding a corporation criminally liable. The corporation was convicted of violating the Elkins Act where a general and an assistant traffic manager paid rebates for shipments of sugar. The agents acted within the scope of actual authority because they were authorized to set up freight rates. Therefore, they acted within the scope of authority conferred upon them by the corporation. In United States v. Investment Enters., Inc.,[6] the company was convicted of violating obscenity laws where the corporation's president conspired to transport obscene videos in interstate commerce. The president's unlawful acts could be imputed to the corporation because he was an undisputedly authorized agent.

    A corporation's liability can be extended to acts performed within the agent's apparent authority. Apparent authority is defined as the authority that has not been expressly agreed but can be understood by a third party from the context of the agent's acts. It is the authority which an outsider could reasonably assume that an agent would have judging from his position within the company, and the responsibility previously entrusted to him, and the circumstances surrounding his past conduct.[7]

    The question of whether an employee acted in the scope of his or her authority is differently determined by each source of law and factual framework. Federal courts have constantly held that a corporation may be liable for the actions of its agents regardless of the agent's position within the corporation. These Courts have found that an employee's act can bind the corporation even where the corporation has implemented policies prohibiting the behaviour. When an employee's conduct is contrary to the company's compliance policies and specific directives, the company can still be held liable.[8] The company can prove that it has established corporate policies in an effort to reduce crime, but this does not prevent a court from finding it criminally liable. The existence of an effective compliance policy will not provide an absolute defence from criminal liability,[9] but the company may qualify for a reduced penalty.

    The concept of scope of employment is common and has broad interpretations. Thus, courts have held that even non-employees conduct can be attributed to be as the corporation's action. In United States v. Parfait Powder, it was held that independent contractors might act for the benefit of the corporation thereby exposing it to criminal liability.[10]

    Many states have adopted specific legislative strategy to deal with corporations that requires criminal acts be committed by high managerial agents in order to trigger liability. This position closely resembles the identification theory. In some states, however, the rule is that the actions taken by a corporation's agents need not have been ratified by the corporation's directors, officers, or other high managerial agents in order to be chargeable to the corporation.

    A stricter standard can be found in the Model Penal Code. The Code requires, as an additional element that the commission of the offence be authorized, requested, commanded, performed or recklessly tolerated by the board of directors or by a high managerial agent acting on behalf of the corporation within the scope of his office or employment.[11]

    By differentiating the ascription of liability based on the actions of agents and based on the actions of high managerial agents, the Code directly distinguishes between the ability of managerial employees and lower employees to understand and prevent crime.

    Benefiting the Corporation

    The second element of corporate criminal liability according to the theory of vicarious liability is that the act benefits the company. The benefit need not be real, yet potential. As Hall points out, for this requirement, the corporation need not actually receive a benefit; the employee's mere intention to bestow a benefit suffices.[12]

    It is not necessary that the employee be primarily concerned with benefiting the corporation since many employees act primarily for their own personal gain.[13] Although the corporation did not actually gain from the action or the agent violated a company policy, liability may still be imputed to a corporation.

    Identification Theory:

    The doctrine of identification is the traditional method by which companies are held liable in most countries under the principles of the common law. The limitations of the agency theory led to the construction of a direct liability theory. This theory was developed as an attempt to overcome the problem of imposing primary, as opposed to vicarious, corporate criminal liability for offences that insisted on proof of criminal fault. In Lennard's Carrying Co Ltd v. Asiatic Petroleum Co Ltd,[14] Viscount Haldane fashioned a model of primary corporate criminal liability for offences that require mens rea that would later be known as the identification theory.

    In the light of Haldane's judgment:

    A corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody, who for some purposes may be called an agent, but who is really the directing mind and will of the corporation; the very ego and centre of the personality of the corporation.

    As in the agency theory, the identification theory relies on an individual to attribute liability to a corporation. However, while the former doctrine simply imitates tort principles, the latter adjusts these principles to the reality of corporate misconduct. Furthermore, the identification theory introduces the personification of the corporate body. According to this theory, the solution for the problem of attributing fault to a corporation for offences that require intention was to merge the individual within the corporation with the corporation itself. Unlike the agency theory, the individual employee is assumed to be acting as the company and not for the company. The theory de-emphasized the need for the development of vicarious liability. The agency theory has now been considered as unjust and lacking in defensible penal rationale.

    Guilty Mind
    The main underlying principle of the identification theory is the detection of the guilty mind, the recognition of the individual who will be identified as the company itself, who will be the company's very ego, vital organ, or mind.

    Tesco Supermarket v. Nastrass[15] is the leading authority in this area. Tesco Supermarket was a large chain store which was charged with an offence against the Trade Descriptions Act 1968[16] by selling goods to consumers at a price different than had been announced. The prosecution concerned the advertisement of soap powder at a reduced price. A shop assistant had mistakenly placed normally priced soap powder on the shelf. The manager had failed to ensure that the powder was available at the advertised price. There was a defence of due diligence which could be pleaded by the company, unless the manager's lack of due diligence could be attributed to the company.[17] The question was whether the manager of the store could be identified with the company via the common law doctrine, or in other words, whether natural person or persons are to be treated as being the corporation itself.

    The House of Lords held that the manager was not a person of sufficiently important stature within the corporate structure to be identified as the company for this purpose, and since there had been due diligence at the level of top management, the company could use the defence.

    The metaphor used by Lord Denning in an earlier case was a reference in this decision:
    A company may in many ways be likened to a human body. It has a brain and a nerve centre which controls what it does. It also has hands which hold the tools and act in accordance with directions from the centre. Some of the people in the company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the directing mind and will of the company, and control what it does. The state of mind of these managers is the state of mind of the company and is treated by the law as such.[18]

    The manager of the store was not considered as the mind of the store. Instead, he was regarded as a servant, the hands of the store. In order to give some guidance for the problem of who is to be considered as the corporation itself for the purposes of imputing liability, some standards were articulated in Tesco Supermarket v. Nastrass. Lord Reid stated that, Normally the board of directors, the managing director and perhaps other superior officers of a company carry out the functions of management and speak and act as the company.

    Viscount Dilhorne explained that in his view a person who is in actual control of the operations of a company or of part of them and who is not responsible to another person in the company168 would be the directing mind and will of the company. Lord Pearson underscored this reasoning adding that the constitution of the company concerned should be taken into account in order to indicate if the person is in a position of being identifiable with the company.

    Tesco's criterion is still the most frequently used for determining whose corporate agent can be identified as the embodiment of the corporation itself. According to these established pattern, the guilty mind, the ego or 'brain of the company must be a vital organ of the company, an individual who is sufficiently senior within the corporate structure to represent, metaphorically, the mind of the company. Generally, the guilty mind can be identified with the board of directors, the top officers of the corporation, those who are delegated responsibility, and those that have duties of such responsibility that their conduct may fairly be assumed to represent the policy of the corporation.

    The array of personnel whose acts can be imputed to the company varies from jurisdiction to jurisdiction. Australian courts have shown a marked tendency to apply Tesco principles. Some American states and the American Model Penal Code also accept this approach.[19] In England, where the principles were molded, the Tesco standard is strictly followed, yet it can be shaped differently in every situation. For example, in Meridian Global Fund Management Asia Ltd v Securities Commission,[20] Lord Hoffman[21] stated that in each case the court had to fashion a special rule of attribution for the particular substantive rule. Canadian courts adopted a broader view of the Tesco principles and stretched the set of personnel that can be identified with the company itself.[22] The wider Canadian position can be contrasted with the restricted English application of the doctrine of identification, established in Tesco.

    In Canadian Dredge and Dock the distinctive posture is clearly defended in a comparative ground:

    The application of identification rule in Tesco, supra, may not accord with the realities of life in our country. Then it is said that the simple size of Canada means that corporations may be widespread, and consequently may have a decentralized control, which implies that the directing minds and will can be found in different geographic locations. Estey J. stated that:
    This must be a particularly so in a country such as Canada where corporate operations are frequently geographically widespread. The transportation companies, for example, must of necessity operate by the delegation and sub-delegation of authority from the corporate centre: by the division and subdivision of the corporate brain; and by decentralizing by delegation the guiding forces in the corporate undertaking.

    Bill C-45, enacted on November 7, 2003, extends the concept of directing mind; it uses the expression senior officers" to include everyone who has an important role in setting policy or managing an important part of the organization's activities. For crimes of negligence, the bill proposes a departure from the concept of directing mind when it states that mental element of the offence will be attributable to corporations and other organizations through the aggregate fault of the organization's senior officers (which will include those members of management with operational, as well as policy-making, authority).

    Aggregation Theory:

    Over the past decades the corporation's internal structures have been altered and expanded. Large modern corporations are no longer set up with a clear, pyramid-like hierarchal structure of authority and power. On the contrary, modern corporations have multiple power centers that share in controlling the organization and setting its policy. The complexity of this new setting has created some challenges for the imposition of criminal liability to corporations under the traditional approaches. Sometimes power and influences are extremely diffused in the corporation context so that it is almost impossible to isolate the responsible individual whose intention could be attributed to the corporation itself. The aggregation or collective knowledge doctrine was developed as a response to this puzzling scenario.

    The aggregation theory is grounded in an analogy to tort law in the same way as the agency and identification doctrine. Under the aggregation theory, the corporation aggregates the composite knowledge of different officers in order to determine liability. The company aggregates all the acts and mental elements of the important or relevant persons within the company to establish whether in toto they would amount to a crime if they had all been committed by one person.180 According to Celia Wells, aggregation of employees' knowledge means that corporate culpability does not have to be contingent on one individual employee's satisfying the relevant culpability criterion.[23]

    The theory of aggregation is a result of the work of American Federal Courts. The leading case is United States v. Bank of New England,[24] where the bank was found guilty of having failed to file CTRs (currency transactions reports)[25] for cash withdrawals higher than $10, 000. The client made thirty-one withdrawals on separate occasions between May 1983 and July 1984. Each time, he used several checks, each for a sum lower than the required total, none of which amounted to $10, 000. Each check was reported separately as a singular item on the Bank's settlement sheets. Once the checks were processed the client would receive in a single transfer from the teller, one lump sum of cash which always amounted to over $10,000. On each of the charged occasions, the cash was withdrawn from one account. The Bank did not file CTRs on any of these transactions. Each group of checks was presented to a different teller at different times.

    In this case, the question was if any knowledge and will could be attributed to the corporate entity. The trial judge found that the collective knowledge model was entirely appropriate in such context, and stated as much in addition, however, you have to look at the bank as an institution. As such, its knowledge is the sum of all the knowledge of all its employees. That is, the bank's knowledge is the totality of what all of the employees knew within the scope of their employment.

    So, if employee A knows of one facet of the currency reporting requirement, B knows another facet of it, and C a third facet of it, the banks know them all. So, if you find that an employee within the scope of his employment knew that the [reports] had to be filed, even if multiple checks are used, the bank is deemed to know it if each of the several employees knew a part of the requirement and the sum of what the separate employees knew amounted to the knowledge that such a requirement existed. The partisans of collective knowledge explain that the difficulty of proving knowledge and willfulness in a compartmentalized structure such as a corporation should not be an impediment to the formation of the corporation's knowledge as a whole. According to these positions, it is not essential that one part be aware of the intention and act of the other part for the formation of aggregate knowledge.

    In Bank of New England, it was explained that:

    Corporations compartmentalize knowledge, subdividing the elements of specific duties and operations into smaller components. The aggregate of those components constitutes the corporation's knowledge of a particular operation. It is irrelevant whether employees administering one component of an operation know the specific activities of employees administering another aspect of the operation.

    This theory appears to combine the respondeat superior (vicarious liability) principle with one of presumed or deemed knowledge. Even if no employee or agent has the requisite knowledge to satisfy a statutory requirement needed to be guilty of a crime, the aggregate knowledge and actions of several agents, imputed to the corporate executive, could satisfy the elements of the criminal offence. In spite of the wide interpretation of the aggregation theory employed in Bank of New England decision, American courts have been careful with the application of this ruling. Some federal courts have had a narrower understanding, and distinguished collective knowledge from collective intent or collective recklessness. According to this version, the attribution of mens rea or intent or recklessness to a corporation necessarily depends on the full development of this culpable state of mind in one of the corporation's employees. Contrary to the Bank of New England decision, American courts understand that a corporation could not be deemed to have a culpable state of mind when that state of mind is not possessed by a single employee. In Inland Freight Lines[26] it was clarified that corporate collective knowledge and collective criminal intent do not necessarily have the same meaning.

    The idea of aggregate knowledge is fundamental to the notion of corporate fault; it represents a departure from the paradigm that intention must come from a single individual. However, as to be expected, the rupture with old concepts is not brusque, which is the reason why individualism is still present in the collective knowledge theory. Corporate fault is the fault of the group and not of the corporation itself. This fact does not take merit away from the aggregation theory. Common law theories have been the necessary bridge between the individualistic and organizational approaches. They are bringing back to life principles of criminal law that have prevailed before the prevalence of the principle that only individuals commit crimes. In all of these theories, corporate fault is still traced back to an individual or a group of individual, yet they allow the attribution of criminal liability to corporations.

    Corporate Criminal Liability In India
    Criminal Liability is attached only those acts in which there is violation of Criminal Law i.e. to say there cannot be liability without a criminal law which prohibits certain acts or omissions.[27] The basic rule of criminal liability revolves around the basic Latin maxim actus non facit reum, nisi mens sit rea. It means that to make one liable it must be shown that act or omission has been done which was forbidden by law and has been done with guilty mind.

    Hence every crime has two elements one physical known as actus reus and other mental known as mens rea.[28] This is the rule of criminal liability in technical sense but in general the principle upon which responsibility is premised is autonomy of the individual, which states that the imposition of responsibility upon an individual flows naturally from the freedom to make rational choices about actions and behaviour.[29]

    Although the general rule as stated above is applicable to all criminal cases but the criminal law jurisprudence has seen one exception to the above said concept in form of doctrine of strict liability in which one may be made liable in absence of any guilty state of mind. This happens in cases of mass destructions through pollution, gross negligence of the company resulting in widespread damages like in the Bhopal Gas tragedy, etc.[30]

    Hence, there can be no dispute of imposing criminal liability on corporations as regards no mens rea requiring offences but however, it used to come to be questioned before the Chartered Bank judgement when mens rea was concerned.

    Corporate Criminal Liability - The Necessity:

    In the modern day world, the strong effect of activities of corporations is incredible on the society. In the day to day activities, not only do the corporations affect the lives of the people as a blessing but also many a times proves disastrous which then falls under the category of crimes. For instance, the Uphar Cinema tragedy or thousands of scandals especially the white collar and organized crimes can come within the category that requires immediate concern. Despite so many disasters, the law was unwilling to impose criminal liability upon corporations for a long time. This was for basically two reasons that are[31]:
    # That corporations cannot have the mens rea or the guilty mind to commit an offence; and
    # that corporations cannot be imprisoned.

    These two obstacles were managed to survive till late 20th and very early 21st century. The general belief in the early 16th and 17th centuries was that corporations could not be held criminally liable. In the early 1700s, corporate criminal liability faced at least four obstacles, i.e.

    Firstly, attributing acts to a juristic fiction, the corporation. Eighteenth-century courts and legal thinkers approached corporate liability with an obsessive focus on theories of corporate personality; a more pragmatic approach was not developed until the twentieth century.

    Secondly, the legal thinkers did not believe corporations could possess the moral blameworthiness necessary to commit crimes of intent.

    Thirdly, the ultra vires doctrine, under which courts would not hold corporations accountable for acts, such as crimes, that were not provided for in their charters.
    Finally, the fourth obstacle was court's literal understanding of criminal procedure; for example, judges required the accused to be brought physically before the court.

    Corporate mens rea

    Courts in United States were slow to extend corporate criminal liability to crimes of intent8 and the process in India was even slower. Now, it is well settled that a corporate can be held liable for committing offences that require mens rea as now it has been recognized that a corporate can have a mens rea.

    Generally, corporations may be held criminally responsible for the illegal acts of its employees if such acts are[32] related to and committed within the course of employment, committed in furtherance of the business of the corporation and its imbibed culture; for example, if the corporate structure is so organized as to deprive senior managers of the information they need to exercise such powers, this would indicate a corporate culture that is designed to elude law enforcement. Generally, deficient structures for the dissemination of information within the firm would also be suspect. Moreover, in organized crime networks, the culture and the objective of the corporation in itself is to commit crimes, authorized or acquiesced in by the corporation. In these cases, the corporate itself authorizes and sometimes directs its employees to enter into unethical business practices which are sanctioned by the organization structure like in case of recovery wherein hiring of antisocial elements is directed many a times.

    Hence, there is no obstacle in the criminal law jurisprudence whatsoever to impose criminal sanction on a corporation since it can have a mind of its own and also an environment wherein crime is nurtured. However, this concept still not contemplated in the statutes in India.

    Statutory Inadequacy:
    This developed jurisprudence does not find a place in the Indian statues as they still make only the officials responsible for the act criminally liable and not the corporate itself. Instances of this are:
    Sections. 45, 63, 68, 70(5), 203, etc of the Indian Companies Act wherein only the officials of the company are held liable and not the company itself; it is also reflected through the Takeover Code. The various sections of the IPC that direct compulsory imprisonment does not take a corporate into account since such a sanction cannot work against the corporation.

    These are the major statutes in their respective field that are devoid of necessary legal aspects. On the other hand, law has also developed to an extent with regard to certain other statutes and their respective penal provisions wherein a fine has been imposed on the corporations when they are found to be guilty.

    Some such examples are:

    Section 141 of the Negotiable Instruments Act, 1862[33]
    Section 7, Essential Commodities Act[34]
    Section 276-B of the Income Tax Act[35]

    The statutes mentioned in the first point need to be amended soon to include corporate criminal liability and not merely restricting criminal liability to its personnel.

    Corporate Punishment

    In India, certain statutes like the Indian Penal Code talk about kinds of punishments that can be imposed upon the convict and as per Section 53 include death, life imprisonment, rigorous and simple imprisonment, forfeiture of property and fine. In certain cases the sections speak only of imprisonment as a punishment like in case of offence under Section 420. Thus the problem arises as to how to apply those sections on the companies since a criminal statute needs to be strictly interpreted and in such statutes there is no scope for corporations to be imprisoned.
    Going with the above viewpoint and with the growing trend of corporate criminality, the Courts in India have finally recognized that a corporation can have a guilty mind but still were reluctant to punish them since the criminal law in India does not allow this action.

    In The Assistant Commissioner, Assessment- II, Bangalore and Ors. v. Velliappa Textiles Ltd. and Ors.[36], B.N. Srikrishna J. said that corporate criminal liability cannot be imposed without making corresponding legislative changes. For example, the imposition of fine in lieu of imprisonment is required to be introduced in many sections of the penal statutes. The Court was of the view that the company could be prosecuted for an offence involving rupees one lakh or less and be punished as the option is given to the court to impose a sentence of imprisonment or fine, whereas in the case of an offence involving an amount or value exceeding rupees one lakh, the court is not given a discretion to impose imprisonment or fine and therefore, the company cannot be prosecuted as the custodial sentence cannot be imposed on it.

    The legal difficulty arising out of the above situation was noticed by the Law Commission and in its 41st Report, the Law Commission suggested amendment to Section 62 of the Indian Penal Code by adding the following lines:

    In every case in which the offence is only punishable with imprisonment or with imprisonment and fine and the offender is a company or other body corporate or an association of individuals, it shall be competent to the court to sentence such offender to fine only.

    As per the jurisprudence evolved till then, under the present Indian law it is difficult to impose fine in lieu of imprisonment though the definition of 'person' in the Indian Penal Code Includes 'company.' It is also worthwhile to mention that our Parliament has also understood this problem and proposed to amend the IPC in this regard by including fine as an alternate to imprisonment where corporations are involved in 1972.[37] However, the Bill was not passed but lapsed. Such a fundamental change in the criminal jurisprudence is a legislative function and hence the Parliament should perform it as soon as possible by also considering the following arguments that the author has brought about.

    However, the Apex Court later overruled this decision in Standard Chartered Bank and Ors. v. Directorate of Enforcement and Ors[38] on account of providing complete justice to the aggrieved which could not be prejudiced in the garb of corporate personality. In this case, the Court did not go by the literal and strict interpretation rule required to be done for the penal statutes and went on to provide complete justice thereby imposing fine on the corporate.

    The Court looked into the interpretation rule that that all penal statutes are to be strictly construed in the sense that the Court must see that the thing charged as an offence is within the plain meaning of the words used and must not strain the words on any notion that there has been a slip that the thing is so clearly within the mischief that it must have been intended to be included and would have included if thought of.[39]

    Simultaneously, it also considered the legislative intent and held that all penal provisions like all other statutes are to be fairly construed according to the legislative intent as expressed in the enactment. It was of the view that here, the legislative intent to prosecute corporate bodies for the offence committed by them is clear and explicit and the statute never intended to exonerate them from being prosecuted. It is sheer violence to commonsense that the legislature intended to punish the corporate bodies for minor and silly offences and extended immunity of prosecution to major and grave economic crimes. If an enactment requires what is legally impossible it will be presumed that Parliament intended it to be modified so as to remove the impossibility element. These Courts have applied the doctrine of impossibility of performance [Lex non cogit ad impossibilia] in numerous cases including the aforementioned.[40]

    Finally, the Court decided that as the company cannot be sentenced to imprisonment, the court cannot impose that punishment, but when imprisonment and fine is the prescribed punishment the court can impose the punishment of fine which could be enforced against the company. Such discretion is to be read into the section so far as the juristic person is concerned. Of course, the court cannot exercise the same discretion as regards a natural person. Then the court would not be passing the sentence in accordance with law. As regards company, the court can always impose a sentence of fine and the sentence of imprisonment can be ignored as it is impossible to be carried out in respect of a company. This appears to be the intention of the legislature and we find no difficulty in construing the statute in such a way. We do not think that there is blanket immunity for any company from any prosecution for serious offences merely because the prosecution would ultimately entail a sentence of mandatory imprisonment.

    The well known maxim 'judicis est just dicere, non dare' best expounds the role of the court. It is to interpret the law, not to make it. This read with the Doctrine of Separation of Powers has bound the Court's hands in imposing various kinds of punishments and all that it is left with is to impose fines. In order to avoid compelling the Courts to go out of the statute and interpret and therefore define the law which is essentially the task of the legislature[41], it is advised that the legislature amends the various penal statutes in a way so as to bring in various forms of punishments for the corporations as well, thereby maintaining the separation of powers regime and hence the rule of law.

    Feasibility of fine

    Fine is the most common punishment in every part of the world and it is a punishment the advantages of which are so great and obvious that we propose to authorize the courts to inflict it in every case… Imprisonment, transportation, banishment, solitude, compelled labour are not equally disagreeable to all men. With fine the case is different. In imposing a fine it is necessary to have regard to the pecuniary circumstances of the offender, as to the character and magnitude of the offence. The mullet which is ruinous to the labourer is easily borne by a tradesman and is absolutely unfelt by a rich zamindar.

    The imposition of fines may be made in four different ways as provided in the Indian Penal Code. It is the sole punishment for certain offences and the limit of maximum fine for some. In certain cases fine is an alternative punishment but the amount is limited. In certain offences it is imperative to impose fine in addition to some other punishment and in some it is obligatory to impose fine but no pecuniary limitation is laid down.

    Fines can be an effective punishment in cases of traffic offences or offences against property. But where the offence is grave, in the sense of murder or rape or kidnapping for death etc., it is questionable whether fine can achieve the object of punishment. Another shortcoming of this form of punishment is that it brooches the poor and eases the rich. The rich can easily get away by paying a huge fine while the poor may have to hustle hard even to get a hundred rupees. Nevertheless, its efficacy in specific crimes has made it a necessary mode of sanction. This shows that biggest drawback in restricting fine as the sole form of punishment to corporations since with their massive bank accounts, it is easy for them to get away with the criminal liability and it also does not solve the purpose of punishment since neither the corporates would be deterred nor would they be restrained for committing crimes like corporate killings (for instance: using poor quality of material in building dams which would soon collapse thereby dislocating and even killing inhabitants around the area or the labourers themselves). Looking into the above drawbacks, there is a need to evolve new forms of punishments which could effectively deter the corporate from engaging into any criminal activity.

    En route for new forms

    Presently, all the penal provisions of various statutes include only fine as a form of punishment that can be imposed on a company. So is the case with judicial pronouncements on the aspect of sentencing. In addition to this, the Law Commission in its 41st Report also speaks of introducing only fine as an additional punishment to be imposed upon corporations in lieu of fines. This restrictive thinking, according to Courts is based on the maxim lex non cogit ad impossibilia, which tells us that law does not contemplate something which cannot be done.[42] This reasoning in itself shows that the law lacks in a non holistic viewpoint in the concept of corporate criminal liability. The Courts have no doubt been efficient in evolving the concept of criminal liability of corporate and have imposed the same on the convicts but the only way of punishing them that has been thought of is by way of fines. It is now for the legislature to evolve new forms of punishments and incorporate them in the criminal justice system of the land.

    Corporate bodies reap all the advantages flowing from the acts of the directors and they act to the detriment of the public in the name of the corporate bodies.
    From the above analysis, it is clear that 'corporate criminal liability' is not an alien term. This category of liability existed since time immemorial. However, the legislature kept its mouth shut when the question of imposing punishment arose with respect of corporate liability. With the evolution of various theories, the most vital issue with regard to corporate criminal liability settled i.e., the issue of mens rea. Concept of vicarious and strict liability is an important aspect of corporate criminal liability.

    The criminal law jurisprudence relating to imposition of criminal liability on corporations is settled on the point that the corporations can commit crimes and hence be made criminally liable. However, the statutes in India are not in pace with these developments and the above analysis shows that they do not make corporations criminally liable and even if they do so, the statutes and judicial interpretations impose no other punishments except for fines. Apart from fines, punishments such as winding up of the company, temporary closure of the corporation, heavy compensation to the victims, by stepping on the weakness of the corporation i.e., its goodwill, etc. Such means of punishment would have a deterrent effect on the corporate and the sole aim of punishment under criminal jurisprudence would be achieved.

    End notes
    [1] Harvey L. Pitt, and Karl A Groskaufmanis., Minimizing Corporate Civil and Criminal Liability: A second Look at Corporate Codes of Conduct (1990) 78 The Georgetown Law Journal 1560 at 1560.
    [2] Nicolette Parisi, Theories of Corporate Criminal Liability (or Corporations Don't Commit Crimes, People Commit Crimes) in Hellen Hochstedler, ed., Corporations as Criminals - Perspectives in criminal justice 6 (New York: Sage Publications, 1984) 41 at 44.
    [3] United States v. One Parcel of Land, 965 F. 2d 311, 316 (7th Cir. 1992) (stating agent's knowledge of illegal act may be imputed to corporation if agent was acting as authorized and motivated at least in part by an intent to benefit the corporation [citing Zero v. United States, 459 U.S. 991 (1982)].
    [4] United States v. Investment Enter Inc., 10 F. 3d 263, 266 (5th Cir.1993) (stating that a corporation is criminally liable for the unalwful acts of its agents, provided that the conduct is within the scope of the agent's authority, whether actual or apparent); Meyers v. Bennet Law Offices, 238 F. 3d 1068, 1073 (9th Cir 2001) (rejecting fact that employee acted outside scope of authority because employee had at least apparent authority to take actions).
    [5] New Hampshire v. Zeta Chi Fraternity, 696 A. 2d 530, 535 (N.H. 1997)
    [6] United States v. Investment Enter Inc., 10 F. 3d 263, 266 (5th Cir.1993)
    [7] United States v. Bi-Co Pavers, Inc., 741 F. 2d 730, 737 (5th Cir. 1984) (stating apparent authority is authority which outsiders would normally assume the agent to have, judging from his position with the company and the circumstances surrounding his past conduct.
    [8] United States v. Automated Med. Labs., Inc., 770 F. 2d 399, 407 (4th Cir. 1985) ('The fact that many of [employees'] actions were unlawful and contrary to corporate policy does not absolve [defendant] of legal responsibility for their acts).
    [9] Dan K. Webb et al., Understanding and Avoiding Corporate and Executive Criminal Liability, (1994) 49 Bus Law 617 at 624 cited in Matthew E. Beck & Matthew E. O'Brien, Corporate Criminal Liability (annual white collar crime survey) (2000) 37 American Law Review 261 at 268, n.37.
    [10] United States v. Parfait Powder Puff Co., 163 F.2d 1008, 1009-1010 (7th Cir. 1947)
    [11] US Model Penal Code [sections] 2.07 (1) (c) (1962)
    [12] Joseph Hall Corporate Criminal Liability (Thirteenth Survey of White Collar Crime) (1998) 35 American Criminal Law Review 549 at 554. Zero v. United States, 689 F. 2d 238, 242 (1st Cir. 1982) (holding that employee must have been motivated at least in part by an intent to benefit the corporation.
    [13] United States v. Bainbridge Mgmt., 2002 U.S. Dist. Lexis 16686 at *15 (N.D. III Sept. 5, 2002) (To impute liability an agent must have intended to benefit the corporation or partnership, not merely his own interests.)
    [14] Lennard's Carrying Co Ltd v. Asiatic Petroleum Co Ltd [1915] AC 705.
    [15] [1971] 2WLR 1166. [Tesco]
    [16] Trade Descriptions Act 1968, s. 20 (1): Where an offence under this Act which has been committed by a body corporate is proved to have been committed with the consent and connivance of,…any director, manager, secretary or other similar officer of the body corporate, …he as well as the body corporate shall be guilty of that offence
    [17] Trade Descriptions Act 1968, s. 24 (1):In any proceedings for an offence under this Act it shall be a defence for the person charged to prove-(a) that the commission of the offence was due to…the act or default of another person, and (b) that he took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence...
    [18] Lord Denning in H. L. Bolton (Engineering) Co. Ltd. v. T. J. Graham & Sons Ltd., [1957] 1 Q.B.159 at 172.
    [19] American Model Penal Code 2.07(4) (Proposed Official Draft 1962) stating that the corporation's agent is a senior managerial agent.
    [20] Meridian Global Fund Management Asia Ltd v Securities Commission [1995] 2 AC 500 PC
    [21] Lord Hoffman cited in Grantham, Ross, Corporate Knowledge: Identification or Attribution, (1996) 59 The Modern Law Review at 733.
    [22] R. v. Canadian Dredge & Dock Ltd. (1985) 10 CCC (3d) 1 (S.C.C.).
    [23] Celia Wells, Corporations and Criminal Responsibility, 2nd ed. (Oxford: Oxford University Press, 2001) at 156.
    [24] United States v Bank of New England. (1987) 821 F. 2d 844 (1st Cir.), cert. Denied, 484 U.S. 943.
    [25] The Currency Transaction Reporting Act ( 31 C. F. R 103.22 91986) requires banks to file Currency Transaction Reports within fifteen days of customer currency transactions exceeding $10,000.
    [26] Inland Freight Lines v. United States, 191 F. 2d 313 (10th cir. 1951) at 315-316. This case involved the Commerce Act's prohibition against maintaining false time logs for the drivers.
    [27] Abhishek Anand, Holding Corporations Directly Responsible For Their Criminal Acts: An Argument
    [28] actus reus connotes those result of human conduct which is forbidden by law and hence constitutes of Human action; result of conduct and act prohibited by law2[5]. One other hand mens rea is generally taken as blame worthy mental condition: Russell, W.O., Russell on Crime p.17-51 (J.W.C. Turner Ed., New Delhi; Universal Law Publishing Pvt., 2001).
    [29] A. Ashworth, Principles of Criminal Law p. 79-81 (Oxford: Clarendon Press, 1991) cited by Fisse, Reconstructing Corporate Criminal Law: Deterrence, Retribution, Fault, and Sanctions, 56 S. Cal. L. Rev. 1141
    [30] Assn. of Victims of Uphaar Tragedy v. UOI, 104 (2003) DLT 234, Rylands v. Fletcher, (1868), L.R. 3 H.L. 330.
    [31] Zee Telefilms Ltd. v. Sahara India Co. Corporation Ltd., 2001 (3) Recent Criminal Reports (Criminal) 292; Motorola Inc. v. UOI, 2004CriLJ1576.
    [32] US v. Jorgensen, 144 F3d 550; US v. Route 2, Box, 60 F3d 1523 (CA11 1995); Tippecanoe Beverages, Inc. v. S.A. El Aguila Brewing Co., 833 F2d 633 (CA7 1987); The proper standard for jury instruction is that the corporation may be held criminally responsible for antitrust violations committed by its employees if they were acting within scope of their authority, or apparent authority, and for benefit of corporation. United States v. Basic Const. Co., 711 F2d 570 (CA4 1983).
    [33] Balaji Trading Company v. Kejriwal Paper Ltd. and Anr., 2005CriLJ3805
    [34] State of M. P v. N. Singh
    [35] M. V. Javali v. Mahajan Borewell & Co
    [36] AIR 2004 SC 86
    [37] The proposed Indian Penal Code (Amendment) Bill, 1972, Clause 72(a) reads as hereunder: "Clause 72(a)(1) - In every case in which the offences is punishable with imprisonment and fine, and the offender is a company, it shall be competent for the Court to sentence such offender to fine only. (2) - In every case in which the offence is punishable with imprisonment and any other punishment not being fine, and the offender is a company, it shall be competent for the Court to sentence such offender to fine only. Explanation: - For the purpose of this section, 'company' means any body corporate and includes a firm or other association of individuals."
    [38] AIR 2005 SC 2622
    [39] Tolaram Relumal and Anr. v. The State of Bombay MANU/SC/0057/1954 and Girdhari Lal Gupta v. D.H. Mehta and Anr. MANU/SC/0487/1971
    [40] State of Rajasthan v. Shamsher Singh, 1985(Supp.) SCC 416; Special Reference No. 1 of 2002 reported in MANU/SC/0891/2002
    [41] Asif Hameed and others v. State of Jammu& Kashmir, AIR1989SC1899
    [42] Kartick Chandra v.Harsha M. Dasi, AIR 1943 Calcutta 35 at 354; Edmund N. Schuster v. Assistant Collector of Customs, New Delhi, AIR 1967 Punjab 189; State of Maharashtra v. Syndicate Transport, AIR 63 (1966) Bom 197; Knightsbridge Estates Trust Ltd. v. Byrne and Ors. 1940 (2) All ER 40

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