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Criminal Liability of Corporate Firms

Some corporate entities, firms, conglomerates, and corporations have grown to be so large, powerful, or structurally vital to the government that the government cannot credibly enforce effective criminal penalties when they violate laws or contravene corporate governance principles.

Corporates Becoming Too Influential:
With the passage of time, these corporates have become Too-Big-to-Jail, and this dilemma has harmed the ability to investigate agencies to deter corporate crimes by simply issuing minimum monetary fines or warnings. When guilty individuals/entities are not prosecuted under the law, the administration of justice and the Rule of Law are jeopardized. In the case of India, structural reforms are required, which will include incorporating a stringent political-economic constraint into a normal microeconomic model of corporate liability.

Investigative agencies and prosecutors frequently lack the resources and experience necessary to charge corporate crime or to implement institutional reforms. The threat of criminal prosecution alone is insufficient to motivate large organizations to invest in internal controls or cooperate with government agencies; however, in order to deter these companies and their management, investigating agencies should legitimately investigate and prosecute the accused management and officials with criminal and monetary sanctions.

How to Prosecute the Companies?
Normally, a company cannot be named as an accused in a criminal proceeding; but, when a firm is named as an accused, the relevant management/officials must also be named as an accused. The prosecution will be quashed if the management/officials involved are not named as an accused. In Aneeta Hada vs. Godfather Travels & Tours Pvt. Ltd. (2012) 5 SCC 661, the Hon'ble Supreme Court held that a company cannot be prosecuted without naming the directors involved in the crime.

The Corporate Veil- Lifting:
It would be difficult to hold the corporation liable for the wrongdoer's deception, mismanagement, or reckless activities every time because the firm lacks any 'MensRea' to commit wrongdoing on its own because it is a legal/juristic construct. The concept of a corporate body was created to encourage and promote trade and business, not to commit illegal crimes or deceive others. The corporate veil can unquestionably be pierced if the corporate personality is found to be opposed to justice, and the public interest. This veil must be lifted in order to enforce the law without prejudice in the interests of equity, a good conscience, and justice. The idea of 'Lifting of Corporate Veil' is rarely invoked by Indian courts in its decisions, which are based on numerous statutory provisions.

The courts, as a dynamic institution of the law, must work effectively within the scope of the law in order to accomplish justice by piercing the corporate veil to examine the individuals responsible for a Corporate Crime. In Delhi Development Authority vs. Skipper Construction Company Co. Pvt. Ltd. 1996 SCC (4) 622, the Supreme Court examined the issue of lifting the corporate veil and laid down the necessary principles.

Law Enforcement & Prosecution:
The fact that investigating agencies, governmental agencies, and prosecutors currently rely on an investigation apparatus that may produce valuable information for corporate settlements, but does not reliably produce evidence sufficient to charge culpable individuals of corporate entities, is one structural explanation for the lack of individual prosecutions in relation to negotiated criminal settlements with these big companies. Because of the participation of investigating agencies, government agencies, and prosecutors, the courts rarely have the opportunity to decide situations involving corporate crimes, and substantial corporate settlements occur without needing a complete investigation or adjudicatory process of the courts.

Lack of coordination of Investigating & Government Agencies And Cross-Jurisdictions Disputes:
In practice, it has been seen that when it comes to corporate crimes, the investigating and government entities have limited or no coordination. The techniques for obtaining coordination are lengthy, inconvenient, time-consuming, and provide unfavorable outcomes.

Coordination on a national and international level is required in cross-jurisdictional issues, such as in international efforts to establish uniform accounting standards and having some experience in cross-border laws. The European Union's efforts to further integrate its common market are currently demonstrating this trend.

Conclusion:
As a result, investigating authorities must concentrate more narrowly on bringing individual charges, relying less on corporate internal investigations for evidence gathering, and drafting more effective structural-reform mandates. However, this is a limited strategy, and if government agencies are hesitant to prosecute white-collar crimes, this methodological point is unlikely to yield results. For governments with a democratic mandate to address the problem of corporate misbehavior, the comparatively quick political will of multibillion-rupee settlements made through traditional "cooperative" procedures may be too appealing to avoid.

In the end, these issues are pathological repercussions of our excessively concentrated political economy, and the investigation and the governmental agencies have limited capacity to remedy them. However, the government should not depend only on corporate penalties/settlements to discourage illegal behavior as long as some corporations are considered too big to prosecute.

References:
  • https://www.thelawcodes.com/fixing-criminal-liability-of-giant-corporate-firms/
  • https://www.thelawcodes.com/bare-acts/the-code-of-criminal-procedure-1973/
  • https://www.thelawcodes.com/corporate-lawyers-in-chandigarh/
  • https://www.thelawcodes.com/criminal-lawyers-in-chandigarh/
  • https://www.thelawcodes.com/corporate-lawyers-in-gurgaon/
  • https://www.thelawcodes.com/criminal-lawyers-in-gurgaon/
  • https://www.thelawcodes.com/bare-acts/the-companies-act-2013/

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