This Article is written by Divya K. (currently pursuing BBA LLB in Symbiosis Law School)
Table of Contents
In this era of globalization, corporate entities have become an essential part of society. Corporations are considered to be separate legal entities and this entity is different from a natural person. A corporation being a legal entity is responsible for realizing the social and economical needs of the country. However, corporations have also started committing crimes. And just like a natural person is punished for the crimes committed, corporations should also be punished for their criminal activities. Section 11 under the Indian Penal Code, 1860, defines a person as any company or association or body of persons whether incorporated or not.Furthermore, section 2 provides that every person shall be liable to punishment under this Code and not otherwise for every act or omission contrary to the provisions thereof, of which he shall be guilty within India. Therefore, the company should be held criminally liable for the acts committed during the course of the business operations. The current paper will study the concept of corporate criminal liability and analyse the kind of punishments the corporates can be subjected to under IPC.
ABOUT CORPORATE CRIMINAL LIABILITY:
According to Black Law Dictionary, corporate crime is a crime committed either by a corporate body or by its representatives acting on its behalf.Corporate criminal liability can be referred to as an extent to which a corporation as a separate legal entity or any individual can be held criminally liable for such acts and omissions which is forbidden by law and order. Although it was recognized that the corporations can be held criminally liable for their illegal acts and omission, the court found it difficult to subject the corporations to punishments. It was difficult to hold the corporations liable for offences that required mens rea, i.e., wrongful intention, and where the punishment to certain crimes involved imprisonment. But it was important to overcome these barriers and fix such punishments that would prevent the corporations or their employees from committing crimes. Thus, the theories of corporate criminal liability were formed according to which corporations could be held responsible for their actions.
THEORIES OF CORPORATE CRIMINAL LIABILITY:
Theory of vicarious liability:
According to this theory, the liability of the corporation can be decided on the basis of the wrongful act committed by the employee of the corporation. It is based on two legal Latin maxims. First, qui facit per alium facit per se, which means he who acts through another, acts himself. Second, Respondent Superior, which means let the master answer. The company is held liable for the acts or omissions done by the employee during the course of the employment. In order to hold the corporation liable under this theory, it is important to determine the wrongful act of the employee and how that wrongful act can be attributed to the corporation based on the employee-employer relationship.
Theory of identification:
This theory is based on the fact that the guilty mind (mens rea) of the employees is the state of mind of the corporation. This means that the actions of the employees are the actions of the corporation. According to this theory, the corporation can be held liable for the actions of the managers and directors of the company who are generally regarded as the decision-making body of the corporation and not of the employees who execute the decisions of the body.
Theory of wilful blindness:
If an illegal act is committed and the representative of the company ignores it and does not take any actions to prevent happening of such an act, then the corporation can be held liable under a theory of willful blindness.
Theory of Collective Blindness:
According to this theory, even if a single person has committed wrong and all the employees had the knowledge of it, the corporation will be held liable.
Theory of Attribution:
As per this theory, when the actions of the employee are violative of the criminal law and punishment for such act or omission is fine or imprisonment, then the guilty mind of the individual can be attributed to the corporation and it can be held liable.
Theory of Alter Ego:
The individuals who manage the corporation are considered as the alter ego of the corporation. Even though the company is a separate legal entity, it does not have a body and soul of its own. Therefore, the managers and directors of the corporation can be held liable for the acts committed by or on behalf of the corporation.
RECENT DEVELOPMENTS WITH RESPECT TO CORPORATE CRIMINAL LIABILITY:
Corporate criminal liability can be derived from the Indian Penal Code, 1860. But earlier the courts used to opine that a corporation cannot be held liable because of lack of mens rea and uncertainty of punishment. In State of Maharashtra v Syndicate transport, the court held that the corporation cannot be punished for offences that involve corporal punishment or imprisonment because a corporation is not a natural person but just a body created by law. The law developed after the 47th Law Commission Report which said there are many offences that require mandatory punishment of imprisonment. In the case of corporations, it becomes difficult it is separate legal entities and natural persons. In such cases, it is suggested that the courts impose fines instead of imprisonment. In Standard Chartered Bank and Ors. v Directorate Enforcement and Ors, the court opined that companies can also be held criminally liable. It also iterated that just because a company cannot be held for imprisonment, it does not mean that it could escape the punishment. In such cases where the company is being prosecuted for offences that include imprisonment and fine as a punishment, the court can ignore imprisonment and impose fines on the company. In Iridium India Telecom Ltd v Motorola Inc and Ors., the supreme court opined that the mens rea of the employees can be attributed as the mens rea of the company. Thus, if the employees of the company committed an act that is violative of criminal law, then the company will be held liable. In Sunil Bharti Mittal v Central Bureau of Investigation and Ors., the court iterated that if the representatives of the company committed a criminal act on behalf of the company, then that person can also be charged with the company. The individual can be punished with imprisonment and a fine. It is important to observe whether the individual had the criminal intent and active involvement in committing such an act. This proves that the representatives of the company can be vicariously held for offences committed during the operations of the company.
India has come a long way from excluding the companies from criminal liability to holding them liable for the criminal acts or omission which proves harmful to society. The courts have accepted the fact that even though corporations are legal entities and not natural persons, they can still be punished for their unlawful acts. But, with the advancement of technology, corporations are increasingly taking part in criminal activities. Merely, imposing a fine on the company is not an effective measure of prevention. The courts should consider serious punishments which could serve as a warning to the companies that they can be seriously implicated by their unlawful criminal acts.
 Indian Penal Code, 1860, § 11, No 45, Acts of Parliament, 1860 (India).
 Id. § 2.
Bryan A. Garner, Black’s Law Dictionary, 377, (7th ed, 1999).
 State of Maharashtra v Syndicate transport, AIR 1964 Bom 195.
 Standard Chartered Bank and Ors. v Directorate Enforcement and Ors, AIR 2005 SC 2622.
 Iridium India Telecom Ltd v Motorola Inc and Ors., AIR 2011 SC 20.
 Sunil Bharti Mittal v Central Bureau of Investigation and Ors., AIR 2015 SC 923.