Corporate criminal liability in India is a pivotal area of legal practice penalizing corporations that commit crimes. Traditionally, such criminal liability was confined to individuals, allowing companies to avoid the liability for criminal acts, as the requisite mental element (mens rea) during the commission of any act can’t be imposed on any corporation. 

However, considering the rise of corporate crimes, the legal system has evolved the criminal practice of holding the corporations’ liability. The corporations are penalized by way of Absolute or Strict Liability. This article delves into the concept of corporate criminal liability in India and analyses the relevant legal provisions covering the same.

With the advent of the new technological era, industries are gaining momentum in today’s business world. Therefore, in order to protect society, the corporate entities can also be held accountable for crimes committed in due course of their business. The corporation, being a separate legal entity can be penalized for violating the law. Legal services for corporate crime in India need prompt mechanisms for regulating the acts of corporations.

The relevancy of corporate criminal liability in India cannot be overlooked in this scenario.

 

Understanding Corporate Liability in India

Corporate criminal liability in India refers to the legal accountability of corporations for the commission of illegal acts. To tackle the problem of economic crime and to protect society, a Strict liability rule is applied, whereby upon proving the commission of a prohibited act, the presence of a mental element is presumed without requiring further proof. However, in case of conclusive presumption, absolute liability is also imposed. 

Key Indian Penal Laws Governing Corporate Criminal Liability in India

Several Indian Penal provisions highlight the Corporate Criminal Liability in India:

  • Indian Penal Code, 1860: Section 2 of this code specifically mentions that this code shall apply to corporations as well.

‘The word ‘person’ includes any company or association, or body of persons, whether incorporated or not’. Pertinently, liability is ascertained in cases of fraud, conspiracy and other criminal activities.

Legal services for corporate crime in India have been providing regulatory mechanisms to ensure legal compliances within corporate bodies and to effectively tackle internal and external corruption

Case studies

Every provision imposing corporate criminal liability in India on corporations, deeming provisions are provided thereby, creating a legal fiction for the presumption of participation in the commission of an illegal act. Therefore, Strict and Absolute liabilities are imposed on the corporate body and its officers.

The court in Aneeta Bada v. Godfather Travels & Tours (P) Ltd held that criminal liability can be accorded to the corporations. If a group of people guiding the functions of a corporate body have criminal intent, then such intent can be imputed to the corporations as well.

In the case of Standard Chartered Bank v. Director of Enforcement, the Supreme Court held that a company can be prosecuted for offenses in which a minimum sentence of imprisonment is laid down. A corporate can’t escape the liability on the ground that it can’t be imprisoned as it has nobody. However, in such cases, the natural person behind such crimes can be prosecuted.

In Iridium India Telecom Ltd v. Motorola Inc., the Supreme Court decided that corporate criminal liability in India can be imposed even in cases of offence where mens rea is an essential requisite. Court decided that attribution and imputation rule shall determine the criminality wherein the ‘alter ego’ of a company i.e. the person or group of persons guiding the business of the company, would be imputed to the corporation.

Role of a Corporate Criminal Lawyer in India

A corporate criminal lawyer in India plays a crucial role in tackling corporate crimes. From the initial phase of regulating the acts of any corporate body, a corporate criminal lawyer assists the legal team of a company in Legal compliance. Pertinently in case of the commission of illegal acts, it can assist in defending the case and filing a suit in case of litigation.

Lawyers assist companies in identifying potential risks and developing strategies to prevent any criminal liability. Effective legal services for corporate crime in India can help corporations to better co-operate with the existing legal system.

Challenges in Enforcing Corporate Criminal Liability in India

Enforcing corporate criminal liability in India is arduous. corporations being separate legal entities have no mind of their own, therefore imposing criminal liability based on mental element during the commission of an act becomes challenging. 

Large and multinational companies often have complex legal structures including, shareholders, directors, stakeholders etc, therefore, pinpointing liability for prosecution in such cases becomes complex and difficult. Pertinently, such large companies are prone to corruption because of the excessive power given to the office bearers. Such powers usually influence the legal and regulatory process by the way of bribes, thereby complicating the entire procedure.

Corporate criminal liability in India is relatively a recent development; therefore it gives rise to uncertainties in the enforcement of legal provisions.

 

Conclusion

Corporate criminal liability in India is gaining momentum with the support of the recent legal precedents. In India, the liability is ascertained by numerous legal provisions, thereby presuming the mens rea on the part of the corporation. With the rise of business activities in India, stringent measures are required to set in place in order to prevent greater harm to society.

Engagement with a corporate criminal lawyer in India can prevent the corporations from any such criminal liability as they ensure mandatory compliances are kept in check.

Protect Your Business with ACM Legal’s Expert Corporate Criminal Liability Solutions

At ACM Legal, we specialize in providing comprehensive legal solutions for corporate criminal liability in India. Our team of experienced corporate criminal lawyers ensures that your business complies with all legal requirements and is well-prepared to navigate the complexities of corporate criminal cases. Whether it’s defending against charges, managing legal risks, or ensuring strict regulatory compliance, ACM Legal offers strategic guidance and expert representation to safeguard your company from criminal liabilities.

 

FAQs

1. What is Corporate Criminal Liability and how does it apply in India?

Corporate criminal Liability in India refers to legal accountability of a corporation for the illegal acts committed within its operation. In India, legal provisions like IPC 1860, the companies act, 2013 primarily govern and regulate the acts committed by the corporate bodies.

2. Which Indian laws govern corporate Criminal Liability?

Key legal provisions include IPC, The companies Act, The prevention of Corruption Act, The Environment Protection Act, the SEBI Act and other regulatory acts.

3. What are the key responsibilities of a corporate Criminal lawyer in India?

A corporate criminal lawyer in India is responsible for assisting the companies in maintaining the legal compliances. Pertinently, in cases of any violation, it can also file a suit or defend a company in a litigation.

4. How can companies protect themselves from corporate Criminal Liability?

A company can protect itself from corporate criminal liability in India by ensuring robust Compliance system, regulating the acts of its official, maintaining transparency and accountability, and strict adherence to the relevant laws.

5. What challenges are faced in Enforcing Corporate Criminal Liability in India?

Challenges include according to mens rea to a corporate body, complex structures of a company, mixed share of office bearers, corruption in internal management, and influencing the legal structure through bribery.

Author: Anjali Singhvi, Associate

Co-Author: Eylah Singh, Intern