11/17/2015 CorporateCriminalLiabilityAnAnalysisAuthor:SowmyaSuman

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CorporateCriminalLiabilityAnAnalysis

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Agenerousandelevatedmindisdistinguishedbynothingmorecertainlythananeminentdegreeofcuriositynoristhatcuriosityever
moreagreeablyorusefullyemployed,thaninexaminingthelawsandcustomsofforeignnations.

Largescalecorporationsarethedefiningforceontheglobe.Theyareeverywhere,inalmosteveryaspectofourlives.Paralleltothis
subtleandsometimesnotsosubtledominance,corporationshavebecomedangerouscriminalsaswell.However,Corporationsbeing
nonhumanentities,theircriminalbehaviourisalsooutoftheordinary.

Corporatecriminalitychallengesornagsatoursenseofreality.Itisthischaracteristicthatmakescorporatecrimeatrickyissue.The
developmentofcorporatecriminalliabilityhasbecomeaproblemwhichagrowingnumberofprosecutorsandcourtshavetodealwith
atthepresenttime.Inthecommonlawworld,followingstandingprinciplesintortlaw,Englishcourtsbegansentencingcorporations
inthemiddleofthelastcenturyforstatutoryoffenses.Ontheotherhand,alargenumberofEuropeancontinentallawcountrieshave
notbeenabletoornotbeenwillingtoincorporatetheconceptofcorporatecriminalliabilityintotheirlegalsystems.Thefactthatcrime
hasshiftedfromalmostsolelyindividualperpetratorsonly150yearsago,towhitecollarcrimesonaneverincreasingscalehasnot
yetbeentakenintoaccountinmanylegalsystems.Atthesametime,crimehasalsobecomeincreasinglyinternationalinnature.

CriminalLiabilityiswhatunlocksthelogicalstructureoftheCriminalLaw.Eachelementofacrimethattheprosecutorneedstoprove
beyondareasonabledoubtisaprincipleofcriminalliability.Therearesomecrimesthatonlyinvolveasubsetofalltheprinciplesof
liability,andthesearecalledcrimesofcriminalconduct.

Thequestionofimposingcriminalliabilitytoacorporationforcriminaloffencescommittedbydirectors,managers,officersandother
employeesofthecorporationwhileconductingcorporateaffairshasgainedalotofimportanceinthejurisprudenceofcriminallaw.
Theverybasisforthepossibilityofimposingcriminalliabilitytoacorporationisitsindependentlegalpersonality.

Nowthequestioniswhetheracorporationasanartificialpersoniscapableofcommittingacrimeandiscriminallyliablebythelawor
not.Thetraditionalviewwasthatacorporationcouldnotbeguiltyofacrime,becausecriminalguiltrequiredintentandacorporation
nothavingamindcouldformnointent.Inaddition,acorporationhadnobodythatcouldbeimprisoned.

Courtsareespeciallylikelytoimposecriminalliabilityonacorporationwhenthecriminalactisrequested,authorized,orperformedby
theboardofdirectors,anofficeroranotherpersonhavingresponsibilityforformulatingcompanypolicyorhighleveladministrator
havingsupervisoryresponsibilityoverthesubjectmatteroftheoffenceandactingwithinthescopeofhisemployment.

AssessingCommonLawTheoriesOfCorporateCriminalLiability
Theendorsementofcriminalliabilityofcorporationshaslargelybeenatwentiethcenturyjudicialdevelopment,influencedbythe
"sweepingexpansion"[1]ofcommonlawprinciples.Themajorityoftheoriesofcorporatecriminalliabilityaretypicalofcommonlaw
developmentstheyhavebeenconstructedonacasebycasebasis.Despitetheirimportance,thesetheorieshaveprovedtobe
ineffective,fortheirlackofstrongtheoreticalbasisandtheirindividualisticroots.Examplesofthesemodelsaretheagencytheory
and,inamoreelaborateform,identificationandaggregationtheories.

AgencyTheory
Theagencytheorywasfirstdevelopedintortlawandgraduallywascarriedoverintothecriminalarena.[2]Accordingtothistheory,
thecorporationisliablefortheintentsandactsofitsemployees.

VicariousliabilityorrespondeatsuperioriscommonlyemployedintheUnitedStates.Inotherjurisdictions,thistheoryisrestrictively
establishedinrelationtosomestrictliabilityandhybridoffencesthatdealwithmatterssuchaspollution,food,drugs,healthand
safetyatworkbutnottomensreaoffences.

Theagencytheoryisbasedonthepremisethatcriminalviolationsnormallyentailtwoelements,actusreusandmensrea.Since
corporationsareconsideredtobepurelyincorporeallegalentities,theydonotpossesanymentalstateandtheonlywaytoimpute
intenttoacorporationistoconsiderthestateofmindofitsemployees.Thetheoryencompassesasimpleandlogicalmethodof
attributingliabilitytoacorporateoffender,ifcorporationsdonothaveintention,someonewithinthecorporationsmusthaveitandthe

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intentionofthisindividualaspartofthecorporationistheintentionofthecorporationitself.CourtsintheUnitedStates,wherethe
theoryiswidelyused,havedevelopedathreeparttesttodeterminewhetheracorporationwillbeheldvicariouslyliablefortheactsof
itsemployees.First,theemployeemustbeactingwithinthescopeandcourseofhisemployment.Secondly,theemployeemustbe
acting,atleastinpart,forthebenefitofthecorporation,yetitisirrelevantwhetherthecompanyactuallyreceivesthebenefitor
whethertheactivitymightevenhavebeenexpresslyprohibited.Thirdly,theactandintentmustbeimputedtothecorporation.[3]

ScopeofEmployment
Therequirementthatanemployeemustbeactingwithinthescopeofhisorheremploymentismetiftheemployeehasactualor
apparentauthoritytoengageintheactinquestion.[4]Actualauthorityexistswhenacorporationknowinglyandintentionally
authorizesanemployeetoactonitsbehalf.InNewYorkCentralRailroad,[5]thefirstSupremeCourtcaseholdingacorporation
criminallyliable.ThecorporationwasconvictedofviolatingtheElkinsActwhereageneralandanassistanttrafficmanagerpaid
rebatesforshipmentsofsugar.Theagentsactedwithinthescopeofactualauthoritybecausetheywereauthorizedtosetupfreight
rates.Therefore,theyactedwithinthescopeofauthorityconferreduponthembythecorporation.InUnitedStatesv.Investment
Enters.,Inc.,[6]thecompanywasconvictedofviolatingobscenitylawswherethecorporationspresidentconspiredtotransport
obscenevideosininterstatecommerce.Thepresidentsunlawfulactscouldbeimputedtothecorporationbecausehewasan
undisputedlyauthorizedagent.

Acorporationsliabilitycanbeextendedtoactsperformedwithintheagentsapparentauthority.Apparentauthorityisdefinedasthe
authoritythathasnotbeenexpresslyagreedbutcanbeunderstoodbyathirdpartyfromthecontextoftheagentsacts.Itisthe
authoritywhichanoutsidercouldreasonablyassumethatanagentwouldhavejudgingfromhispositionwithinthecompany,andthe
responsibilitypreviouslyentrustedtohim,andthecircumstancessurroundinghispastconduct.[7]

Thequestionofwhetheranemployeeactedinthescopeofhisorherauthorityisdifferentlydeterminedbyeachsourceoflawand
factualframework.Federalcourtshaveconstantlyheldthatacorporationmaybeliablefortheactionsofitsagentsregardlessofthe
agentspositionwithinthecorporation.TheseCourtshavefoundthatanemployeesactcanbindthecorporationevenwherethe
corporationhasimplementedpoliciesprohibitingthebehaviour.Whenanemployeesconductiscontrarytothecompanys
compliancepoliciesandspecificdirectives,thecompanycanstillbeheldliable.[8]Thecompanycanprovethatithasestablished
corporatepoliciesinanefforttoreducecrime,butthisdoesnotpreventacourtfromfindingitcriminallyliable.Theexistenceofan
effectivecompliancepolicywillnotprovideanabsolutedefencefromcriminalliability,[9]butthecompanymayqualifyforareduced
penalty.

Theconceptofscopeofemploymentiscommonandhasbroadinterpretations.Thus,courtshaveheldthatevennonemployees
conductcanbeattributedtobeasthecorporationsaction.InUnitedStatesv.ParfaitPowder,itwasheldthatindependent
contractorsmightactforthebenefitofthecorporationtherebyexposingittocriminalliability.[10]
Manystateshaveadoptedspecificlegislativestrategytodealwithcorporationsthatrequirescriminalactsbecommittedbyhigh
managerialagentsinordertotriggerliability.Thispositioncloselyresemblestheidentificationtheory.Insomestates,however,the
ruleisthattheactionstakenbyacorporationsagentsneednothavebeenratifiedbythecorporationsdirectors,officers,orother
highmanagerialagentsinordertobechargeabletothecorporation.

AstricterstandardcanbefoundintheModelPenalCode.TheCoderequires,asanadditionalelementthatthecommissionofthe
offencebeauthorized,requested,commanded,performedorrecklesslytoleratedbytheboardofdirectorsorbyahighmanagerial
agentactingonbehalfofthecorporationwithinthescopeofhisofficeoremployment.[11]

Bydifferentiatingtheascriptionofliabilitybasedontheactionsofagentsandbasedontheactionsofhighmanagerialagents,the
Codedirectlydistinguishesbetweentheabilityofmanagerialemployeesandloweremployeestounderstandandpreventcrime.

BenefitingtheCorporation
Thesecondelementofcorporatecriminalliabilityaccordingtothetheoryofvicariousliabilityisthattheactbenefitsthecompany.The
benefitneednotbereal,yetpotential.AsHallpointsout,forthisrequirement,thecorporationneednotactuallyreceiveabenefitthe
employeesmereintentiontobestowabenefitsuffices.[12]

Itisnotnecessarythattheemployeebeprimarilyconcernedwithbenefitingthecorporationsincemanyemployeesactprimarilyfor
theirownpersonalgain.[13]Althoughthecorporationdidnotactuallygainfromtheactionortheagentviolatedacompanypolicy,
liabilitymaystillbeimputedtoacorporation.

IdentificationTheory:
Thedoctrineofidentificationisthetraditionalmethodbywhichcompaniesareheldliableinmostcountriesundertheprinciplesofthe
commonlaw.Thelimitationsoftheagencytheoryledtotheconstructionofadirectliabilitytheory.Thistheorywasdevelopedasan
attempttoovercometheproblemofimposingprimary,asopposedtovicarious,corporatecriminalliabilityforoffencesthatinsistedon
proofofcriminalfault.InLennardsCarryingCoLtdv.AsiaticPetroleumCoLtd,[14]ViscountHaldanefashionedamodelofprimary
corporatecriminalliabilityforoffencesthatrequiremensreathatwouldlaterbeknownastheidentificationtheory.Inthelightof
Haldanesjudgment:

Acorporationisanabstraction.Ithasnomindofitsownanymorethanithasabodyofitsownitsactiveanddirectingwillmust
consequentlybesoughtinthepersonofsomebody,whoforsomepurposesmaybecalledanagent,butwhoisreallythedirecting
mindandwillofthecorporationtheveryegoandcentreofthepersonalityofthecorporation.

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Asintheagencytheory,theidentificationtheoryreliesonanindividualtoattributeliabilitytoacorporation.However,whiletheformer
doctrinesimplyimitatestortprinciples,thelatteradjuststheseprinciplestotherealityofcorporatemisconduct.Furthermore,the
identificationtheoryintroducesthepersonificationofthecorporatebody.Accordingtothistheory,thesolutionfortheproblemof
attributingfaulttoacorporationforoffencesthatrequireintentionwastomergetheindividualwithinthecorporationwiththe
corporationitself.Unliketheagencytheory,theindividualemployeeisassumedtobeactingasthecompanyandnotforthe
company.Thetheorydeemphasizedtheneedforthedevelopmentofvicariousliability.Theagencytheoryhasnowbeenconsidered
asunjustandlackingindefensiblepenalrationale.

GuiltyMind
Themainunderlyingprincipleoftheidentificationtheoryisthedetectionoftheguiltymind,therecognitionoftheindividualwhowillbe
identifiedasthecompanyitself,whowillbethecompanysveryego,vitalorgan,ormind.

TescoSupermarketv.Nastrass[15]istheleadingauthorityinthisarea.TescoSupermarketwasalargechainstorewhichwas
chargedwithanoffenceagainsttheTradeDescriptionsAct1968[16]bysellinggoodstoconsumersatapricedifferentthanhadbeen
announced.Theprosecutionconcernedtheadvertisementofsoappowderatareducedprice.Ashopassistanthadmistakenlyplaced
normallypricedsoappowderontheshelf.Themanagerhadfailedtoensurethatthepowderwasavailableattheadvertisedprice.
Therewasadefenceofduediligencewhichcouldbepleadedbythecompany,unlessthemanagerslackofduediligencecouldbe
attributedtothecompany.[17]Thequestionwaswhetherthemanagerofthestorecouldbeidentifiedwiththecompanyviathe
commonlawdoctrine,orinotherwords,whethernaturalpersonorpersonsaretobetreatedasbeingthecorporationitself.

TheHouseofLordsheldthatthemanagerwasnotapersonofsufficientlyimportantstaturewithinthecorporatestructuretobe
identifiedasthecompanyforthispurpose,andsincetherehadbeenduediligenceattheleveloftopmanagement,thecompany
couldusethedefence.ThemetaphorusedbyLordDenninginanearliercasewasareferenceinthisdecision:

Acompanymayinmanywaysbelikenedtoahumanbody.Ithasabrainandanervecentrewhichcontrolswhatitdoes.Italsohas
handswhichholdthetoolsandactinaccordancewithdirectionsfromthecentre.Someofthepeopleinthecompanyaremere
servantsandagentswhoarenothingmorethanhandstodotheworkandcannotbesaidtorepresentthedirectingmindandwillof
thecompany,andcontrolwhatitdoes.Thestateofmindofthesemanagersisthestateofmindofthecompanyandistreatedbythe
lawassuch.[18]

Themanagerofthestorewasnotconsideredasthemindofthestore.Instead,hewasregardedasaservant,thehandsofthestore.
Inordertogivesomeguidancefortheproblemofwhoistobeconsideredasthecorporationitselfforthepurposesofimputing
liability,somestandardswerearticulatedinTescoSupermarketv.Nastrass.LordReidstatedthat,Normallytheboardof
directors,themanagingdirectorandperhapsothersuperiorofficersofacompanycarryoutthefunctionsof
managementandspeakandactasthecompany.
ViscountDilhorneexplainedthatinhisviewapersonwhoisinactualcontroloftheoperationsofacompanyorofpartofthemand
whoisnotresponsibletoanotherpersoninthecompany168wouldbethedirectingmindandwillofthecompany.LordPearson
underscoredthisreasoningaddingthattheconstitutionofthecompanyconcernedshouldbetakenintoaccountinordertoindicateif
thepersonisinapositionofbeingidentifiablewiththecompany.

Tescoscriterionisstillthemostfrequentlyusedfordeterminingwhosecorporateagentcanbeidentifiedastheembodimentofthe
corporationitself.Accordingtotheseestablishedpattern,theguiltymind,theegoorbrainofthecompanymustbeavitalorganof
thecompany,anindividualwhoissufficientlyseniorwithinthecorporatestructuretorepresent,metaphorically,themindofthe
company.Generally,theguiltymindcanbeidentifiedwiththeboardofdirectors,thetopofficersofthecorporation,thosewhoare
delegatedresponsibility,andthosethathavedutiesofsuchresponsibilitythattheirconductmayfairlybeassumedtorepresentthe
policyofthecorporation.

Thearrayofpersonnelwhoseactscanbeimputedtothecompanyvariesfromjurisdictiontojurisdiction.Australiancourtshave
shownamarkedtendencytoapplyTescoprinciples.SomeAmericanstatesandtheAmericanModelPenalCodealsoacceptthis
approach.[19]InEngland,wheretheprinciplesweremolded,theTescostandardisstrictlyfollowed,yetitcanbeshapeddifferentlyin
everysituation.Forexample,inMeridianGlobalFundManagementAsiaLtdvSecuritiesCommission,[20]LordHoffman[21]stated
thatineachcasethecourthadtofashionaspecialruleofattributionfortheparticularsubstantiverule.Canadiancourtsadopteda
broaderviewoftheTescoprinciplesandstretchedthesetofpersonnelthatcanbeidentifiedwiththecompanyitself.[22]Thewider
CanadianpositioncanbecontrastedwiththerestrictedEnglishapplicationofthedoctrineofidentification,establishedinTesco.In
CanadianDredge&Dockthedistinctivepostureisclearlydefendedinacomparativeground:Theapplicationofidentificationrulein
Tesco,supra,maynotaccordwiththerealitiesoflifeinourcountry.ThenitissaidthatthesimplesizeofCanadameansthat
corporationsmaybewidespread,andconsequentlymayhaveadecentralizedcontrol,whichimpliesthatthedirectingmindsandwill
canbefoundindifferentgeographiclocations.EsteyJ.statedthat:

ThismustbeaparticularlysoinacountrysuchasCanadawherecorporateoperationsarefrequentlygeographicallywidespread.The
transportationcompanies,forexample,mustofnecessityoperatebythedelegationandsubdelegationofauthorityfromthe
corporatecentre:bythedivisionandsubdivisionofthecorporatebrainandbydecentralizingbydelegationtheguidingforcesinthe
corporateundertaking.

BillC45,enactedonNovember7,2003,extendstheconceptofdirectingminditusestheexpressionseniorofficers"toinclude
everyonewhohasanimportantroleinsettingpolicyormanaginganimportantpartoftheorganizationsactivities.Forcrimesof

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negligence,thebillproposesadeparturefromtheconceptofdirectingmindwhenitstatesthatmentalelementoftheoffencewillbe
attributabletocorporationsandotherorganizationsthroughtheaggregatefaultoftheorganizationsseniorofficerswhichwillinclude
thosemembersofmanagementwithoperational,aswellaspolicymaking,authority.

AggregationTheory:
Overthepastdecadesthecorporationsinternalstructureshavebeenalteredandexpanded.Largemoderncorporationsareno
longersetupwithaclear,pyramidlikehierarchalstructureofauthorityandpower.Onthecontrary,moderncorporationshave
multiplepowercentersthatshareincontrollingtheorganizationandsettingitspolicy.Thecomplexityofthisnewsettinghascreated
somechallengesfortheimpositionofcriminalliabilitytocorporationsunderthetraditionalapproaches.Sometimespowerand
influencesareextremelydiffusedinthecorporationcontextsothatitisalmostimpossibletoisolatetheresponsibleindividualwhose
intentioncouldbeattributedtothecorporationitself.Theaggregationorcollectiveknowledgedoctrinewasdevelopedasaresponse
tothispuzzlingscenario.

Theaggregationtheoryisgroundedinananalogytotortlawinthesamewayastheagencyandidentificationdoctrine.Underthe
aggregationtheory,thecorporationaggregatesthecompositeknowledgeofdifferentofficersinordertodetermineliability.The
companyaggregatesalltheactsandmentalelementsoftheimportantorrelevantpersonswithinthecompanytoestablishwhetherin
tototheywouldamounttoacrimeiftheyhadallbeencommittedbyoneperson.180AccordingtoCeliaWells,aggregationof
employeesknowledgemeansthatcorporateculpabilitydoesnothavetobecontingentononeindividualemployeessatisfyingthe
relevantculpabilitycriterion.[23]

ThetheoryofaggregationisaresultoftheworkofAmericanFederalCourts.TheleadingcaseisUnitedStatesv.BankofNew
England,[24]wherethebankwasfoundguiltyofhavingfailedtofileCTRscurrencytransactionsreports[25]forcashwithdrawals
higherthan$10,000.TheclientmadethirtyonewithdrawalsonseparateoccasionsbetweenMay1983andJuly1984.Eachtime,he
usedseveralchecks,eachforasumlowerthantherequiredtotal,noneofwhichamountedto$10,000.Eachcheckwasreported
separatelyasasingularitemontheBankssettlementsheets.Oncethecheckswereprocessedtheclientwouldreceiveinasingle
transferfromtheteller,onelumpsumofcashwhichalwaysamountedtoover$10,000.Oneachofthechargedoccasions,thecash
waswithdrawnfromoneaccount.TheBankdidnotfileCTRsonanyofthesetransactions.Eachgroupofcheckswaspresentedtoa
differenttelleratdifferenttimes.

Inthiscase,thequestionwasifanyknowledgeandwillcouldbeattributedtothecorporateentity.Thetrialjudgefoundthatthe
collectiveknowledgemodelwasentirelyappropriateinsuchcontext,andstatedasmuchinaddition,however,youhavetolookatthe
bankasaninstitution.Assuch,itsknowledgeisthesumofalltheknowledgeofallitsemployees.Thatis,thebanksknowledgeisthe
totalityofwhatalloftheemployeesknewwithinthescopeoftheiremployment.So,ifemployeeAknowsofonefacetofthecurrency
reportingrequirement,Bknowsanotherfacetofit,andCathirdfacetofit,thebanksknowthemall.So,ifyoufindthatanemployee
withinthescopeofhisemploymentknewthatthe[reports]hadtobefiled,evenifmultiplechecksareused,thebankisdeemedto
knowitifeachoftheseveralemployeesknewapartoftherequirementandthesumofwhattheseparateemployeesknewamounted
totheknowledgethatsucharequirementexisted.Thepartisansofcollectiveknowledgeexplainthatthedifficultyofproving
knowledgeandwillfulnessinacompartmentalizedstructuresuchasacorporationshouldnotbeanimpedimenttotheformationofthe
corporationsknowledgeasawhole.Accordingtothesepositions,itisnotessentialthatonepartbeawareoftheintentionandactof
theotherpartfortheformationofaggregateknowledge.InBankofNewEngland,itwasexplainedthat:

Corporationscompartmentalizeknowledge,subdividingtheelementsofspecificdutiesandoperationsintosmallercomponents.The
aggregateofthosecomponentsconstitutesthecorporationsknowledgeofaparticularoperation.Itisirrelevantwhetheremployees
administeringonecomponentofanoperationknowthespecificactivitiesofemployeesadministeringanotheraspectoftheoperation.

Thistheoryappearstocombinetherespondeatsuperiorvicariousliabilityprinciplewithoneofpresumedordeemedknowledge.
Evenifnoemployeeoragenthastherequisiteknowledgetosatisfyastatutoryrequirementneededtobeguiltyofacrime,the
aggregateknowledgeandactionsofseveralagents,imputedtothecorporateexecutive,couldsatisfytheelementsofthecriminal
offence.InspiteofthewideinterpretationoftheaggregationtheoryemployedinBankofNewEnglanddecision,Americancourts
havebeencarefulwiththeapplicationofthisruling.Somefederalcourtshavehadanarrowerunderstanding,anddistinguished
collectiveknowledgefromcollectiveintentorcollectiverecklessness.Accordingtothisversion,theattributionofmensreaorintentor
recklessnesstoacorporationnecessarilydependsonthefulldevelopmentofthisculpablestateofmindinoneofthecorporations
employees.ContrarytotheBankofNewEnglanddecision,Americancourtsunderstandthatacorporationcouldnotbedeemedto
haveaculpablestateofmindwhenthatstateofmindisnotpossessedbyasingleemployee.InInlandFreightLines[26]itwas
clarifiedthatcorporatecollectiveknowledgeandcollectivecriminalintentdonotnecessarilyhavethesamemeaning.

Theideaofaggregateknowledgeisfundamentaltothenotionofcorporatefaultitrepresentsadeparturefromtheparadigmthat
intentionmustcomefromasingleindividual.However,astobeexpected,therupturewitholdconceptsisnotbrusque,whichisthe
reasonwhyindividualismisstillpresentinthecollectiveknowledgetheory.Corporatefaultisthefaultofthegroupandnotofthe
corporationitself.Thisfactdoesnottakemeritawayfromtheaggregationtheory.Commonlawtheorieshavebeenthenecessary
bridgebetweentheindividualisticandorganizationalapproaches.Theyarebringingbacktolifeprinciplesofcriminallawthathave
prevailedbeforetheprevalenceoftheprinciplethatonlyindividualscommitcrimes.Inallofthesetheories,corporatefaultisstill
tracedbacktoanindividualoragroupofindividual,yettheyallowtheattributionofcriminalliabilitytocorporations.

CorporateCriminalLiabilityInIndia
CriminalLiabilityisattachedonlythoseactsinwhichthereisviolationofCriminalLawi.e.tosaytherecannotbeliabilitywithouta
criminallawwhichprohibitscertainactsoromissions.[27]ThebasicruleofcriminalliabilityrevolvesaroundthebasicLatinmaxim
actusnonfacitreum,nisimenssitrea.Itmeansthattomakeoneliableitmustbeshownthatactoromissionhasbeendonewhich
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wasforbiddenbylawandhasbeendonewithguiltymind.

Henceeverycrimehastwoelementsonephysicalknownasactusreusandothermentalknownasmensrea.[28]Thisistheruleof
criminalliabilityintechnicalsensebutingeneraltheprincipleuponwhichresponsibilityispremisedisautonomyoftheindividual,
whichstatesthattheimpositionofresponsibilityuponanindividualflowsnaturallyfromthefreedomtomakerationalchoicesabout
actionsandbehaviour.[29]

Althoughthegeneralruleasstatedaboveisapplicabletoallcriminalcasesbutthecriminallawjurisprudencehasseenoneexception
totheabovesaidconceptinformofdoctrineofstrictliabilityinwhichonemaybemadeliableinabsenceofanyguiltystateofmind.
Thishappensincasesofmassdestructionsthroughpollution,grossnegligenceofthecompanyresultinginwidespreaddamageslike
intheBhopalGastragedy,etc.[30]

Hence,therecanbenodisputeofimposingcriminalliabilityoncorporationsasregardsnomensrearequiringoffencesbuthowever,it
usedtocometobequestionedbeforetheCharteredBankjudgementwhenmensreawasconcerned.

CorporateCriminalLiabilityTheNecessity:
Inthemoderndayworld,thestrongeffectofactivitiesofcorporationsisincredibleonthesociety.Inthedaytodayactivities,notonly
dothecorporationsaffectthelivesofthepeopleasablessingbutalsomanyatimesprovesdisastrouswhichthenfallsunderthe
categoryofcrimes.Forinstance,theUpharCinematragedyorthousandsofscandalsespeciallythewhitecollarandorganized
crimescancomewithinthecategorythatrequiresimmediateconcern.Despitesomanydisasters,thelawwasunwillingtoimpose
criminalliabilityuponcorporationsforalongtime.Thiswasforbasicallytworeasonsthatare[31]:

#Thatcorporationscannothavethemensreaortheguiltymindtocommitanoffenceand
#thatcorporationscannotbeimprisoned.
Thesetwoobstaclesweremanagedtosurvivetilllate20thandveryearly21stcentury.Thegeneralbeliefintheearly16thand17th
centurieswasthatcorporationscouldnotbeheldcriminallyliable.Intheearly1700s,corporatecriminalliabilityfacedatleastfour
obstacles,i.e.

Firstly,attributingactstoajuristicfiction,thecorporation.Eighteenthcenturycourtsandlegalthinkersapproachedcorporateliability
withanobsessivefocusontheoriesofcorporatepersonalityamorepragmaticapproachwasnotdevelopeduntilthetwentieth
century.
Secondly,thelegalthinkersdidnotbelievecorporationscouldpossessthemoralblameworthinessnecessarytocommitcrimesof
intent.
Thirdly,theultraviresdoctrine,underwhichcourtswouldnotholdcorporationsaccountableforacts,suchascrimes,thatwerenot
providedforintheircharters.
Finally,thefourthobstaclewascourtsliteralunderstandingofcriminalprocedureforexample,judgesrequiredtheaccusedtobe
broughtphysicallybeforethecourt.

Corporatemensrea
CourtsinUnitedStateswereslowtoextendcorporatecriminalliabilitytocrimesofintent8andtheprocessinIndiawasevenslower.
Now,itiswellsettledthatacorporatecanbeheldliableforcommittingoffencesthatrequiremensreaasnowithasbeenrecognized
thatacorporatecanhaveamensrea.

Generally,corporationsmaybeheldcriminallyresponsiblefortheillegalactsofitsemployeesifsuchactsare[32]relatedtoand
committedwithinthecourseofemployment,committedinfurtheranceofthebusinessofthecorporationanditsimbibedculturefor
example,ifthecorporatestructureissoorganizedastodepriveseniormanagersoftheinformationtheyneedtoexercisesuch
powers,thiswouldindicateacorporateculturethatisdesignedtoeludelawenforcement.Generally,deficientstructuresforthe
disseminationofinformationwithinthefirmwouldalsobesuspect.Moreover,inorganizedcrimenetworks,thecultureandthe
objectiveofthecorporationinitselfistocommitcrimes,authorizedoracquiescedinbythecorporation.Inthesecases,thecorporate
itselfauthorizesandsometimesdirectsitsemployeestoenterintounethicalbusinesspracticeswhicharesanctionedbythe
organizationstructurelikeincaseofrecoverywhereinhiringofantisocialelementsisdirectedmanyatimes.

Hence,thereisnoobstacleinthecriminallawjurisprudencewhatsoevertoimposecriminalsanctiononacorporationsinceitcan
haveamindofitsownandalsoanenvironmentwhereincrimeisnurtured.However,thisconceptstillnotcontemplatedinthestatutes
inIndia.

StatutoryInadequacy:
ThisdevelopedjurisprudencedoesnotfindaplaceintheIndianstatuesastheystillmakeonlytheofficialsresponsiblefortheact
criminallyliableandnotthecorporateitself.Instancesofthisare:
Sections.45,63,68,705,203,etcoftheIndianCompaniesActwhereinonlytheofficialsofthecompanyareheldliableandnotthe
companyitselfitisalsoreflectedthroughtheTakeoverCode.ThevarioussectionsoftheIPCthatdirectcompulsoryimprisonment
doesnottakeacorporateintoaccountsincesuchasanctioncannotworkagainstthecorporation.

Thesearethemajorstatutesintheirrespectivefieldthataredevoidofnecessarylegalaspects.Ontheotherhand,lawhasalso
developedtoanextentwithregardtocertainotherstatutesandtheirrespectivepenalprovisionswhereinafinehasbeenimposedon
thecorporationswhentheyarefoundtobeguilty.Somesuchexamplesare:

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Section141oftheNegotiableInstrumentsAct,1862[33]
Section7,EssentialCommoditiesAct[34]
Section276BoftheIncomeTaxAct[35]
Thestatutesmentionedinthefirstpointneedtobeamendedsoontoincludecorporatecriminalliabilityandnotmerelyrestricting
criminalliabilitytoitspersonnel.

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CorporatePunishment
InIndia,certainstatutesliketheIndianPenalCodetalkaboutkindsofpunishmentsthatcanbeimposedupontheconvictandasper
Section53includedeath,lifeimprisonment,rigorousandsimpleimprisonment,forfeitureofpropertyandfine.Incertaincasesthe
sectionsspeakonlyofimprisonmentasapunishmentlikeincaseofoffenceunderSection420.Thustheproblemarisesastohowto
applythosesectionsonthecompaniessinceacriminalstatuteneedstobestrictlyinterpretedandinsuchstatutesthereisnoscope
forcorporationstobeimprisoned.

Goingwiththeaboveviewpointandwiththegrowingtrendofcorporatecriminality,theCourtsinIndiahavefinallyrecognizedthata
corporationcanhaveaguiltymindbutstillwerereluctanttopunishthemsincethecriminallawinIndiadoesnotallowthisaction

InTheAssistantCommissioner,AssessmentII,BangaloreandOrs.v.VelliappaTextilesLtd.andOrs.[36],B.N.SrikrishnaJ.said
thatcorporatecriminalliabilitycannotbeimposedwithoutmakingcorrespondinglegislativechanges.Forexample,theimpositionof
fineinlieuofimprisonmentisrequiredtobeintroducedinmanysectionsofthepenalstatutes.TheCourtwasoftheviewthatthe
companycouldbeprosecutedforanoffenceinvolvingrupeesonelakhorlessandbepunishedastheoptionisgiventothecourtto
imposeasentenceofimprisonmentorfine,whereasinthecaseofanoffenceinvolvinganamountorvalueexceedingrupeesone
lakh,thecourtisnotgivenadiscretiontoimposeimprisonmentorfineandtherefore,thecompanycannotbeprosecutedasthe
custodialsentencecannotbeimposedonit.

ThelegaldifficultyarisingoutoftheabovesituationwasnoticedbytheLawCommissionandinits41stReport,theLawCommission
suggestedamendmenttoSection62oftheIndianPenalCodebyaddingthefollowinglines:
Ineverycaseinwhichtheoffenceisonlypunishablewithimprisonmentorwithimprisonmentandfineandtheoffenderisacompany
orotherbodycorporateoranassociationofindividuals,itshallbecompetenttothecourttosentencesuchoffendertofineonly.

Asperthejurisprudenceevolvedtillthen,underthepresentIndianlawitisdifficulttoimposefineinlieuofimprisonmentthoughthe
definitionofpersonintheIndianPenalCodeIncludescompany.ItisalsoworthwhiletomentionthatourParliamenthasalso
understoodthisproblemandproposedtoamendtheIPCinthisregardbyincludingfineasanalternatetoimprisonmentwhere
corporationsareinvolvedin1972.[37]However,theBillwasnotpassedbutlapsed.Suchafundamentalchangeinthecriminal
jurisprudenceisalegislativefunctionandhencetheParliamentshouldperformitassoonaspossiblebyalsoconsideringthe
followingargumentsthattheauthorhasbroughtabout.

However,theApexCourtlateroverruledthisdecisioninStandardCharteredBankandOrs.v.DirectorateofEnforcementandOrs[38]
onaccountofprovidingcompletejusticetotheaggrievedwhichcouldnotbeprejudicedinthegarbofcorporatepersonality.Inthis
case,theCourtdidnotgobytheliteralandstrictinterpretationrulerequiredtobedoneforthepenalstatutesandwentontoprovide
completejusticetherebyimposingfineonthecorporate.

TheCourtlookedintotheinterpretationrulethatthatallpenalstatutesaretobestrictlyconstruedinthesensethattheCourtmustsee
thatthethingchargedasanoffenceiswithintheplainmeaningofthewordsusedandmustnotstrainthewordsonanynotionthat
therehasbeenaslipthatthethingissoclearlywithinthemischiefthatitmusthavebeenintendedtobeincludedandwouldhave
includedifthoughtof.[39]

Simultaneously,italsoconsideredthelegislativeintentandheldthatallpenalprovisionslikeallotherstatutesaretobefairly
construedaccordingtothelegislativeintentasexpressedintheenactment.Itwasoftheviewthathere,thelegislativeintentto
prosecutecorporatebodiesfortheoffencecommittedbythemisclearandexplicitandthestatuteneverintendedtoexoneratethem
frombeingprosecuted.Itissheerviolencetocommonsensethatthelegislatureintendedtopunishthecorporatebodiesforminorand
sillyoffencesandextendedimmunityofprosecutiontomajorandgraveeconomiccrimes.Ifanenactmentrequireswhatislegally
impossibleitwillbepresumedthatParliamentintendedittobemodifiedsoastoremovetheimpossibilityelement.TheseCourts
http://www.legalserviceindia.com/article/l101CorporateCriminalLiabilityAnAnalysis.html 6/9
11/17/2015 CorporateCriminalLiabilityAnAnalysisAuthor:SowmyaSuman
haveappliedthedoctrineofimpossibilityofperformance[Lexnoncogitadimpossibilia]innumerouscasesincludingthe
aforementioned.[40]

Finally,theCourtdecidedthatasthecompanycannotbesentencedtoimprisonment,thecourtcannotimposethatpunishment,but
whenimprisonmentandfineistheprescribedpunishmentthecourtcanimposethepunishmentoffinewhichcouldbeenforced
againstthecompany.Suchdiscretionistobereadintothesectionsofarasthejuristicpersonisconcerned.Ofcourse,thecourt
cannotexercisethesamediscretionasregardsanaturalperson.Thenthecourtwouldnotbepassingthesentenceinaccordance
withlaw.Asregardscompany,thecourtcanalwaysimposeasentenceoffineandthesentenceofimprisonmentcanbeignoredasit
isimpossibletobecarriedoutinrespectofacompany.Thisappearstobetheintentionofthelegislatureandwefindnodifficultyin
construingthestatuteinsuchaway.Wedonotthinkthatthereisblanketimmunityforanycompanyfromanyprosecutionforserious
offencesmerelybecausetheprosecutionwouldultimatelyentailasentenceofmandatoryimprisonment.

Thewellknownmaximjudicisestjustdicere,nondarebestexpoundstheroleofthecourt.Itistointerpretthelaw,nottomakeit.
ThisreadwiththeDoctrineofSeparationofPowershasboundtheCourtshandsinimposingvariouskindsofpunishmentsandall
thatitisleftwithistoimposefines.InordertoavoidcompellingtheCourtstogooutofthestatuteandinterpretandthereforedefine
thelawwhichisessentiallythetaskofthelegislature[41],itisadvisedthatthelegislatureamendsthevariouspenalstatutesinaway
soastobringinvariousformsofpunishmentsforthecorporationsaswell,therebymaintainingtheseparationofpowersregimeand
hencetheruleoflaw.

Feasibilityoffine
Fineisthemostcommonpunishmentineverypartoftheworldanditisapunishmenttheadvantagesofwhicharesogreatand
obviousthatweproposetoauthorizethecourtstoinflictitineverycaseImprisonment,transportation,banishment,solitude,
compelledlabourarenotequallydisagreeabletoallmen.Withfinethecaseisdifferent.Inimposingafineitisnecessarytohave
regardtothepecuniarycircumstancesoftheoffender,astothecharacterandmagnitudeoftheoffence.Themulletwhichisruinous
tothelaboureriseasilybornebyatradesmanandisabsolutelyunfeltbyarichzamindar.

TheimpositionoffinesmaybemadeinfourdifferentwaysasprovidedintheIndianPenalCode.Itisthesolepunishmentforcertain
offencesandthelimitofmaximumfineforsome.Incertaincasesfineisanalternativepunishmentbuttheamountislimited.Incertain
offencesitisimperativetoimposefineinadditiontosomeotherpunishmentandinsomeitisobligatorytoimposefinebutno
pecuniarylimitationislaiddown.

Finescanbeaneffectivepunishmentincasesoftrafficoffencesoroffencesagainstproperty.Butwheretheoffenceisgrave,inthe
senseofmurderorrapeorkidnappingfordeathetc.,itisquestionablewhetherfinecanachievetheobjectofpunishment.Another
shortcomingofthisformofpunishmentisthatitbroochesthepoorandeasestherich.Therichcaneasilygetawaybypayingahuge
finewhilethepoormayhavetohustlehardeventogetahundredrupees.Nevertheless,itsefficacyinspecificcrimeshasmadeita
necessarymodeofsanction.Thisshowsthatbiggestdrawbackinrestrictingfineasthesoleformofpunishmenttocorporationssince
withtheirmassivebankaccounts,itiseasyforthemtogetawaywiththecriminalliabilityanditalsodoesnotsolvethepurposeof
punishmentsinceneitherthecorporateswouldbedeterrednorwouldtheyberestrainedforcommittingcrimeslikecorporatekillings
forinstance:usingpoorqualityofmaterialinbuildingdamswhichwouldsooncollapsetherebydislocatingandevenkilling
inhabitantsaroundtheareaorthelabourersthemselves.Lookingintotheabovedrawbacks,thereisaneedtoevolvenewformsof
punishmentswhichcouldeffectivelydeterthecorporatefromengagingintoanycriminalactivity.

Enroutefornewforms
Presently,allthepenalprovisionsofvariousstatutesincludeonlyfineasaformofpunishmentthatcanbeimposedonacompany.
Soisthecasewithjudicialpronouncementsontheaspectofsentencing.Inadditiontothis,theLawCommissioninits41stReport
alsospeaksofintroducingonlyfineasanadditionalpunishmenttobeimposeduponcorporationsinlieuoffines.Thisrestrictive
thinking,accordingtoCourtsisbasedonthemaximlexnoncogitadimpossibilia,whichtellsusthatlawdoesnotcontemplate
somethingwhichcannotbedone.[42]Thisreasoninginitselfshowsthatthelawlacksinanonholisticviewpointintheconceptof
corporatecriminalliability.TheCourtshavenodoubtbeenefficientinevolvingtheconceptofcriminalliabilityofcorporateandhave
imposedthesameontheconvictsbuttheonlywayofpunishingthemthathasbeenthoughtofisbywayoffines.Itisnowforthe
legislaturetoevolvenewformsofpunishmentsandincorporatetheminthecriminaljusticesystemoftheland.

Conclusion
Corporatebodiesreapalltheadvantagesflowingfromtheactsofthedirectorsandtheyacttothedetrimentofthepublicinthename
ofthecorporatebodies.
Fromtheaboveanalysis,itisclearthatcorporatecriminalliabilityisnotanalienterm.Thiscategoryofliabilityexistedsincetime
immemorial.However,thelegislaturekeptitsmouthshutwhenthequestionofimposingpunishmentarosewithrespectofcorporate
liability.Withtheevolutionofvarioustheories,themostvitalissuewithregardtocorporatecriminalliabilitysettledi.e.,theissueof
mensrea.Conceptofvicariousandstrictliabilityisanimportantaspectofcorporatecriminalliability.

Thecriminallawjurisprudencerelatingtoimpositionofcriminalliabilityoncorporationsissettledonthepointthatthecorporationscan
commitcrimesandhencebemadecriminallyliable.However,thestatutesinIndiaarenotinpacewiththesedevelopmentsandthe
aboveanalysisshowsthattheydonotmakecorporationscriminallyliableandeveniftheydoso,thestatutesandjudicial
interpretationsimposenootherpunishmentsexceptforfines.Apartfromfines,punishmentssuchaswindingupofthecompany,
temporaryclosureofthecorporation,heavycompensationtothevictims,bysteppingontheweaknessofthecorporationi.e.,its
goodwill,etc.Suchmeansofpunishmentwouldhaveadeterrenteffectonthecorporateandthesoleaimofpunishmentunder
criminaljurisprudencewouldbeachieved.

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