MAHARASHTRA NATIONAL LAW UNIVERSITY,

AURANGABAD

WHITE COLLAR CRIME

PROJECT REPORT

White Collar Crime and “Wrongful gain”:-

Dimension and inter-relation

SUBMITTED BY :-
SOM DUTT VYAS
B.A.LL.B.(Hons.)
VIII SEMESTER

Roll no. 21

………………………………………………..

SUBMITTED TO:-

Mrs. Tejal Vakil Ma’am

Asst. Professor of law

Maharashtra National Law University,

Aurangabad
ABSTRACT

“The practitioners of evil, hoarders, the profiteers, the black marketeers, and speculators are
the worst enemy of our society. They have to be dealt with sternly. However well placed
important and influential they maybe, if we acquiesce in wrongdoing, people will lose faith in
us.”                                                                   -Dr. S. Radhakrishnan 

To begin with, White Collar Crimes are the crimes which are committed by the men of elite
society in realms of their business or their occupation. White Collar Crime is an illegal act
per se which is committed in pursuit to achieve illegal ends or benefits known as Wrongful
Gain1or in order to avoid payment of legal or formal dues, or to retain money or property etc.
All of this encompasses criminal and civil violations.

Professor Sutherland points out that, “when a person of respectability and high social status
in course of his legitimate occupation commits an act which is approximately a crime, it is a
White Collar Crime”2. Later he modified his own definition and proposed a new definition as
“A person of upper Socio-economic class who violates the criminal law in course of
occupational or professional activities.”3

In this Research paper, I will primarily focus upon the various faucets of White Collar Crime
i.e. types of white collar crime, liabilities affixed to the same, government’s role in white
collar crimes and furthermore I will explore the quite intertwined relationship of White Collar
Crime with the concept of Wrongful Gains and the theory of Unjust Enrichment.

1
Section 23 of Indian Penal Code (45 of 1860)
2
Dr. S.S Srivastava, Criminology, Criminal Administration (3rd Edition, Central Law Agency, 2007) pg. no. 40
3
Ahmad Siddique’s’ criminology and penology (16th Edition, Eastern Book Company, 2011) pg. no. 438.
3
 Index

1. List Of Authorities
2. Part 1 Introduction
 Statement of Problem
 Hypothesis
 Research Objectives
 Research Questions
 Literature Review
 Research Methodology
3. Part II:- Birth Of White Collar Crimes and their Inter relationships
 Concept of Harmonious Construction
 Interrelationship Of White Collar Crimes with Unjust Enrichment
 Interrelationship of White Collar Crimes With Wrongful Gains
 Defining the Term WHITE COLLAR CRIMES
 Difference Between Traditional Crimes and White Collar Crimes
 Limitations that of the Term “White Collar Crime”
 Relationship to Other Types of Crimes
4. Part III:- Classification Of White Collar Crimes
 Ad hoc crimes
 Breach of trust
 Insider Trading
 Bank Fraud
 Bribery
 Computer Fraud
 Embezzlement
 Extortion
 Tax Evasion
 Corruption
4
 5. Part IV:- Laws and Acts Preventing White Collar Crimes
 Prevention of Money Laundering Act, 2002
 Prevention of Corruption Act, 1988
 Companies Act , 2013
 Essential Commodity Act, 1955
 Industrial (Development and Regulation ) Act, 1951
 Information Technology Act , 2002
 Fugitive Economic Offender’s Bill, 2017
6. Part V:- White Collar Crime In India
 Hoarding, Black Marketing, Adulteration
 Tax Evasion
 Role of Government In White Collar Crimes
7. Part VI:- Remedial Measures
8. Part VII:- Conclusion

5
LIST OF AUTHORITIES
Case Laws:-
1.  State of Gujarat v. Mohanlal Jitamalji Porwal and Anr

2. R. K. Garg v. Union of India

3. Vineet Narayan v. Union of India

4. Subramanium Swamy v. Dr. Man Mohan Singh

5. Jaylalitha v. Union of India

6. The Bihar Fodder Scam Case

7. Centre for Public Interest litigation V Union of India (2G spectrum Case)

8. cash for vote

9. coal scam

10. M.H Hoskot V. State of Maharashtra

Websites

1. Blog.ipleaders.in
2. Legaservicesindia.com
3. Casemine.com

Books Referred

1. S.M.A Qadri, Ahmad Siddique’s Criminology, Penology & Victimology (Eastern

Book Company, Lucknow, 7th Edition. 2016)
2. Joseph F. Sheley, Criminology (Wadsworth Thomason learning, Belmont, USA, 3RD
Edition)
3. Prof. N. V. Paranjape, Criminology and Penology (Central law Publications,
Allahabad, 14th Edition. 2010)

6
 4. J.P.S SIROHI, Criminology & Penology (Allahabad Law Agency, Faridabad
(Haryana) 6th Edition, 2004)
5. MAGUIRE (M) & ETC., OXFORD HANDBOOK OF CRIMINOLOGY
6. Sponsorship of the Justice and Legal System Research Institute, Mrs. Glory Nirmala.k

PART I

INTRODUCTION

A.1
STATEMENT OF PROBLEM:-
The main aim of this study is to know more about the various ingredients and types of White
Collar Crimes particularly keeping in focus it’s significance and its interrelationship with the
concept of Wrongful Gains. To reach at the desired conclusion various case laws have been
discussed to present a holistic understanding about the working and the thought process of
the courts with respect to applicable concepts of law.
A.2
HYPOTHESIS:-
With the aid of various case laws and certain theories the provisons and evolution of White
Collar Crime in India has been discussed in order to see how liabilities can be affixed to the
same while considering it as a part and parcel of Wrongful Gains.

A.3
RESEARCH OBJECTIVES
Following are the research objectives:
•To briefly understand the concept of White Collar Crimes.
•To explore the Interrelation of White Collar Crimes With Wrongful Gains
•To discuss various cases and facets pertaining to the Concept.

A.4
RESEARCH QUESTIONS
1. Define white collar crimes. Are there any limitations to the usage of the term?

7
 2. Is white collar crime in any way related to traditional crime? If so, how?
3. Is white collar crime in any way related to blue collar crime? If so, how?
4. Relationship of White Collar Crime with the Concept of Wrongful Gains?
5. What should be done to eliminate or reduce the rate of White Collar Crimes?
6. Are there any remedial measure to lessen white collar crimes?
7. Is the Government only responsible for the high increase in white collar crimes?

A.5
LITERATURE REVIEW
For the purpose of this project various case laws, statutes, articles were referred by me for
gathering relevant information. One of the Articles on Blog.I pleader.in titled ‘ White Collar
Crimes in India’ which I referred provided me with deep insight about the topic and helped
me immensely to grasp the knowledge regarding my topic for research.

A.6
RESEARCH METHODOLOGY

AIM & OBJECTIVE OF THE STUDY

The aim of the study is to give knowledge about the concept of White Collar Crimes and it’s
and intertwined relationship with the Concept of Wrongful Gains.
SCOPE OF STUDY
The study primarily focuses on the rule as it is developed in the common law system and its
implications India. Its secondary focus also deals with the situations prevailing in European
Countries
SIGNIFICANCE OF THE STUDY
The study is significant as it helps us to know about the Evolution and
Various aspects pertaining to white collar crimes. The study contains certain national cases
which shows how the Concept evolved in India.
LIMITATION OF THE PROJECT

8
The project fails to conduct a primary research thorough examination, interviews and surveys
due to lack of time and Social Distancing norms. The research of the project limits to internet
content as due to pandemic there is lack of access to Books.

PART II :-

BIRTH OF WHITE COLLAR CRIMES

Due to the advance feats of scientific and technological temperament, a modernized form of
criminality known as white collar crime came into being.

The concept of white collar crime was introduced in the field of ‘Criminology’ by Edwin H.
Sutherland in 1939 as “crimes committed by people who enjoy the high social status, great
repute, and respectability in their occupation”. The five attributes of the given definition are:

 It is a crime.

 That is committed by an important person of the company.

 Who enjoys a high social status in the company.

 And has committed it in the course of his profession or occupation.

 There may be a violation of trust.

Furthermore, Indian Penal Code was enacted in 1860 but the Enigma herein is that, the
word white collar crime is nowhere mentioned in the Code. But the dimension of the crime

9
is so wide that certain offences under Indian Penal Code are closely linked with white
collar crime such as bribery4, corruption, food adulteration, forgery5 , fraud, cheating6 ,
extortion7 etc. The Codified criminal law has also provided the punishment for the offences
that comes under the dimensions of white collar crime or socio- economic offences.
However, the dimensions of white collar crimes are so wide that after analyzing the
provisions of Indian Penal Code 1860 we may conclude that certain offences under Indian
Penal Code are closely linked with white collar crimes such as corruption, bribery,
counterfeiting of coins and government stamps, offences relating to weights and measures,
adulteration of food stuffs and drugs, misappropriation of property, criminal breach of trust,
cheating and dishonesty inducing delivery of property, forgery, etc.

These aforementioned crimes are typically an extension of the Concept of ‘Wrongful Gains',
which is defined as “Wrongful gain” is gain by unlawful means of property to which the
person gaining is not legally entitled.8 Henceforth, it can be quite evidently construed that
White Collar Crimes are basically an extension of Wrong Gains as Explained in IPC 1860,
therefore in theory, it is possible to affix liabilities to White Collar Crimes.

Though being 161 years old, the IPC is an admirable compilation of substantive criminal law
and most of its provisions are as suitable today as they were when they were formulated.
But the social and economic structure of India has changed to such a large extent that in
many respects the Code does not really fulfills the needs of the present day. It is dominated
by the nation that almost all major crimes consist of offences against person, property or
State.

However, the Penal Code does not deal in any satisfactory manner with acts which may be
described as white collar crimes having regard to the special circumstances under which they
are committed and which have now become dominant feature of certain powerful sections of
modern society. The punishment prescribed for white collar crimes under Indian Penal Code,
1860 are proving inadequate.

4
Section 171B of Indian Penal Code( 45 of 1860)
5
Section 463 of Indian Penal Code( 45 of 1860)
6
Section 415 of Indian Penal Code ( 45 0f 1860)
7
Section 383 of Indian Penal Code( 45 of 1860)
8
Section 23 of the Indian Penal Code 1860
10
CONCEPT OF HARMONIOUS CONSTRUCTION:-

The specific Acts dealing with white collar crimes and the provisions of Indian Penal Code
should be harmoniously interpreted to control the problem of white collar crimes. The
provisions of Indian Penal Code dealing with white collar crimes should be amended in such
a way to enhance punishment particularly fine in tune with changed socio-economic
conditions.

INTERELATION OF WHITE COLLAR CRIME WITH UNJUST ENRICHMENT

Unjust Enrichment can be understood as The retention of a benefit conferred by another,

without offering compensation, in circumstances where compensation is reasonably expected.
· A benefit obtained from another, not intended as a gift and not legally justifiable for which
the beneficiary must make restitution or

recompense.
· The area of law dealing with unjustifiable benefits of this kind.9

This theory primarily deals with contract laws. Basically as per the theory of unjust
enrichment, a person who has been unjustly enriched at the expense of the other is required to
reimburse the other party to the extent of the enrichment. It happens that sometimes a person
uses the benefit from other person and then there is no point of compensation raised at the
time of contract but after the completion of the act, sometimes the person becomes morally
liable to pay the damages to the party. In substantial ways it means certain illegal benefit
derived by an individual to which the same was not legally Entitled to avail the same. For
instance Corruption and Bribery can be attributed to Unjust Enrichments wherein officials
who are not entitled to monetary gains exploit individuals to avail the same with the aid of
various mechanisms such as Red-Tapism, etc. Such wrongful Gains are the primeval source
of White Collar Crimes in essence.

9
Black's Law Dictionary
11
INTERRELATION OF WHITE COLLAR CRIME WITH WRONGFUL GAINS

The Criminal aspect of Wrongful Gains is well enshrined under Section 23 of Indian Penal
Code 1860. “Wrongful gain” can be understood as a gain by unlawful means of property to
which the person gaining is not legally entitled. The word “wrongful” means prejudicially
affecting on a party in some legal right. Wrongful gain includes wrongful acquisition or
wrongful retention.

It must be an acquisition or retention with the intention of appropriation. For instance in

cases of Corruption or tax evasion, certain kind of property is willfully misappropriated so as
to benefit an individual in some material ways. Such practices are often regarded as wrongful
gains and are duly encompassed within the ambit of Section 23 of the IPC 1860.
The Prime Ingredients of Wrongful Gains are:

(i) There must be gain of some property;

(ii) Gain must be by unlawful means;

(iii) Person gaining must not be legally entitled to that property

Therefore, whilst analyzing the concept of Wrongful Gains and harmoniously constructing
the principles of the same within the purview of white collar crimes, theoretically, Criminal
liability under IPC can be affixed on individuals involved in White Collar Crimes as White
Collar Crimes are basically an Extension of Wrongful Gains only.

Defining the term WHITE COLLAR CRIMES.

White collar crime is a term that was first used by a sociologist in 1939 to describe criminal
activity by members of the upper classes in connection with their professions.
His point was that this type of crime was barely acknowledged by the criminal justice system
and rarely prosecuted.

12
Today, the most common definition of white collar crime now no longer focuses on the social
status of the offender but rather on the type of conduct/behavior which is involved:

 Illegal acts using deceit and concealment to obtain money, property, or services, or to
secure a business or professional advantage.

Within the field of criminology, white-collar crime has been defined by Edwin Sutherland as
"a crime committed by a person of respectability and high social status in the course of his
occupation"10
 SUTHERLAND was a proponent of Symbolic Interactionism, and believed that
criminal behavior was learned from interpersonal interaction with others. White-collar
crime thus overlaps with corporate crime because the opportunity for fraud, bribery,
insider trading, embezzlement, computer crime, and forgery is more available to
white-collar employees.

Generally, however, white collar crime is defined as “violation of the law committed by a
person or group of persons in the course of an otherwise respected and legitimate occupation
or business enterprise.”11

The nature of White Collar is so grievous in nature that the injury or damage caused as the
result of them is so widely diffused in the society at large scale that the gravity in regard to
individual victim is almost negligible. Therefore, its nature is such that it overlaps the
multiple type of violation of criminal code, and it also includes moral or ethical violation of
causing most serious social as well as economic harm.12

Sutherland’s Concept of White Collar Crimes. (in figure 1.1)

10
Sutherland Definitions (1949).
11
James W. Coleman, 1989
12
Girjesh Shukla, Criminology , Crime Causation , Sentencing and Rehabilitation of Victims( Lexis
Nexis), pg. no 99

13
 Crimes by Crimes for
high status Organizations
people

White-collar
Crimes

Crimes against
Organizations

The figure 1.1 illustrates the overlap of (at least) three different types of misbehavior
(crimes). The first refer to any crime committed by a person of high status (whether or not in
the course of their occupation); second to crime committed on the behalf of organizations (by
people of any status); and third to crimes committed against organizations (whether or not
these are carried out by people working in the same organization, another organization, or no
organization at all).
Sutherland focuses on that area of overlap in which people of high status use organizations to
commit crimes for their organization against workers, consumers or other organizations
including competitors and the government. But whatever, there may be in common among
the offences highlighted by this focus, it is probable that, for each of the 3 types misbehavior
on which his definition draws, there will be even more in common between the behavior
which fits into his central category and other examples of behavior of the same types which
fall outside his definition. This creates a continual tension in crime to develop typologies of
white collar crime.13

Difference between Traditional Crimes and White- Collar Crimes

13
Oxford Handbook of Criminology Maguire(M) & ETC
14
It is pertinent to note that the mens-rea of the White Collar Criminal is excessive greed and
rapaciousness not lust or hate as is the case in traditional crimes. Modus Operandi as
pertaining to white collar crimes is essentially non-emotional (unlike rape, murder,
defamation etc.) whereas in case of traditional crimes some emotional aspect is normally
found. Also there is no reaction as between the victim and the offender in care of white collar
crimes. The victim is usually the State or a section of the public, particularly the consuming
public (the portion which consumes goods or services, buys shares or securities or other
intangibles). Even where there is an individual victim, the more important element of the
offence is harm to the society.
Mode of operation of the offender is fraud not force. Usually, the act is deliberate and willful.
Interest is protected in two-fold-
(a) Social interest in the preservation of
(i) The property or wealth or health of its individual members, and national
resources
(ii) The general economic system as a whole, from
(1)Exploitation or
(2)Waste by individuals or groups

(b) Social Interest in the augmentation of the wealth of the country by enforcing the laws
Relating to taxes and duties, foreign exchange, foreign commerce, industries and the
like.

Limitations that of the Term “White Collar Crime”14

Modern criminology generally rejects a limitation of the term by reference to type of

crime and the topic is now divided:

14
Mrs. Glory Nirmala.k , Sponsorship of the Justice and Legal System Research Institute
15
  By the type of offense, e.g. property crime, economic crime, and other corporate
crimes like environmental and health and safety law violations. Some crime is only
possible because of the identity of the offender, e.g. transnational money laundering
requires the participation of senior officers employed in banks. But the Federal
Bureau of Investigation has adopted the narrow approach, defining white-collar crime
as "those illegal acts which are characterized by deceit, concealment, or violation of
trust and which are not dependent upon the application or threat of physical force or
violence" (1989, 3). Because this approach is relatively pervasive in the United States,
the record-keeping does not adequately collect data on the socioeconomic status of
offenders which, in turn, makes research and policy evaluation problematic. While the
true extent and cost of white-collar crime are unknown, it is estimated to cost the
United States more than $300 billion annually, according to the FBI.
 By the type of offender, e.g. by social class or high socioeconomic status, the
occupation of positions of trust or profession, or academic qualification, researching
the motivations for criminal behavior, e.g. greed or fear of loss of face if economic
difficulties become obvious. Shover and Wright (2000) point to the essential
neutrality of a crime as enacted in a statute. It almost inevitably describes conduct in
the abstract, not by reference to the character of the persons performing it. Thus, the
only way that one crime differs from another is in the backgrounds and characteristics
of its perpetrators. Most if not all white-collar offenders are distinguished by lives of
privilege, much of it with origins in class inequality.
 By organizational culture rather than the offender or offense which overlaps with
organized crime. Appelbaum and Chambliss (1997; 117) offer a twofold definition:
Occupational crime occurs when crimes are committed to promote personal interests,
say, by altering records and overcharging, or by the cheating of clients by
professionals15. Organizational or corporate crime occurs when corporate executives
commit criminal acts to benefit their company by overcharging or price fixing, false
advertising, etc.

Relationship to Other Types of Crimes

15
Appelbaum and Chambliss (1997; 117)
16
Blue-Collar Crime

The types of crime committed are a function of the opportunities available to the potential
offender. Thus, those employed in relatively unskilled environments and living in inner-
City areas have fewer "situations" to exploit 16
than those who work in "situations" where
large financial transactions occur and live in areas where there is relative prosperity. Note
that Newman (2003) applies the Situational Crime Prevention strategy to e-crime where the
opportunities can be more evenly distributed between the classes. Blue-collar crime tends to
be more obvious and attract more active police attention (e.g. for crimes such as vandalism or
shoplifting which protect property interests), whereas white-collar employees can intermingle
legitimate and criminal behavior and be less obvious when committing the crime. Thus, blue-
collar crime will more often use physical force whereas in the corporate world, the
identification of a victim is less obvious and the issue of reporting is complicated by a culture
of commercial confidentiality to protect shareholder value. It is estimated that a great deal of
white collar crime is undetected or, if detected, it is not reported. In the truest sense, the terms
white and blue collar crime refers to police slang for an arrest of a suspect, or collar. Blue
collar crimes are those that involve local police (known for wearing blue, or, "Men in Blue")
and white collar crimes are those involving Federal agents, such as FBI (who typically wear
suits and ties with white shirts.) The difference between ‘blue collar crimes’, which are crime
of a general nature, and ‘white collar crimes’ was laid down by the Supreme Court of India in
the case of State of Gujarat v. Mohanlal Jitamalji Porwal and Anr17. Justice Thakker
elucidated that one person can murder another person in the heat of the moment, but causing
financial loss or say committing economic offences requires planning. It involves calculations
and strategy making in order to derive personal profits.

State-Corporate Crime:
Because the negotiation of agreements between a state and a corporation will be at a
relatively senior level on both sides, this is almost exclusive a white-collar "situation" which
offers the opportunity for crime.

16
Clarke, 1997
17
AIR 1987 SC 1321
17
Part III:-

Classification of White Collar Crimes

White Collar Crimes can Broadly be classified into Following Categories principally:-

Ad hoc crimes:-They are also called as personal crimes as in this category , the offender
pursues in his own individual objective having no face to face contact with the victim. For
example: - Hacking on computers, credit- card frauds, tax evasion etc.

Breach of trust :- In this type of crime breach of faith bestowed by an individual or

institution on perpetrator.18

Insider Trading: -When some uses the confidential information to trade in shares of
publicly held corporations.19

Bank Fraud : - It means to engage in such activities which is taken place in order to
defraud a bank or using illegal means to obtain assets held by financial or non - financial
institution.

Bribery: -Bribery means offering money, goods or any kind of gift to some government
officials in order to have control over his actions or making them to work as per the choice
of giver in an illegal manner.

Computer Fraud : Computer frauds are very common these days . It has increased with
the advancement in the technology. It can also include cyber- crimes. Computer frauds in
simple words can be defined as, such frauds which involve hacking or stealing information

18
Prof. N.V. Paranjape, Criminology, Penology , Victimology (17th Edition, Central Law Publication , 2017)
pg. no148.
19
Aaashish Ahuja , Analysis of White Collar Crime
https://blog.ipleaders.in/analysis-white-collar-crimes-india/ (10 October 2019).
18
of some other persons20 without his or her permission.

Embezzlement: - Embezzlement means when a person illegally obtains someone’s

property by actual or threatened force or coercion. It can also be called as criminal breach of
trust.21

Extortion22:-When someone illegally obtains someone’s property by means of threatening or

obtains any property by unlawful means or in a dishonest manner.

Tax Evasion : - The complex tax law structure in India have provided sufficient scope for
the tax payers to evade from payable taxes. Tax evasion is common between persons of
high class such as traders, businessman, lawyers, doctors, businessmen, engineers etc. In
case of R. K. Garg v. Union of India23 Supreme Court upheld that the validity of the Special
Bearer Bonds(Immunities and Exemption)Act, 1981, observed that the Acts was not
intended to encourage tax evasion in future and condone such evasion committed in past but
real legal intent of the act is to launch a nation –wide search to unearth wealth encouraging
small incentive to those who declare their disclosed cash.24

Corruption: -It is an dishonest or fraudulent conduct by those in power, typically and

highly involved bribery. Corruption is an illegal act and his controlled by Prevention of
Corruption Act. The Supreme Court in Vineet Narayan v. Union of India25, observed that
agency having disclosed a prime facie case against the public servant. the corruption cases
against the public servant were often delayed the investigation

In case of Subramanium Swamy v. Dr. Man Mohan Singh,26 Supreme Court reiterated that

20
Aaashish Ahuja , Analysis of White Collar Crime
https://blog.ipleaders.in/analysis-white-collar-crimes-india/ (10 October 2019).
21
Section 405 of Indian Penal Code( 45 of 1860)
22
Section 383 Indian Penal Code( 45 of 1860)
23
( 19811) 133 ITR 239
24
Prof. N.V. Paranjape, Criminology, Penology , Victimology (17th Edition, Central Law Publication , 2017)
pg. no152.
25
(1998) 1 SCC 226
26
AIR 2012 SC 1185
19
 the time –limit of three months for grant of government sanction under Section 19 of the
Prevention of Corruption Act, 1988 for the prosecution of public servant alleged of
corruption
charges , must be strictly followed.

Further in case of Jaylalitha v. Union of India27, Supreme Court observed that corruption
erodes the moral fabric of society and is detrimental to national economy. Misuse and abuse
of power by persons occupying high position in the Government has reached alarming
dimensions and it has tarnished the image of the country.28

PART IV:-

Laws and Acts preventing White Collar Crime

Prevention of Money Laundering Act, 2002: - In India , black money is generated in large
scale from last few decades from various socio-economic crimes and this black money is
converted into white money so the economic offenders can easily get escape of his or her
criminal liability and that money can easily be used in the economy with the notice of the
government authorities . The process of conversion of tainted money into untainted money
is called the money laundering. Thus, the main purpose and object of the mentioned Act, is
to prevent money laundering.

The concept of money laundering is an international concept and menace and for the same
reason, United Nations adopted a political declaration in June 1998 and asked its members
to enact the national legislations for the prevention of money laundering29. The present Act
has been passed to implement the resolution of United Nations. The main aim of the
guidelines is-
 To safeguard banks from acting as a chain in money laundering activities or in
27
(1999) 5 SCC 138.
28
Prof. N.V. Paranjape, Criminology, Penology, Victimology (17th Edition, Central Law Publication , 2017)
pg. no160.

29
Snangeet Kedia’s Economic and Commercial Laws (June2011 , Pooja Law Publishing Co.)pg.no 155

20
 the process of money laundering.
 To help banks to know more about the clients and customer and to keep a check
on them thus to protect them from the losses.

Prevention of Corruption Act, 1988:- In context with white collar crime, The Prevention
of Corruption Act, 1988 is very important Corruption erodes the authority of state and
promotes crime. The issue of corruption is very dangerous to nation. The Santhanam
Committee Report of 1964 defines the problem of corruption as a complex problem having
its roots and ramification in the society itself as a whole. The Act came into force because
of increasing cases of bribery and corruption among the public authorities. The Act
consolidated the provisions of IPC, CrPc and Criminal Act, 1952. The act has provided the
definition of “public duty”, “public authority”, “public servant”. The provided definitions
are very important in determining the criminal liability of a public officer.

Companies Act , 2013 :- The act also deals with the white collar crimes. The Companies
Act, 2013 contains special provisions for offences , penalties and their Compounding in
many of its sections. The provisions of Companies Act , 2013 also provides provisions to
deal with effective penalty, mechanism, speedy trials according to the gravity of offences
committed under the Act. The Companies Act , 2013 in Sec. 447 provides list of offences
and punishment for fraud where- as Sec. 212 deals with investigation into the affairs of the
Company by Serious Fraud Investigation Office.

The Act states that notwithstanding anything in CrPc, 1973, every offence under the act
expect to offence mentioned under sub- section (6) of Sec 212 shall be deemed to be non-
cognizable offence.
Section 435- 438 of the Act provides establishment of special courts for the purpose of
providing speedy trials for offence committed which is punishable under the Act. Sec.447
of the Act provides punishment for fraud and Sec 448 provides punishment for producing or
providing any false statement. Thus, the act tried to cover every aspect to deal with the
white collar crime or corporate criminal liability of the corporate houses.

Essential Commodity Act, 1955 :-It is an another act, which is enacted with an
21
legislative intent to prevent the socio – economic offences or white collar crime.
The main object of this Act is to control the production, supply and the
distribution of certain commodities in the market. The act tries to protect the
interest of general public in order to secure equitable distribution of essential
commodity at a reasonable distribution. The act itself gives the definition of
essential commodity. The items and commodity declared as “essential
commodity” under the Act are reviewed from time to time in the light of
liberalized economic policies in the consultation and particularly with regard to
their production, demand and supply.30
Section 6 of the Act imposes penalties and punishment for cognizable offences. The
punishment impose under section 6 of the Act is non –bailable offence. The Act provides
that mens rea is an essential element of the offence punishable under the Act. The Act
expressly that no Civil Court can grant any injunction or make any order for any other relief
against the Central or State Government or any public officer, in respect of any act done, or
purporting to be done.31Thus, the Act does not give any privilege to high authorities or to
high officers of the Government. The act intended to impose criminal liability upon the
offender(s).

Industrial (Development and Regulation ) Act, 1951: - As earlier mentioned, the

increasing rate of white collar crime has started with era of industrialization in India. With
the growth of industrial sector at high rate and on sustained basis forced the Govt. of India
to issue industrial policies in order to avoid any kind of malpractices in this sector. Thus,
the Industrial Policies Resolution of 1948 provided a legal support and aid to enact the
Industrial (Development and Regulation) Act, 1951.
The main objective of the act is to empower the Govt. to take necessary steps for the growth
and development of the industry. It also empowers the Govt. to take necessary steps to –

 regulate the pattern and direction of industrial

development, to control the activities,

30
Economic and Commercial laws The Institute of Company Secretary of India, June 2017 (pg.no489).
31
Economic and Commercial laws, The Institute of Company Secretary of India, June 201(pg.no504).

22
  performance of industrial knowledge in the public
interest.

The acts also give power to Central Govt. to take over the industrial undertakings without
going for any kind of investigation under the certain circumstances. Sec. 24 of the Act
imposes penalties for the contravention or attempt to contravene or abetment of the
contravention, by any person.

Sec 24A of the Act provides that if any person when required by the Act or by an order
publish or made under the Act, makes or furnishes any information which is false or
misleading and he knows or has a reasonable cause to believe that the produced
information or statement is false or misleading shall be punished under the Act with the
fine of Rs 2000 or imprisonment of three months or both. Misleading information may
include the misrepresentation of accounts, records or any declaration or any document.
Thus, the policies made under the act and a provision tries to prevent the occurrence of
white collar crime at a very high rate in the country.

Information Technology Act , 2002:- In order to tackle with computer- related crimes ,
Information Technology Act , 2000 has enacted to provide legal recognition to
authentication of information exchanged on social media websites or any E- Commerce
networking sites. The act contains certain provisions that deal with white collar crimes.
Some of the section also deals with the awareness of crimes. The Act in its Section 43 and
44 of Information Technology provides penalty for offences committed as prescribed by the
Act. Some of the following such offences are as follows:-
 Unauthorized copying of an extract form any kind of the data
 Unauthorized access and downloading files illegally.
 Causing any damage to computer system or computer networking
system.
 Providing any kind of assistance in any form to any unauthorized
person who can access to the other person’s computer without his
or her permission
.

23
Fugitive Economic Offender’s Bill, 2017: - Recent case of Vijay Mallia has forced
Government and Legislature to make a law on economic offenders who commits white
collar crime in India and flee to other country in order to escape from their criminal liability
and jurisdiction of Indian Courts. The Bill has been referred to the Standing Committee of
Parliament. The draft of Bill provides provision which empowers the Govt. to confiscate any
property of economic offender in India who flees to other country. The proposed bill will be
applicable to all those economic offenders who had a criminal liability of Rs 100 Crore or
more. The Bill provides a list of offences in its Scheduled List which can be termed as
“economic offences”. The bill provides provisions to a establish Special Court under The
Prevention of Money Laundering Act, 2002 to declare a person as fugitive economic
offender. The key feature of the Bill is that it provides the definition of fugitive of economic
offenders and talks about the procedure of Special Court and the applicability of the Act.
The Bill also provides that the Central Government may enter into any treaty with any
nation through any means inter alia devising a mechanism to extradite the Fugitive
Economic Offender of India which is present in their country or allowing the Govt. or any
respective authority to confiscate any foreign property of such offender.

PART V:-

White Collar Crimes in India

India is vehemently in the clutches of white collar criminality. The reason for enormous
increase of white collar crimes in the recent decade is to be found in the fast developing
economy and industrial growth of the nation. The Santhanam committee report in its finding
a vivid picture of white collar crime committed by persons of respectability such as
businessmen, industrialists, contractors and suppliers as also the corrupt the public officials. 32
Highlighting the magnitude of white collar crimes in India the commission of prevention of
corruption in its report observed:

 “The advance of technological and scientifical developments is contributing to the

emergence of “mass society” with a large rank of file and small control elite,
encouraging the growth of monopolized, the rise of a managerial class and intricate

32
Santhanam Committee Report, pp. 151-53
24
 institutional mechanisms. The strict adherence to high standard of ethical behaviors is
necessary for the even and honest functioning of the new social, political and
economic processes. The inability to all sections of society to appreciate this need in
full results in the emergence and growth of white collar and economic crimes, renders
enforcement of laws, themselves not sufficiently deterrent, more difficult. Tax
evasion and avoidance, share pushing, malpractice in share market and administration
of companies, monopolistic control, usury, under invoicing or over invoicing,
hoarding, profiteering, substandard performance of contracts of constructions and
supply, evasion of economic laws, bribery and corruption, election offence and
malpractices are some examples of white collar crime”.33

The Commission broadly classified white collar and socio economic crimes into various
categories and suggested insertion of a new chapter on white collar crime in the Indian Penal
Code. The matter was referred by the government to the Law Commission of India of
consideration, which however, disagreed with the proposal and observed that “such offences
are better left to be dealt with by special and self-contained enactments which supplement the
basic of criminal law”. The rapid industrialization has also led us to discover new modes of
economic offences. New groups of individuals have engaged themselves in manipulating of
accounts and misuse of government permits and licenses to make illegal financial gains.
Another reason for the increase in the white collar crime in India is the emergence of the
concept of the welfare of the State after the independence of the country. In a welfare State,
the government tends to control a vast number of means of production of goods and essential
services in the interest of the community. But the fact remains that such controls provide the
grounds for the emergence of white collar crime in the community which is infested with
severe shortage, corruption, fraud and endemic administrative inefficiency of the
management. 34

 Interestingly, the Report of the Vivin Bose Commission of Inquiry into the affairs of
Dalmia-Jain groups of companies in 1963 highlights how these big industries indulge

33
Law Commission of India Report of the commission on prevention of corruption para 213, p 11.
34
Criminology & Penology, J.P.S SIROHI p 90
25
 in white collar crimes such as frauds, falsification of accounts, tampering with records
for personal gains and tax evasion etc. Similar observations were made by Mr Justice
M.C Chagla about the big business magnate Mundhra who wanted to “build up an
industrial empire of dubious means”. There were as many as 124 prosecutions against
this business tycoon and companies on controlled by him between 1958 to 1960 and
as many as 113 of them resulted into convictions.35

Hoarding, Black Marketing and Adulteration

Violation of foreign exchange regulations and import and export laws are frequently resorted
for the sake of huge profits. That apart, adulteration of food stuff, edible and drugs which
causes irreparable danger to public health is yet another white collar crime common in India.
The Law Commission in India has suggested drastic measures against such offenders who
benefit themselves with such wrongful gains. In the Commission observations, the tedious
prosecution process involved in the trial of such cases frustrates the cause of justice and often
unjustified acquittal due to defective report of the analyst or delay in examination of sample
or lack of legal expertise etc.

Tax-evasion

The complexity of tax laws in India as provided sufficient scope for the tax payers to evade
taxes the evasion is more common with influential categories of persons such as traders,
businessmen, lawyers, doctors, engineers, contractors, etc. The main difficulty posed before
the income tax department is to know the real and exact income of these professionals. It is
often alleged that the actual tax paid by these personsis only a fraction of their income and
rest of the money goes into circulation as ‘black money’. Despite frequent modification in tax
laws of the country the menace of tax evasion countries unabated and it is causing
considerable loss to government revenue.

35
Fourth annual report on the working of Indian Companies Act 1956 Government of India (1960)
26
The supreme court in its majority decision in ‘R.K Garg vs. Union of India36’ upholding the
validity of the special bearer bonds (immunities and exemption) act, 1981, observed that the
act was not intending to encourage tax evasion in future and condone such evasion committed
in past but the real object of the act was to nation-wide search to uncertain undisclosed wealth
by encouraging small incentives to those who declare their undisclosed case. The main
intention was to uncertain “black money” so as to prevent further loss of government
revenues.

It is significant not in this context that was constitutes crime is ‘tax-evasion’ not the ‘tax-
avoidance’. Though both these terms appears to be synonymous, there is a fine distinction
between the two. While the former implied the non-payment of tax due to be paid, the latter
signifies arranging the spread over of one’s income in such a way that it doesn’t incur tax
liability legally and lawfully37.

Role of Government in White Collar Crimes in India

 Corruption in government:

The factors which make public servant corrupt are connected with the economic condition of
most of the government employees. In India, though government service has some special
prestige, the salaries given to employees, by and large, are quite low. This factor in
combination with some other factors like inflation contributes a great deal towards
corruption. Fortunately, the judiciary has been by and large, free from corruption so far but
lately some unhealthy trends have set in.38

 Corruption in Politics:

36
1982 133 ITR 239 SC
37
White Collar Crimes in India | Yogesh V Nayyar |
38
In quite a few decided cases, Magistrates have been found guilty of corruption. In Delhi as many as our civil
judges have been removed from their office lately.
27
Corruption among ministers and other political personages is more dangerous than corruption
in governmental machinery in terms of enormity of the stakes involved in public life. The
Santhanam Committee noted that while there were elaborate rules to ensure probity among
officials, there were none for Ministers, legislators and political parties.39
The more usual form of political corruption in India are grafts, violation of election laws and
the abuse of official and political machinery because of the liaison of political forces with big
business. The popular episodes, known as Mundhra Sirajuddin Tul Mohan Ram, in the party
affairs involving Central Cabinet Minister and Members of Parliament are typical example of
political corruption.

The cases of political corruption in India is on increase. Over the years, we have seen that the
politician/ministers are involved in number of corruption cases, some of which after pending
even before the various courts of the country. The Bihar Fodder Scam Case 40, Centre for
Public Interest litigation V Union of India41 (2G spectrum Case), cash for vote42, coal scam43
are some of the examples.

PART VI :-
REMEDIAL MEASURES

In a country like India where large scale starvation, mass literacy and ignorance affect the life
of the population, white collar crimes are ought to multiply in large ratio.44

However, Few of the suggested reforms to curb the Wrongful Gains derived out of white
collar crime are as follows :-

39
Santhanam Committee Report (p101-102)
40
Union of India v. Sushil Kumar Modi, (1997) 4 SCC 770
41
(2012) 3 SCC I
42
P.V Narasimha Rao V State, (1998) 4 SCC 626; 1998 SCC (Cri) 1108
43
Manohar Lal Sharma V. Union of India (2014) 2SCC 532
44
Prof. N. V. Paranjape Criminology and Penology
28
  Generating public awareness against such crimes via media of press, platform and
other audio-visual aids. Intensive legal literacy programs might help in reducing the
incidence of white collar criminality to a considerable extent.

 Special Tribunals should be constituted with power to give sentence of imprisonments

up to 10 years for white collar criminals.

 Stringent regulatory laws and drastic punishment for white collar criminals may help
in reducing these crimes. Even legislations with retrospective operation may be
justified for this purpose.

Dr. RadhaKrishnan, the 2nd President of India, in this context once observed:

“The practitioner of this evil (i.e. White collar and socio-economic crimes) the
hoarders, the profiteers, the black marketeers, the speculators are the worst enemies of
our country. They have to be dealt with sternly, however well-placed, important and
influential they may be, if acquiesce in wrong doing, people will lose faith in us.”
The penalty for white collar crime which are a potential damages to human lives may
be extended to the imprisonment for life or even to death, if the circumstances so
demand.

 A complete separate chapter on white collar crimes and socio economic crimes should
be incorporated in the Indian Penal Code as the current practice of drawing
harmonious construction between Wrongful Gains and white collar crimes is vague
and grossly lacks proper legal sanctions. Amending the Code would ensure that White
Collar Criminals who are convicted by the court do not escape punishment because of
their high social status.

 White Collar offenders should be dealt with sternly by prescribing stiffer punishments
keeping in view the gravity of injury caused to society because of these crimes.

29
 The Supreme Court, in M.H Hoskot V. State of Maharashtra45, in this context
observed, “soft sentencing justice is gross injustice where many innocents are the
potential victims”.

 There is an urgent need for a National Crime Commission which may squarely tackle
the problem of crime and criminality in all its facets.
 Most significantly, public vigilance seems to be cornerstone of an anti-white collar
crime strategy. Unless white collar crimes become abhorrent to public mind, it will
never be possible to contain this growing menace.

In order to attain this objective, there is a need for strengthening of morals

particularly, in the higher strata and among the public services. It is further necessary
to evolve sound group norms and service ethics based on the twin concepts of
absolute honesty and integrity for the sake of national welfare. This is only possible
through character building a grass root level and inculcating a sense of real concern
for the nation among youngsters so that they are prepared and trained for an upright
living when they enter the public life.

PART VII:-

CONCLUSION

The advancement of science and technology in last few decades has created a new form of
crime which is known as “white collar crime”. It is a socio- economic offence due to
which economy suffers a lot. The person who commits these types of crime is called socio-
economic offenders. The term white collar is not defined in criminal law but although
certain form of white collar crime is defined in Indian Penal Code.

The concept of Wrongful Gains as under IPC is closely intertwined with the nature of
White Collar Crimes and appropriate certain sanctions can also be imposed upon White
Collar Crimes while incorporating the concept of Harmonious Construction.

The provision of white collar crime also deals with the punishment and fine associated with
45
(1987)3 SCC 544.
30
the nature of crime. In past years many scam has been witnessed by India in form of white
collar crimes.

Govt. of India has taken many steps to prevent this type of crime in India. The act such as
Prevention of Corruption Act, 1988, Prevention of Money Laundering Act, 2002, Essential
Commodity Act,1955 helps the Govt. to penalize such offences. The recent bill pending in
Parliament, The Economic Offender’s Bill, 2017, is an initiative of NDA Govt. to have
jurisdiction on economic offenders to flee off to other country to escape from their criminal
liability. The above mentioned acts (or any other related act which prevents white collar
crimes) along with legal provisions of Indian Penal Code, 1860 should be harmoniously
interpreted in such a strict manner to control problem of white collar crimes in India.

31