Corporate Crimes and Directors Liability

January 26, 2015

This is an interesting question and the same is always a matter of discussion whenever there is a company involved in an offence. So I am trying to figure out the facts behind that question. As more and more companies are emerging in India they are obviously becoming part of many offences and we are reading many such news on day today basis. Almost all the business units are in the form of companies and hence companies will be dragged to the offenders list whenever there is a misappropriation or offence related to that business.
 

Even though there were several rulings in favour of the matter that a company cannot commit a crime directly, it is now very clear that a corporation may be subject to indictment and other criminal process even if the criminal act is committed through its agent. Hence it is clarified that a corporation is liable to be prosecuted and punished for the criminal offences. In Standard Chartered Bank and Others Vs. Directorate of Enforcement and Others, the Majority in the constitution bench held that there is no immunity to the corporate from prosecution merely in respect of the matter that the prosecution is in respect of the offences which requires imprisonment and fine. When imprisonment and fine is prescribed as punishment, the Court can impose fine which can be enforced against the Corporation.
 

In the case of Irridium India Telecom Limited Vs. Motorola Incorporated and Others it was held that the Corporation can no longer claim immunity on the ground that they are incapable of processing the necessary Mens rea for the commission of the criminal offences.
 

The Managing Directors or directors of the company cannot be said to have committed the offence committed by the Company just because of the reason that they are holding the offices of the company. Indian Penal Code does not contain any provision for fixing the vicarious liability of the offence committed by the company on its directors. Vicarious Liability of Managing Director and or director arise only when there is specific provision in the statue enabling them as vicariously liable for the offence committed by the company. Statutes undisputedly must contain the provisions fixing such vicarious liability and it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability.
 

Hence from the aforesaid discussion it is clear that the Corporations are liable for the offences committed by them and punishable with fine, even if the offence is chargeable with imprisonment and/ or fine and the directors are vicariously liable only for the offences which is having specific fixing in the related statues.

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