Company Law Project

UNIVERSITY OF PETROLEUM & ENERGY STUDIES COLLEGE OF LEGAL STUDIES

BA., LLB (HONS.) SEMESTER -VI -VI ACADEMIC YEAR : 201-1!

SESSION: "AN- MAY

PRO"ECT FOR COMPANY LA# $ II ON CORPORATE CRIMINAL LIABILITY IN INDIA (LLBL %22) UNDER THE NDER THE SUPERVISION OF: Prof. Shruti Reddy

Name:

Prateek Semwal

Sap No:

500028319

Roll No

R4213082

INDE

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INTRODUCTION

Setio 11 of dia Peal %ode 180 6the %ode7 defie pero. t read the word pero ilude ay %ompay or +oiatio or a ody of per o whether iorporated or ot.; *urther etio 2 of the %ode pro of thee two proh it i ot the ole le>ilatio whih proral part of our oiety ad with deifiat ator i our eoomy our oiety ru i the rik of >etti> al peroality ad they are differet from their memer  ad thi i uffiiet to make it poile to held them liale ad eure them. 1 %rimial )iaility i the Auality or tate of ei> le>ally oli>ated or aoutaleB le>ally repoile to aother or to oiety whih i eforeale y rimial puihmet. +d therefore %orporate %rimial )iaility mea the e=tet to whih a %orporatio a a le>al pero a e held rimially liale for it at ad omiio ad for thoe of the atural pero employed y it. !hi paper i iteded to e=amie ilatio.

. S!"R%+) ,+%C/R"$N# 1 Doh !. ,yam The Economic Inefficiency of Corporate Criminal Liability 6ol. 27 1982 pp. 582E585.

!he >rowth of %orporate rimial liaility a e traed i the term of the followi> four ta>e. !hi i alo a hroolo>ial aout of how the ourt o otale: 1. Puli Nuiae E %ourt i (>lad ad the $ited State firt impoed orporate rimial liaility i ae i oEfeaae of AuaiEpuli orporatio uh a muiipalitie that reulted i puli uiae.2 2. %rime ot reAuiri> rimial itet E + the preee ad importae of orporatio >rew ourt e=teded orporate rimial liaility from puli uiae to all offee that did ot reAuire rimial itet.  the Fuee <. /reat North of (>lad Railway %o. 3 )ord #ema ruled that orporatio ould e rimially liale for mifeaae ad +meria ourt oo e>a followi> thi tred. 4 !hi deed ourt to e=ted orporate rimial liaility to all rime ot reAuiri> itet. 3. %rime of itet E %ourt were low to e=ted orporate rimial liaility to rime of itet. Not util New -ork %etral ad udo Ri fator of thi reult wa the eed for effetiait orporatio. %reatio of orporate peroality had otherwie reated too lar>e a <. haitat of )ifto 101 (> Rep 280 6C, 1G947 Re= <. haitat of /reat ,rou>hto 9, (> Rep 418 6C, 1GG17 %ae of )aford ,rid>e G9 (>. Rep. 919 6C, 1357.

3 115 (> Rep 1294 6F, 1847.

4 State <. 'orri H (e= Rail Road %o. 23 N D ) 30 618527B ee %ommowealth <. Proprietor of New ,edford ,rid>e 8 'a 62 /ray7 339 618547. +meria %ourt followed (>lih preedet ad idiated orporatio for affirmati
5 115 (> Rep 1294 6F, 1847.

4. (=paio of orporate rimial liaility E ariou hitorial derowth ad e=paio of orporate rimial liaility. owe rimial liaility o
T#IN MODEL OF CORPORATE CRIMINAL LIABILITY DERIVATIVE MODEL

!hi model i idi that idi it iurred ome liaility. #eriorie: a7 iariou )iailityB 7 detifiatio #otrie. I.VICARIOUS LIABILITY

!he oept of h aother hall deemed to haeerally applie to ial fitio omprii> oly of idi
G State of aharashtra vs! "s Syndicate Transport Co! #$% Ltd! +R 194 ,om 195.

ut ow thi model ha ee re@eted oideri> it to e u@ut to odem oe pero for the wro>ful odut of aother.

.#(N!*%+!"N #"%!RN(

!hi dotrie i a (>lih law dotrie whih trie to idetify ertai key pero of a orporatio who at i it ehalf ad whoe odut ad tate of mid a e attriuted to that of the orporatio.  ae of Salomo <. Salomo H %o. 8 oue of )ord held that orporate etity i eparate from the pero who at o it ehalf. !he %ourt i (>lad had i met like #PP <. Cet H Sue= %otrator )td. 9 R <. %R aula>e )td.10 ruled that the orporate etitie ould e u@eted to rimial liaility ad the ompaie were held liale for rime reAuiri> itet. Dud>met like thee led to the promul>atio of Iidetifiatio dotrie. + to the liaility of thee key pero who at o ehalf of ompay it wa held i 'oore <. ,riler 11 that the pero who are idetified with the orporatio mut e ati> withi the ope of their employmet or authority. !he odut mut our withi a ai>ed area of operatio eh partiular may e uauthoried. t will e wie to ifer that idetifiatio dotrie i arrower i ope tha the orporatio liale for at of ay employee idetifiatio dotrie arrow it dow to ertai pero. ORGANI'ATIONAL MODEL

$like deriai?atioal model take orporatio ito oideratio. "ffee reAuire metal tate 6mens rea7 to ommit a rime alo> with phyial at 6actus reus7 ut the prolem that arie while holdi> orporatio rimially 8 Salomon v! Salomon & Co!, 189G +% 22: 61895E997 +ll (R Rep 9 6)7.

9 '$$ v! (ent & Susse) Contractors Ltd . 619447 1 +ll (.R.119.

10 '$$ v! (ent & Susse) Contractors Ltd . 619447 1 +ll (.R. 91.

11 oore v! *risler  J1944K 2 +ll (R 515.

liale i how a orporatio whih i @uriti pero ould poe reAuiite metal tate to ommit a rime. #eri that there e=ited a eed the oEompliae of peifi law whih made it offee. 'oreo it rimial liaility. %orporate ulture may help for ommiio of a offee reAuiri> metal tate yE firtly pro the eemet that it wa elie i the orporatio that it wa perfetly alri>ht to ommit that offee or orporatio ha pyholo>ially upported the ommiio of offeeB eodly it i Auite poile that the orporatio reated a e ulture that let the offee ommitted.

A NE# PERSPECTIVE: EVALUATING CORPORATE CRIME AS A MANAGEABLE DEFECT P"S!"N "* %"RP"R+!( %R'N+) )+,)!-  N  N#+

$til reetly ourt i dia were heitat to attriute rimial liaility to a ompay for a offee that reAuired a rimial itet ad they were of the opiio that they ould ot proeute ompaie for offee that etailed a madatory etee of impriomet eaue the orporatio ould ot e rimially proeuted for offee reAuiri> me rea a they ould ot poe the reAuiite me rea.  +. C. Chola <. S. ekatea 12  two orporatio were har>ed for ommitti> fraud uder the dia Peal %ode. !he 'a>itrate iued order a>ait the orporatio ad the %ourt oer that of me rea ad the other ei> the aility to impoe the madatory etee of impriomet. + orporate ody ould ot e aid to ha
12 +. C. Chola <. S. ekatea 619927 %r.).D. 1448

 "wal aapati H +llied dutrie <. State of $.P.13  the *ull ,eh of the +llahaad i>h %ourt held that a ompay ei> a @uriti pero aot oait Lee !ele film uder Setio 500 of the P%.  thi ae it wa alle>ed that Lee had teleated a pro>ram whih wa aed o falehood ad therey defamed Sahara dia. !he ourt held that me rea wa oe of the eetial elemet of the offee of rimial defamatio ad that a ompay ould ot hah %ourt Auahed a proeedi> a>ait a orporatio for alle>ed heati> ad the ourt oluded that it wa impoile for a orporatio to form the reAuiite me rea whih wa the eetial i>rediet of the offee. !hu the orporatio ould ot e proeuted for heati> uder etio 420 of the P%.  the ae of !he +itat %ommiioer +emetE ,a>alore H "r. <. elliappa !e=tile1  a pri a peal tatute if more tha oe ed to lea i fa
14 2004 %ri )D 15G.

15 'otorola . <. $io of dia620047 %ri.).D. 15G.

1 !he +itat %ommiioer +emetE ,a>alore H "r. . elliappa !e=tile 620047 1 %omp. ).D. 21.

 ' Daal diffiulty arii> out of the ao>eted amedmet to Setio 2 of the dia Peal %ode y addi> the followi> lie:  e
R ATIONALE OF CORPORATE CRIME

 e fie ad the offeder i a orporatio it hall e ompetet to the ourt to etee uh offeder to fie.  thi etio orporatio; mea a iorporated ompay or other ody orporate ad ilude a firm ad other aoiatio of idi appropriate puihmet for the %orporatio whih ommit offeeB thi ha ee doe with a
puihmet ad fie i uh a ae it eed to e fi=ed a to how the law ourt would aded i a ladmark ae of S*++ C+ B*/ *+ O. . D34 45 E*5436* .18  thi ae

Stadard %hartered ,ak wa proeuted for the alle>ed  (=ha>e Re>ulatio +t 19G3 ad the Supreme %ourt did ot >o  y the literal ad trit iterpretatio rule reAuired to e doe for the peal tatute ad held that the orporatio ould e proeuted ad puihed with fie re>ardle of the madatory puihmet reAuired uder the repeti har>ed a a offee i withi the plai meai> of the word ued ad mut ot trai the word o ay otio that there ha ee a lip that the thi> i o learly withi the mihief that it mut haht of later. 19 +fter the deiio of the Stadard hartered ak ae the ourt were >eerally of the
ourt held that a orporatio i thoe reAuiri> me rea. !he rimial liaility of a orporatio would arie whe a offee i ommitted i relatio to the uie of the orporatio y a pero or ody of pero i otrol of it affair.  uh irumtae it would e eeary to aertai that the de>ree ad otrol of the pero or ody of pero i o itee that a orporatio may e aid to thik ad at throu>h the pero or the ody of pero.  thi ae it wa alo held that the orporatio a o lo>er laim immuity from rimial proeutio o the >roud that they are iapale of poei> the eeary me rea for the ommiio of rimial offee.

18 J2005K 4 S%% 530.

19 !olaram Relumal ad +r. <. !he State of ,omay '+N$MS%M005GM1954.

20 +R 2011 S% 20

 %, <. 'M ,lueESky !ieEup )td ad "r 21  a appeal aroe from rimial appliatio whih wa Auahed y the %alutta i>h %ourt. !he +ppellat filed rimial appliatio a>ait the repodet for ommitti> rimial offee uder the pro of the aid proeedi>. !he %alutta % Auahed the proeedi> a>ait the Repodet No. 1 o the fale premie that the ompay ei> a ody orporate aot e proeuted ut the Supreme %ourt held that the ompaie are liale to e proeuted for rimial offee ad fie may e impoed o the ompaie. !he rimial itet of the Ialter e>o of the ompay or orporate ody i.e. the pero or >roup of people that >uide the uie of the ompay would e imputed to the orporatio. t i ow a etalihed le>al poitio i dia that a orporatio a e o to it the Supreme ourt haatory to impoe fie ut o peuiary limit i laid dow.22 Setio 35G %r P% empower a %ourt impoi> a puihmet of fie or a etee of whih fie form a part to order paymet of ompeatio out of the fie reoradatio arii> out of idutrial pollutio i reet year ha eome a poitier to

21 %, <. 'M ,lueESky !ieEup )td ad "r %rl. +ppeal No67. 950 of 2004.

22 +>ira Si>h i dia: ReAuired +medmet i )aw; teratioal Doural of %rimial Dutie Siee ol 1 ue.2 Duly 200.

oial eurity. !hu )e>al proai?atio whih poe da>er to puli life y polluti> water24 ad #itrit 'a>itrate a iitiate proeedi> a>ait them uder Setio 133 of the ode of %rimial Proedure 19G3. Setio 1 of (al etity ad thu aot itelf e deterred.;  reality the law aim to deter the ulawful at or omiio of a orporatio a>et. !o defed orporate liaility i deterree term oe mut how that it deter orporate maa>er or employee etter tha doe diret idi
CONSTRAINTS OF CORPORATE LIABILITY A.IMPRISONMENT

23 dia Peal %ode 180 S. 2GG. *ouli> water of puli pri> or reer or reer
24 &ater Pollutio 6+medmet7 +t19G8.

25 )ewi +. Corhauer  + (oomi +alyi of the %hoie ,etwee (terprie ad Peroal )iaility for +idet G0 %+). ). R(. 1345 paim 619827.

+ ha ee diued aoi?ed a a @uriti pero ad ei> a pero it ha to fae the puihmet that ha ee prodoi>. owe ompay uh a Setio 44G of %ompaie +t 2013 +t Setio 420 of !he P% 2G, of !he ome !a= +t et. !he %ourt foud themeled uder etio whih pro a le>al pero aot e imprioed for it rimial at it a oly e puihed with fie ad ot otherwie. !he Supreme %ourt ha to fae imilar diffiulty i ae of '.. Dauilty uder Setio 2G, read with 2G8, of !he ome !a= +t whih >i to impriomet would ot apply to it itead he will e liale for fie. !he ourt a do oe thi> thou>h if it aot imprio a orporate ody ut it a har>e >reater amout of fie i uh ae i ompario to what it har>e to the pero who are apale of ei> imprioed for the ame offee.

MENS REA

2 !0! 1avali vs! aha/an *orewell & Co! and 2thers, 6199G7 8 S%% G2.

+other prolem faed y the Dud>e wa how to try a ompay for the offee where me rea wa a eetial. ow a a @uriti pero hah %ourt Auahed a proeedi> a>ait a orporatio for alle>ed heati> a it ame to the oluio that it wa impoile for a orporatio to form the reAuiite me rea whih wa the eetial i>rediet of the offee. !hu the orporatio ould ot e proeuted uder etio 420 of the P% ut thi idea of ompay ot poei> me rea ame to a ed )ord #ei> >.7 %o. )td. <. !.D. /raham 28 wa aepted that  3 company may in many ways be li4ened to a human body! They have a brain and a nerve centre, which controls what they do! They also have hands, which hold the tools and act in accordance with directions from the centre! Some of the people in the c ompany are mere servants and agents who are nothing more than hands to do the wor4 and cannot be said to represent the mind or will! 2thers are directors and managers who represent the directing mind and will of the company and control what they do! The state of mind of these managers is state of mind of company and it treated by law as such! So you will find that in case where the law requires personal fault as a condition of liability in tort, the fault of the manager will be the personal fault of company!5 !he oept of alter e>o wa eo dotrie real ody. !he %orporatio i oidered to e the alter e>o of the idialore H "r. <. 'M. elliappa !e=tile )td. H +r 29  the Supreme %ourt ha held that Though, initially, it was supposed that Corporation 2G otorola Inc! vs! 6nion of India, 2004 %ri )D 15G.

28 The 3ssistant Commissioner, 3ssessment7II, *angalore & 2rs! vs! "s! 0elliappa Te)tiles Ltd! & 3nr, 62003711 S%% 405.

29 Supra at 1.

could not be held liable criminally for offences where mens rea was requisite, the current /udicial thin4ing appears to be that the mens rea of the person in7charge of the affairs of the %orporatio the alter e>o i liale to e e=trapolated to the %orporatio eali> eo allowed the ourt to frame orporate houe for the offee whih had me rea a a eetial i>rediet ad it i ow le tireome for the ourt to hold a orporatio rimially liale.

PROVISIONS OF CORPORATE CRIMINAL LIABILITY IN COMPANYS ACT 201; %ompaie +t 2013 ha ireaed moetary pealtie ad impriomet. !he ihteed orporate >oh there i o puli moey ierial Peroel

6C'P7 ad uh other diretor a peified y the ,oard i the aee of C'P ad e or partiipatio therei without raii> ay o@etio or where oEompliae ha take plae with hi oet or oi
S34*

#4  8>8 *+  C8?C6*8 8>8@ *48+

•

%ompayE*ieE Not le tha R. 1 lakh ad may e=ted to R. 5 lakh

•

"ffier i defaultE 'a=imum impriomet of  moth or *ieE

53E Prohiitio o iue of

Not le tha R. 1 lakh ad may e=ted to R. 5 lakh or with

hare at diout

oth.

•

%ompayE*ieE Not le tha R. 1 lakh ad may e=ted to R. 3 lakh

86117E Power of %ompay

•

"ffier i defaultE 'a=imum impriomet of 3 year or *ieE

to purhae it ow


euritie

oth.

G16117E #eeture

•

"ffier i defaultE 'a=imum impriomet of 3 year or *ieE Not le tha R. 2 lakh ad may e=ted to R. 5 lakh or with

oth. •

%ompayE*ieE Not le tha R. 50000 !houad ad may e=ted to R. 5 lakh

•

"ffier i defaultE 'a=imum impriomet of i= moth or *ieE Not le tha R. 50000 !houad ad may e=ted to R. 5 lakh

92657E +ual retur

or with oth.

1186127E 'iute of proeedi> of >eeral meeti> meeti> of ,oard of #iretor ad other

•

+y pero foud >uilty of tamperi> with the miuteE

meeti> ad reolutio

'a=imum impriomet for 2 year ad *ieE Not le tha R.

paed y potal allot.

25000 ut whih may e=ted to R. 1 lakh

12867E ,ook of aout

•

et. to e kept y %ompay

"ffier i defaultE 'a=imum impriomet of 1 year or *ieE Not le tha R. 50000 ad may e=ted to R. 5 lakh or with oth.

•

1296G7E *iaial tatemet

"ffier i defaultE 'a=imum impriomet of 1 year or *ieE Not le tha R. 50000 ad may e=ted to R. 5 lakh or with oth.

•

%ompayE*ieE Not le tha R. 50000 ad may e=ted to R.25 lakh

•


134E *iaial tatemet

Not le tha R. 50000 ad may e=ted to R. 5 lakh or with

,oard report et

oth.

1GE aatio of offie of

•

diretor

#iretor O 'a=imum impriomet for 1 year or *ieE Not e le tha R. 1 lakh ad may e=ted to R. 5 lakh or with oth.

•

%ompayE*ieE Not le tha R. 5 lakh ad may e=ted to R.25 lakh

•


185627E )oa to diretor

Not le tha R. 5 lakh ad may e=ted to R. 25 lakh or with

et.

oth.

•

%ompayE*ieE Not le tha R.25000 ad may e=ted to R. 5 lakh

•


186137 )oa ad

Not le tha R. 25000 ad may e=ted to R. 1 lakh or with

i
oth. •

 ae of ulited %ompay e puihale with fie whih hall

188657E Related party

ot e le tha 25000 rupee ut whih may e=ted to 5 lakh

traatio

rupee •

Suh pero i defaultE 'iimum 1 year to 'a=imum 3 year

5GE Puihmet for

impriomet or *ieE Not le tha R. 1 lakh ad may e=ted to

peroatio of hareholder

R. 5 lakh.

5867E Refual of

•

Suh pero i defaultE 'iimum 1 year to 'a=imum 3 year

re>itratio ad appeal

impriomet or *ieE Not le tha R. 1 lakh ad may e=ted to

a>ait refual

R. 5 lakh. •

%ompayE*ieE Not le tha R.1 lakh ad may e=ted to R.5 lakh

•


59657E Retifiatio of


re>iter of memer

oth.

•

%ompayE*ieE Not le tha R.1 lakh ad may e=ted to R.10 lakh

•

"ffier i defaultE 'a=imum impriomet of i= moth or *ieE

%hapterEE Re>itratio of


%har>e

oth.

•

%ompayE*ieE Not le tha R.1000 for e
13G637E %opy of fiaial

•


tatemet to e filed with


Re>itrar

oth.

•

%ompayE*ieE 5 time of the amout of otriutio i otra
182647E Prohiitio ad retritio re>ardi>

•

politial otriutio.

184647E #iloure of

"ffier i defaultE 'a=imum impriomet of  moth ad *ieE 5 time of the amout of otriutio i otra
•

iteret y diretor

Suh pero i defaultE 'iimum 1 year impriomet or *ieE Not le tha R. 50000 ad may e=ted to R. 1 lakh or oth.

•

%ompayE*ieE Not le tha R.25000 ad may e=ted to R.25 lakh

18G647E 
•


%ompay to e held i it


ow ame

oth •

+y pero who i foud to e >uilty of fraudE 'a=imum impriomet of  moth may e=ted to 10 year

•

44GE Puihmet for fraud

Suh pero alo liale to fie whih may e=tet to 3 ti me the amout i
CONCLUSION

+t oe poit of time the oept of a eparate le>al peroality of a orporatio wa e=ploited y idi to orporate rimial liaility i dia are ilature eed to e atiard ad form ertai orete law whih would eure that the orporatio do ot >o upuihed ad a etter oial order eed to e etalihed. %ertai Pro to proedural law alo eed to e reated ad modified o that the orporatio a e adeAuately dealt with. t i therefore reommeded that amedmet hould e arried out y the le>ilature to a the law ad make ertai pro to proedural law o that the orporatio a e adeAuately dealt with ad the ourt are alo reAuired to make the tatute fit for trit iterpretatio y pro for iflitio of rimial liaility o the orporatio a alo pro for
BIBLIOGRAPHY

1. +ihek +ad 8olding Corporations 'irectly 9esponsible :or Their Criminal 3cts; 3n 3rgument  'aupatra 62017 http:MMwww.maupatra.om 6lat Para@a !. Si Pal ).D.B %rimiolo>y;  &adworthM !homo )eari> )odo 2000 pp.39899 5. ,raithwaite Doh B Corporate Crime in the $harmaceutical Industry 1t (ditio Routled>e ad Ce>a Paul )odo 1984 p.. . .S. Chaa Corporate Criminal Liability; >hat $urpose 'oes It Serve 109 ar<. ). Re<. 14GGB G. ,ek H ",rie Corporate Criminal Liability 3G +meria %rimial )aw Re

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