Corporate criminal liability determines how corporations can be held liable for crimes committed by employees. Historically, corporations were not considered capable of possessing criminal intent. However, courts began holding corporations criminally liable in the early 20th century where enforcement would be difficult without it. In India, the Supreme Court established in Standard Chartered Bank v. Directorate of Enforcement that corporations can be prosecuted and fined, even for offenses carrying mandatory imprisonment for individuals. This established that corporations can form criminal intent and are now routinely held criminally liable in India through fines imposed on the corporation.

1. Corporate criminal liability
Abhijith S R
826
3rd semester
Crimes- 2

2. A company can only act through human beings and a human being who
commits an offence on account of or for the benefit of a company will be
responsible for that offence himself. The importance of incorporation is
that it makes the company itself liable in certain circumstances,as well
as the human beings.
---------Glanville Williams

3. Introduction
In criminal law, corporate liability determines the
extent to which a corporation as a legal person can
be liable for the acts and omissions of the natural
persons it employs. It is sometimes regarded as an
aspect of criminal vicarious liability, as distinct
from the situation in which the wording of a
statutory offence specifically attaches liability to
the company / corporation.

4. The basic rule of criminal liability revolves around the Latin maxim
actus non facit reum, nisi mens sit rea.
It means that to make one liable it must be shown that act or omission
has been done which was forbidden by law and has been done with
guilty mind

5. Historical Evolution
The general belief in the early sixteenth and seventeenth centuries was that
corporations could not be held criminally liable. Legal thinkers did not believe that
corporations could possess the moral blameworthiness necessary to commit
crimes of intent.
• It was the common intent of the people that a corporation has no soul, hence it
cannot have "actual wicked intent”
• During the early twentieth century courts began to hold corporations criminally
liable in various areas in which enforcement would be impeded without
corporate liability
• Major hurdles that faced the attribution of criminal liability on corporates
• were factors such as artificial juristic personality and absence of mens rea on the
part of the corporate.

6. Corporate criminal liability in India
• All the Penal liabilities are generally regulated under the IPC, 1860 in
India. It is this statute which needs to be pondered upon in case of
criminal liability of corporation

7. Corporate Criminal Liability:
Pre-Standard Chartered Bank Case Law
• Indian courts held that corporations could not be prosecuted for offenses
requiring a mandatory punishment of imprisonment, as they could not be
imprisoned.
• In A. K. Khosla v. S. Venkatesan (1992) Cr.L.J. 1448, two corporations were
charged with having committed fraud under the IPC. The Magistrate issued
process against the corporations. The Court in this case pointed out that there
were two pre-requisites for the prosecution of corporate bodies, the first being
that of mens rea and the other being the ability to impose the mandatory
sentence of imprisonment. A corporate body could not be said to have the
necessary mens rea , nor can it be sentenced to imprisonment as it has no
physical body.

8. • In Kalpanath Rai v State (Through CBI) (1997) 8 SCC 732
• A company accused and arraigned under the Terrorists and Disruptive Activities
Prevention (TADA) Act, was alleged to have harbored terrorists. trial court
convicted the company - section 3(4) of the TADA Act- appeal S C referred -
definition "harbor" -Section 52A IPC- nothing to indicate- mens rea excluded
• There is uncertainty over whether a company can be convicted for an offence
where the punishment prescribed by the statute is imprisonment and fine.
• This controversy was first addressed in MV Javali v. Mahajan Borewell & Co and
Ors -S C held that mandatory sentence of imprisonment and fine is to be imposed
where it can be imposed, but where it cannot be imposed ,namely on a company
then fine will be the only punishment

9. • In Zee Tele films Ltd. v. Sahara India Co. Corp. Ltd (2001) 3 Recent Criminal
Reports 292
• the court a complaint dismissed -Section 500 of the IPC-alleged that Zee
had telecasted a program based on falsehood and thereby defamed Sahara
India-held that mens rea was one of the essential elements of the offense
of criminal defamation and that a company could not have the requisite
mens rea.
• In another case, Motorola Inc. v. Union of India (2004) Cri.L.J. 1576, the
Bombay H C quashed a proceeding- for alleged cheating, as it came to the
conclusion that it was impossible for a corporation to form the requisite
mens rea, which was the essential ingredient of the offense. Thus, the
corporation could not be prosecuted under section 420 of the IPC.

10. • In The Assistant Commissioner, Assessment-II, Bangalore & Ors. v. Velliappa
Textiles,
• a private company was prosecuted- Sections 276-C and 277 of the ITA
provided for a sentence of imprisonment –S C held -company could not be
prosecuted- each sections required the imposition of a mandatory term of
imprisonment coupled with a fine.
• The sections in question left the court unable to impose only a fine.
Indulging in a strict and literal analysis, the Court held that a corporation
did not have a physical body to imprison and therefore could not be
sentenced to imprisonment.
• The Court also noted that when interpreting a penal statute , if more than
one view is possible, the court is obliged to lean in favour of the
construction that exempts an accused from penalty rather than the one
that imposes the penalty.

11. Standard Chartered Bank and Ors. v. Directorate of
Enforcement (2005) 4 SCC 530
• Standard Chartered Bank was being prosecuted for violation of certain provisions
of the Foreign Exchange Regulation Act, 1973.
• Supreme Court held that the corporation could be prosecuted and punished, with
fines, regardless of the mandatory punishment required under the respective
statute.
• in Velliappa Textiles case, the Bank could be prosecuted and punished for an
offense involving rupees one lakh or less as the court had an option to impose a
sentence of imprisonment or fine. However, in the case of an offense involving an
amount exceeding rupees one lakh, where the court is not given discretion to
impose imprisonment or fine that is, imprisonment is mandatory, the Bank could
not be prosecuted.

12. • view of different High Courts in India was very inconsistent
• in State of Maharashtra v. Syndicate (1963) Transport Bom. L.R. 197
• High Court had held that the company could not be prosecuted for offenses
which necessarily entailed corporal punishment or imprisonment; prosecuting a
company for such offenses would only result in a trial with a verdict of guilty and
no effective order by way of a sentence
• in Oswal Vanaspati & Allied Industries v. State of Uttar Pradesh 1 Comp.L.J.172
• The Full Bench of the Allahabad High Court had disagreed: “A company being a
juristic person cannot obviously be sentenced to imprisonment as it cannot suffer
imprisonment. It is settled law that sentence or punishment must follow
conviction; and if only corporal punishment is prescribed, a company which is a
juristic person cannot be prosecuted as it cannot be punished. If, however, both
sentence of imprisonment and fine is prescribed for natural persons and juristic
persons jointly, then, though the sentence of imprisonment cannot be awarded
to a company, the sentence of fine can be imposed on it. Legal sentence is the
sentence prescribed by law. A sentence which is in excess of the sentence
prescribed is always illegal; but a sentence which is less than the sentence may
not in all cases be illegal”

13. • The Supreme Court in this particular case held:“We do not think that the
intention of the Legislature is to give complete immunity from prosecution to the
corporate bodies for these grave offenses. The offenses mentioned under Section
56(1) of the FERA Act, 1973 for which the minimum sentence of six months'
imprisonment is prescribed, are serious offenses and if committed would have
serious financial consequences affecting the economy of the country. All those
offenses could be committed by company or corporate bodies. We do not think
that the legislative intent is not to prosecute the companies for these serious
offenses, if these offenses involve the amount or value of more than one lakh,
and that they could be prosecuted only when the offenses involve an amount or
value less than one lakh.”
• By implication, it can be said that post Standard Chartered decision, corporations
are capable of possessing the requisite mens rea. As in prosecution of other
economic crimes, intention could very well be imputed to a corporation and may
be gathered from the acts and/or omissions of a corporation

14. Corporate Criminal Liability: Post-Standard Chartered
Bank Case
• In Iridium India Telecom Ltd. v. Motorola Incorporated and Ors AIR 2011 SC 20,
• the apex court held that a corporation is virtually in the same position as any
individual and may be convicted under common law as well as statutory offences
including those requiring mens rea.
• In CBI v. M/s Blue-Sky Tie-up Ltd and Ors Crl. Appeal No(s). 950 of 2004, the apex
court reiterated the position of law held that companies are liable to be
prosecuted for criminal offences and fines may be imposed on the companies.

15. Can Criminal Liability of Corporation be determined
through Imprisonment?
• in case of corporation,Imprisonment cannot be recognised even for serious
offences mentioned under the IPC. Since, there is no explicit provision relating to
it, Hence the apex court in various cases have held that it is better to impose fine
• The argument that a corporation has no soul to damn and no body to imprison
cuts both ways. Critics use it to argue that there is no reason to prosecute a
corporation. Supporters of corporate criminal liability might turn the argument
around and ask what’s the big deal, since the corporation can’t go to jail?
Corporate liability may appear incompatible with the aim of deterrence because
a corporation is a fictional legal entity and thus cannot itself be “deterred.” In
reality, the law aims to deter the unlawful acts or omissions of a corporation’s
agents. To defend corporate liability in deterrence terms, one must show that it
deters corporate managers or employees better than does direct individual
liability.

16. International Scenario
• The criminal sanctions are quite high and criminal liability of a company is
recognized by the Australian Legislation. Moreover, the Australian legislature
have introduced criminal liability of directors
• A basic principle of German law is societas delinquere non potest, which means
that a corporate body cannot be liable for a criminal offence. But Germany has
developed an elaborate structure of administrative sanctions, which includes
provisions on corporate criminal liability. These so called Ordnungswidrigkeiten
are handed down by administrative bodies. It has provision for fine as
punishment
• Corporate criminal liability is an integral part of Japanese law. There are currently
more than 700 criminal provisions on the national level alone, which can punish
entities other than individuals.
• China’s Criminal Code, which was first introduced in 1979, did not contain a
provision on corporate criminal liability until 1997. Prior to the introduction of
“unit crime” intothe Criminal Code in Article 30

17. • 8th International Conference of the Society for the Reform of Criminal Law in
1994 in Hong Kong and the International Meeting of Experts on the Use of
Criminal Sanctions in the Protection of the Environment in Portland, in 1994
• United Nations Congress on the Prevention of Crime and the Treatment of
Offenders of 1985
• 1998, the Council of Europe passed the Convention on the Protection of the
Environment through Criminal Law, which stipulated in Article 9 that
both“criminal or administrative, sanctions or measures” could be taken in order
to hold corporate entities accountable.

18. conclusion
• The wave of corruption scandals is affecting india very badly. In order to fix this it
is relevant to examine criminal liability, not just of individual directors or agents
of a corporation, but also of the company itself. Although considerable debate
surrounds society’s increasing reliance on criminal liability to regulate corporate
conduct, few have questioned in depth the fundamental basis for imposing
criminal liability on corporations. Accordingly Courts is based on the maxim lex
non cogit ad impossibilia, which tells us that law does not contemplate
something which cannot be done. But the statutes in India are not in pace with
these developments and the above analysis shows that they do not make
corporations criminally liable and even if they do so, the statutes and judicial
interpretations impose no other punishments except for fines. So it is inevitable
to take some serious measures in relation to the criminal liability of corporation
so that it could be stopped from the multiple dimensions of the court’s decision.

19. Conclusion
Absent the possibility of criminal liability, corporations would escape moral
conviction for wrongdoing, and the retributive import of criminal liability to the
community would be lost. For under a civil liability regime for the corporation
qua corporation, there would be no moral condemnation equivalent to a
criminal conviction: if found civilly liable, a corporation might be deemed
negligent, or perhaps reckless, but no statement, in the form of a conviction,
would attest to the proper valuation of the persons or goods at issue. In the
end, the financial liability imposed would come to be viewed, by both the
corporation and the community, merely as a cost of doing business. In effect,
then, a corporate civil liability regime that paralleled ordinary criminal liability
for individuals charged with the same wrongdoing would allow the corporation
qua corporation to purchase exemption from moral condemnation. Such
exemption would affect the expressive significance of criminal liability, as the
vindication of the proper valuations of persons and goods would vary not with
the conduct alleged--a distinction that rightly could affect the evaluative
standard employed--but, rather, with the identity of the offender.

20. Offences under Companies Act

21. • Section 16 of Environment (Protection) Act, 1986 and Clause 2 of
Section 47 of Water (Prevention and Control Pollution) Act, 1974 also
explicitly lays down provision for the offences by companies.

22. Thank You