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Corporate Criminal Liability
Globalization, liberalization and privatization led to the increase in corporate entities thus, making companies an inevitable part of society. Corporations have separate legal entity and have an entity different from a natural person. A company is not just a legal entity but it is a legal device to meet the social and economic needs and is socially responsible. Companies should be subject to criminal liability for offences that occur in the course of their business operation for which they must bear responsibility. Corporate Criminal Liability means the extent to which a Corporation as a legal person can be held criminally liable for its acts and omissions. Earlier, the Indian Courts were of the viewthat Company being a juristic person is not capable of having mens rea and hence, it cannot be held criminally liable. Courts were also of the view that as Companies cannot be sentenced to corporal punishment or imprisonment and no effective order could be passedin such cases. Whereas, according to the theory of vicarious liability, a company is liable for the harm caused by its employee while acting during the course of employment. The Identification theory states that the Managers and Directors of the Company represent the directing will of the Company and control the actions of other employees. Hence, the state of mind of the managers is the state of mind of the Company.
In Sunil Banerjee v. Krishna Chandra Nath (AIR 1949 Cal 689) the Court held that the bank is such that it cannot be said to have mens rea requisite for the offence of cheating and so the bank as such cannot be punished for cheating because it has no physical body.
In Standard Chartered Bank and Ors. v. Directorate of Enforcement and Ors. (AIR 2005 SC 2622), the Court stated that as a Company cannot be imprisoned therefore it cannot be prosecuted for the latter offences, which may be graver than the former, then it will be total injustice and defeat the intent of the Legislature. Therefore, the Courts in such cases have discretion to impose only fine and ignore imprisonment. However, this discretion is to be exercised only in case the accused is a Company but for natural persons both imprisonment and fine have to be imposed. Later in Iridium India Telecom Ltd. vs. Motorola Inc and Ors. (AIR 2011 SC 20), the Court held that the companies are capable of having mens rea and therefore they cannot claim immunity from criminal prosecution on the ground of lack of mens rea.
Such a view is important because in the present globalized world Companies undertake vital activities in various sectors that affect the life, liberty and property of the citizens and hence, amenability of the Company to criminal law is essential for a peaceful society with stable economy.
Apart from Indian Penal Code, other legislations such as The Essential Commodities Act, 1955; Prevention of Food Adulteration, 1954 etc., for corporate criminal liability. Section 10 of The Essential Commodities Act, 1955 states that if a person contravening an order is a company,every person who, at the time the contravention was committed, was in-charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Section 17 of Prevention of Food Adulteration Act, 1954 states that if a person who is in-charge of, and responsible to, the company for the conduct of the business or when no one is nominated, every person who at the time when offence was committed was in charge is held responsible.
