Deeming Fiction: The Statutory Intendment of Affixing Corporate Criminal Liability in India
DOI:
https://doi.org/10.12728/culj.7.4Abstract
This article discusses the statutory intendment pursued by the Indian judiciary in order to avoid the standstill issue of corporate criminal liability, by proper mechanism of fastening legal responsibility through the creation of a legal fiction. Far from giving corporations a shield to commit fraud, this concept narrows down the scope of escape by rejecting the plea that no one is to be held criminally liable for an act of another. This article studies the issue of how the judiciary has disallowed the notion that a body corporate cannot commit a criminal offence by reasoning out the scope of deeming fiction. This article also discusses the issue of one principle being compromised for another, arraigning the corporation along with the functionaries of the corporation. The authors argue that the principle of deeming fiction can capture the desirable features of other principles such as identification, attribution and lifting of the corporate veil. Further the authors demonstrate as to how this principle renders all other theories meaningless in the light of a plain statutory intendment, when put to use in its complete sense to have full effect. The application and use of various UK, USA, Canada, and Indian case laws has been adopted in order to understand and compare the above mentioned machinery of fastening culpability to the money making corporations, for the offences committed by them. Lastly, the authors feel that the courts, upon proper application of mind, have considered the issues of participation, responsibility and enforceability in each case, without which it would have been a futile exercise. The article concludes on the note that a blanket application of either principle would prove to be detrimental and statutory intendment would fasten the liability of deemed culpability, and proceeds against the corporation or the director or both, accordingly.
References
ANNA LEON-GUERRERO, SOCIAL PROBLEMS: COMMUNITY, POLICY, AND SOCIAL ACTION 351 (Sage Publications 2013).
Yedidia Z. Stern, Corporate Criminal Personal Liability: Who is The Corporation, 13 J. CORP. L. 125, 126 (1987).
PAUL ROBERTS, STRICT LIABILITY AND THE PRESUMPTION OF INNOCENCE: AN EXPOSÉ OF FUNCTIONALIST ASSUMPTIONS37-41(Oxford Scholarship Online, 2010).
JOHN C. COFFEE, JR., CORPORATE CRIMINAL RESPONSIBILITY, ENCYCLOPAEDIA OF CRIME AND JUSTICE,253 (Sanford H. Kadish et al. eds., 1983).
In re. Queen, (1846) 115 Eng. Rep. 1294 (Q.B.).
Lennard's Carrying Company Ltd. v. Asiatic Petroleum Company Ltd. (1915) A.C. 705, 713-714 (in certain cases, where the law requires personal fault as a condition of liability in tort, the fault of the manager will be the personal fault of the company).
Kathleen F. Brickey, Corporate Criminal Accountability: A Brief History and an Observation, 60 WASH. U. L.Q. 393, 396 (1981); Vikramaditya S. Khanna, Corporate Criminal Liability: What Purpose Does it Serve? 109 (7) HARVARD L. R. 1477 (1996).
Director of Public Prosecutions v. Kent and Sussex Contractors Ltd., (1994) 1 All.E.R. 119 (DC).
Sanford H. Kadish, Some Observations On The Use Of Criminal Sanctions In Enforcing Economic Regulations, 30 U. CHI. L. R. 423, 430-35 (1963); Developments In The Law — Corporate Crime: Regulating Corporate Behaviour Through Criminal Sanctions, HARVARD. L. R. 92, 1227, 1231-42 (1979); Brent Fisse & John Braithwaite, The Allocation of Responsibility for Corporate Crime: Individualism, Collectivism and Accountability, 11 SYDNEY L. R. 468, 504-07 (1988).
Lennard’s Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd. (1915) A.C. 705.
Id. at 713-714.
H.L. Bolton Engineering, (1957) 1 All.Eng. Rep. 159 (Q.B.).
Weatherfoil, (1972)1 W.L. R 118.
Moore v. Bressler Ltd., (1944) 2 All.Eng. Rep. 515 (Q.B.).
H.L. Bolton Engineering, (1957) 1 All. Eng. Rep. 159, 172 (Q.B.).
GLANVILLE WILLIAMS, TEXT BOOK OF CRIMINAL LAW 970 (2nd ed. 1961).
R v. Canadian Dredge & Dock Co., (1985) 1 S.C.R. 662.
HALSBURY'S LAWS OF ENGLAND, CRIMINAL LAW, EVIDENCE AND PROCEDURE, 603 (Volume 11(1), 4th ed. London, Butterworths 1990); Assistant Commissioner v. Velliappa Textiles Ltd., (2003) 11 S.C.C. 405, 423.
Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd, (2012) 5 SCC 661; Avnish Bajaj v. State and Anr, 116 (2005) DLT 427; Ebay India Pvt. Ltd. v. State and Anr, AIR 2012 SC 2693.
Meridian Global, (1995) 2 A.C. 500.
Tesco Supermarkets, (1972) 1 A.C. 153.
Ross Grantham, Attributing Responsibility to Corporate Entities: A Doctrinal Approach, 19 COMPANIES & SEC. L.J. 168 (2001).
State of Maharashtra v. Mayer Hans George, A.I.R. 1965 S.C. 722; W.O. RUSSELL, RUSSELL ON CRIME, 17 (12th ed. 2001); P.S.A. PILLAI, CRIMINAL LAW 27 (Lexis Nexis, Butterworths Wadhwa, Nagpur 10th ed. 2012).
Timothy P. Glynn, Beyond “Unlimiting” Shareholder Liability: Vicarious Tort Liability for Corporate Officers, 57 VAND. L. R. 329, 357 (2004).
R.S. Sodhi and Anr. and Manoranjan Pani and Ors. v. Partha Pratim Saikia, [2009] 151CompCas 583 (Guwahati).
Patricia B. Rodella, Corporate Criminal Liability for Homicide: Has the Fiction Been Extended Too Far?, 4 J. L. & COM. 95, 105–09 (1984); John M. Hickey, Corporate Criminal Liability for Homicide: The Controversy Flames Anew, 17 CAL. W. L. R. 465, 466–67 (1981).
RATANLAL & DHIRAJLAL, THE INDIAN PENAL CODE 71 (Wadhwa & Co., Nagpur, 31st ed. 2006).
CODE CRIM. PROC. § 11; General Clauses Act, 1897 § 3(42); Income Tax Act, 1961 § 2(31) (iii); Foreign Exchange Management Act, 1999 § 2(4); Competition Act, 2002 § 2(1); Prevention of Money Laundering Act, 2003 § 2(s); Indian Electricity Act, 2003 § 2(49).
LAW COMMISSION OF INDIA, The Code of Criminal Procedure, 1898, Report No. 41 (1972), available at http://lawcommissionofindia.nic.in/1-50/Report41.pdf .
PEN.CODE. § 420.
New York Central & Hudson River Railroad Co. v. United States, (53 L. Ed. 613); D.P.P. v. Kent and Sussex Contractors Ltd., (1944) 1 All. Eng. Rep. 119; H.L. Bolton (Engg.)Co. Ltd. v. T.J. Graham & Sons, (1956) 3 All.Eng. Rep. 624; Tesco Supermarkets Ltd. v. Nattrass (1971) All. Eng. Rep. 127; The Director, Central Railway Company of Venezuela v. Joseph Kisch (1867) 15 W.R. 821; Lennard’s Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd., (1915) A.C. 705.
State of Maharashtra v. Syndicate Transport Co. (P) Ltd., 1964 Cri. L.J. 276.
Standard Chartered Bank, (2005) 4 S.C.C. 530.
Id. at 543-545.
Id. at 546.
Iridium India Telecom, A.I.R 2011 S.C. 20.
(17) Ch. D. 746.
East End Dwellings Company Ltd., (1952) A.C. 109.
In construing the legal fiction, courts are not permitted to go beyond the language of the statute by which it is created, C.I.T., Bombay City v. Shakuntala, A.I.R 1996 S.C. 719, 722.
Assistant Commissioner v. Velliappa Textiles Ltd., (2003) 11 S.C.C. 405, 420-423. See Jess M. Krannich, The Corporate "Person": A New Analytical Approach to a Flawed Method of Constitutional Interpretation, 37 LOY. U. CHI. L. J. 61, 62 (2005).
Id. at 426, 437.
Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 228 (Tex 1990); Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex. 1986).
The total dealings between the shareholder and the corporation are relevant in determining whether there is an alter ego relationship.; See also Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d 571 (Tex. 1975). The Supreme Court of Texas has stated that the evidence may include “the degree to which corporate formalities have been followed and corporate and individual property have been kept separately, the amount of financial interest, ownership and control the individual maintains over the corporation, and whether the corporation has been used for personal purposes.” See Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 228 (Tex 1990); Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex. 1986).
Meridian Global Funds Management Asia Ltd v. Securities Commission, (1995) 2 A.C. 413.
STEPHEN M. BAINBRIDGE, THE NEW CORPORATE GOVERNANCE IN THEORY AND PRACTICE 25–30 (2008); Jess M. Kannich, supra note 41 at 64-90.
Helen Anderson, Directors’ Liability for Corporate Faults and Defaults - An International Comparison, 18 PAC. RIM L. &POL’Y J. 1, 34–44 (2009).
United States, 821 F.2d 844 (1987). The knowledge of a corporation is the sum of the knowledge of all of its employees; totality of what all the employees know within the scope of their employment. A corporation could plead immunity by asserting that the information obtained by several employees was not acquired by any one individual who then would have comprehended the full import.
ANDREW ASHWORTH, PRINCIPLES OF CRIMINAL LAW 117 (5th ed. 2006).
Reinier H. Kraakman, Corporate Liability Strategies and the Costs of Legal Controls, 93 YALE L.J. 857 (1984).
Cassels, Jamie, “The Uncertain Promise of Law: Lessons From Bhopal”, 29 OSGOODE HALL L. J. 1, 20 (1991).
The company and the individuals acting for it merge into a single legal entity, and the individual’s acts are distributed from the individual and attributed to the company. See Grantham, supra note 23 at 171; See Stern, supra note 2 at 129; See also Yedidia Z. Stern, Corporate Liability for Unauthorized Contracts-Unification of the Rules of Corporate Representation, 9 U. PA. J. INT’L BUS. L. 649 (1987).
. Aneeta Hada, (2012) 5 S.C.C. 661.
Matrix Cellular Services Pvt. Ltd. Through Capt. Rakesh Walia v. Sanjoy Mukherji & Ors., 196 (2013) D.L.T. 649; Raj Pal Kapil v. State of Himachal Pradesh and Another, 2013 (3) Shim.L.C. 1248.
The Bengal Immunity Company Ltd. v. State of Bihar and Ors., A.I.R. 1955 S.C. 661.
N. Elangovan v. C. Ganesan, 2014 (4) M.L.J. (Crl.) 517.
Aneeta Hada, (2012) 5 S.C.C. 661
Vodafone International Holdings B.V., (2012) 6 S.C.C. 613.
Id. at 672-675.
State of Tamil Nadu, A.I.R. 1997 S.C. 1815.
The Chief Inspector of Mines, A.I.R. 1961 S.C. 838.
J.K. Cotton Spinning, A.I.R. 1988 S.C. 191.
M. Venugopal, (1994) 2 S.C.C. 323.
Harish Tandon, (1995) 1 S.C.C. 537.
S.M.S. Pharmaceuticals, (2005) 8 S.C.C. 89.
Lemon v. Harlem Globetrotters Intern.,Inc., 437 F. Supp. 2d 1089, 1110 (D. Ariz. 2006); Mill Run Assocs. v.
Locke Prop. Co., 282 F. Supp.2d 278, 287 (E.D. Pa. 2003).
Sham Sunder v. State of Haryana, (1989) 4 S.C.C. 630.
Sunil Bharti Mittal v. Central Bureau of Investigation, A.I.R. 2015 S.C. 923; Vinod Kashyap and Ors. v. Central Bureau of Investigation,2015 (1) J.C.C. 749.
Standard Chartered Bank v. Directorate of Enforcement, (2005) 4 S.C.C. 530, 563.
Meenu Bhist v. Vijay Kumar Gupta and Anr., 141 (2007) D.L.T. 923.
