Professional Documents
Culture Documents
Current Supreme Courts decision have made the stand apparently clear in India that the
Corporation can be prosecuted as a separate legal entity even in the offences where the
punishment is imprisonment. The apex courts decision under various matters reflects the gravity
of the concerned problem i.e being faced by the aggrieved parties. The Concept of No soul to
kick has become obsolete and applicability of lifting the corporate veil has unveiled the sheath.
Introduction
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
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. Hence every crime has
two elements- one physical known as actus reus and other mental known as mens rea 1. This is the
rule of criminal liability in technical sense, but in general the principle upon which responsibility
is premised is autonomy of the individual, which states that the imposition of responsibility upon
an individual flows naturally from the freedom to make rational choices about actions and
behavior2. Although, there is an exception to it i.e Rule of Absolute Liablity in which one can be
made liable even in the absence of mens rea3.
A corporation was not indictable for any crime under early common law 4, but the broad general
rule is now well established that a corporation can be subjected to indictment for violating a
statutory or common-law duty. At the present, most countries agree that corporations can be
1 Russell, W.O.,Russell on Crime, J.W.C. Turner Ed., New Delhi; Universal Law Publishing Pvt., 2001
at p.17-51
2 A. Ashworth, Principles of Criminal Law p. 79-81 (Oxford: Clarendon Press, 1991) cited by Fisse,
Reconstructing Corporate Criminal Law: Deterrence, Retribution, Fault, and Sanctions, 56 S. Cal. L. Rev.
1141
3 Assn. of Victims of Uphaar Tragedy v. UOI, 104 (2003) DLT 234, See also: Rule of Strict Liability Rylands v.
Fletcher, (1868), L.R. 3 H.L. 330
4 Nora A. Uehlein, J.D.,Corporation's criminal liability for homicide, A.L.R. 4th 1021
sanctioned under civil and administrative laws5. However, the criminal liability of corporations
has been more controversial. While several jurisdictions have accepted and applied the concept
of corporate criminal liability under various models, other law systems have not been able or
willing to incorporate it. Criminal liability is attached to only those acts in which there is
violation of Criminal Law i.e. to say there cannot be liability without a criminal law which
prohibits certain acts or omissions6.
There has been a gradual and structural shift in stance taken by Indian Courts. Indian courts, like
western courts, now recognise criminal liability of a corporate. A company has a distinct legal
personality. It can sue or be sued, can own and sell assets, or commit an offence that is of civil or
criminal in nature.
Historical Evolution
The general belief in the early sixteenth and seventeenth centuries was that corporations could
not be held criminally liable7. Legal thinkers did not believe that corporations could possess the
moral blameworthiness necessary to commit crimes of intent 8. It was the common intent of the
people that a corporation has no soul, hence it cannot have actual wicked intent9. It cannot,
therefore, be guilty of crimes requiring malus animus10. Treason, felony, perjury, and violent
crimes against the person could be committed only by natural persons 11. Courts in England drew
5 Anca Iulia Pop , Criminal Liability Of CorporationsComparative Jurisprudence, Report Submitted in partial
fulfillment of the requirements of the King Scholar Program, Michigan State University College of Law, under the
direction of Professor Adam Candeub, Spring, 2006
6 Angira Singhvi ,Corporate Crime and Sentencing in India: Required Amendments in Law, International Journal
of Criminal Justice Sciences ,Vol 1 Issue 2 July 2006 ISSN:0973 available at http://www.sascv.org/ijcjs/angira.html
7 Lord Holt reportedly said in 1701 that [a] corporation is not indictable, but the particular members of
it are. Anonymous Case (No. 935), 88 Eng. Rep. 1518, 1518 (K.B. 1701). However, the reasons behind
Lord Holts decision are not clear because the case consists only of this single sentence
8 James R. Elkins, Corporations and the Criminal Law: An Uneasy Alliance, 65 KY. LJ. 73, 87-88 (1976)
9 Kathleen F. Brickey, Corporate Criminal Accountability: A Brief History and an Observation, 60 WASH. U. L.Q.
411(1981) available at http://digitalcommons.law.wustl.edu/cgi/viewcontent.cgi?article=2261&context=lawreview
some distinctions, however, between crimes requiring specific intent and those for which general
intent would suffice. In one sense the acts of the corporation are the acts of its officers, directors,
and employees12. During the early twentieth century courts began to hold corporations criminally
liable in various areas in which enforcement would be impeded without corporate liability 13.
Indeed, courts were soon willing to hold corporations criminally liable for almost all wrongs
except rape, murder, bigamy, and other crimes of malicious intent14.
The old school of thought was that the corporate acts through its directors and officers, and
should not attract criminal liability. It has been argued that punishment for criminal offences such
as imprisonment cannot be conferred on companies and, hence, there cannot be criminal liability
on companies. 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
corporate15.
12 That corporate employees could be held personally accountable for crimes committed on behalf of a corporation
was a point on which there was "no doubt." Regina v. Great North of England Ry., 115 Eng. Rep.1294, 1298 (Q.B.
1846). See also Cowley v. People, 83 N.Y. 464, 469 (1881)
In India, the need for industrial development has led to the establishment of a number of plants
and factories by the domestic companies and under-takings as well as by Transnational
Corporations. Many of these industries are engaged in hazardous or inherently dangerous
activities which pose potential threat to life, health and safety of persons working in the factory,
or residing in the surrounding areas. Though working of such factories and plants is regulated by
a 614 number of laws of our country, there is no special legislation providing for compensation
and damages to outsiders who may suffer on account of any industrial accident18.
the statute clearly excludes mens rea in the commission of an offence, the same must be treated
as an essential ingredient of the act in order for the act to be punishable with imprisonment
and/or fine23. 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 Ors24 where the Supreme Court
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.
In Zee Tele films Ltd. v. Sahara India Co. Corp. Ltd.25, the court dismissed a complaint filed
against Zee under Section 500 of the IPC. The complaint alleged that Zee had telecasted a
program based on falsehood and thereby defamed Sahara India. The court held that mens rea was
one of the essential elements of the offence of criminal defamation and that a company could not
have the requisite mens rea. In another case, Motorola Inc. v. Union of India26, the Bombay
High Court quashed a proceeding against a corporation 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 offence. Thus, the corporation could not be prosecuted under section
420 of the IPC.
It is clear from the above stated cases that Indian court never felt about inclusion of company on
certain criminal liability. But what if a corporation is accused of violating a statute that mandates
imprisonment for its violation? In The Assistant Commissioner, Assessment-II, Bangalore &
Ors. v. Velliappa Textiles27, a private company was prosecuted for violation of certain sections
under the Income Tax Act ("ITA"). Sections 276-C and 277 of the ITA provided for a sentence of
imprisonment and a fine in the event of a violation. The Supreme Court held that the respondent
company could not be prosecuted for offences under certain sections of the Income Tax Act
because each of these 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.
22 A.I.R. 1966 S.C. 43
23 Id
24 AIR 1997 SC 3964
25 (2001) 3 Recent Criminal Reports 292
26 (2004) Cri.L.J. 1576
27 The Assistant Commissioner, Assessment-II, Bangalore & Ors. V. Velliappa Textiles, (2004) 1 Comp.
L.J. 21
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.
28 Tolaram Relumal and Anr. v. The State of Bombay MANU/SC/0057/1954 and Girdhari Lal Gupta v.
D.H. Mehta and Anr. MANU/SC/0487/1971, mentioned under 27 of above mentioned case
29 (1963) Bom. L.R. 197. See also Standard Chartered Bank case 17
the question whether a corporate body should or should not be liable for criminal action
resulting from the acts of some individual must depend on the nature of the offence disclosed by
the allegations in the complaint or in the charge-sheet, the relative position of the officer or
agent, vis-a-vis, the corporate body and the other relevant facts and circumstances which could
show that the corporate body, as such, meant or intended to commit that act
On the other hand, in Oswal Vanaspati & Allied Industries v. State of Uttar Pradesh 31, the
appellant-company had sought to quash a criminal complaint, arguing that the company could
not be prosecuted for the particular criminal offence in question, as the sentence of imprisonment
provided under that section was mandatory. 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
illegal32.
The Supreme court also take notice of contention made by the Senior Counsel Shri Ram
Jethmalani stating if a corporate body is found guilty of the offence committed, the court, though
bound to impose the sentence prescribed under law, has the discretion to impose the sentence of
imprisonment or fine as in the case of a company or corporate body the sentence of
imprisonment cannot be imposed on it and as the law never compels to do anything which is
impossible, the court has to follow the alternative and impose the sentence of fine33.
The Supreme Court in Standard Chartered Bank also referred to an old decision of the United
States Supreme Court, United States v. Union Supply34. In that case, a corporation was indicted
30 Id. 17
31 (1993) 1 Comp.L.J.172 ,See also Supra, note 3 25
32 Id
33 Standard Chartered Bank and Ors. v. Directorate of Enforcement (2005) 4 SCC 530 at 16
34 Id. at 26. See also United States v. Union Supply, 215 U.S. 50 (1909)
for willfully violating a statute that required the wholesale dealers in oleomargarine to keep
certain books and make certain returns. Any person who willfully violated this provision was
liable to be punished with a fine of not less than fifty dollars and not exceeding five hundred
dollars and imprisonment for not less than 30 days and not more than six months. It was
interesting to note that for the offence under Section 5 of the statute at issue, the Court had
discretionary power to punish by either fine or imprisonment, whereas under Section 6 of the
statute (the section that was actually violated in Union Supply), both types of punishment were to
be imposed in all cases. The corporation moved to quash the indictment, and the District Court
quashed it on the grounds that Section 6 was not applicable to the corporations. The United
States Supreme Court reversed the District Court's judgment. Justice Holmes held:
It seems to us that a reasonable interpretation of the words used does not lead to such a result. If
we compare Section 5, the application of one of the penalties rather than of both is made to
depend, not on the character of the defendant, but on the discretion of the Judge; yet, there,
corporations are mentioned in terms. And if we free our minds from the notion that criminal
statutes must be construed by some artificial and conventional rule, the natural inference, when a
statute prescribes two independent penalties, is that it means to inflict them so far as it can, and
that, if one of them is impossible, it does not mean, on that account, to let the defendant
escape35.
Finally, 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 offences. The offences mentioned under Section 56(1) of the FERA Act, 1973 for which
the minimum sentence of six months' imprisonment is prescribed, are serious offences and if
committed would have serious financial consequences affecting the economy of the country. All
those offences 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 offences, if these offences
involve the amount or value of more than one lakh, and that they could be prosecuted only when
the offences involve an amount or value less than one lakh.
The Supreme Court also pointed out that, as to criminal liability, the FERA statute does not make
any distinction between a natural person and corporations. Further, the Indian Criminal
Procedure Code, dealing with trial of offences, contains no provision for the exemption of
corporations from prosecution when it is difficult to sentence them according to a statute. The
court held that the FERA statute was clear: corporations are vulnerable to criminal prosecution,
and allowing corporations to escape liability based on the difficulty in sentencing would do
violence to the statute. The Court did not develop its reasoning far enough so as to specifically
hold that a corporation is capable of forming mens rea and acting pursuant to it. However, the
Court held that corporations are liable for criminal offences and can be prosecuted and punished,
at least with fines. Many of the offences, punishable by fines, however do have mens rea as a
35 Union Supply Case. Id. At p.55
necessary element of the offence. 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.
Inference
The well known maxim 'judicis est just dicere, non dare' best expounds the role of the court. It is
to interpret the law, not to make it. This read with the Doctrine of Separation of Powers has
bound the Courts hands in imposing various kinds of punishments and all that it is left with is to
impose fines. In order to avoid compelling the Courts to go out of the statute and interpret and
therefore define the law which is essentially the task of the legislature 36, it is advised that the
legislature amends the various penal statutes in a way so as to bring in various forms of
punishments for the corporations as well, thereby maintaining the separation of powers regime
and hence the rule of law.
It must be stated that environmental degradation resulting from industrial pollution in recent
years has become a positive danger to social security. Legal provisions are therefore incorporated
in the Indian Penal Code37, to punish industrial and business organizations which create danger to
public life by polluting water38, and District Magistrate can initiate proceedings against them
under Section 133 of the code of Criminal Procedure, 1973.
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. It states companies can be prosecuted under certain circumstances and thus,
reflect the concept of vicarious criminal liability.
43 Supra, note 6
44Cf. John C. Coffee, Jr., No Soul To Damn, No Body To Kick: An Unscandalized Inquiry into the Problem
ofCorporate Punishment, 79 MICH. L. REV. 386 (1981), available at http://digitalcommons.law.Umaryland
edu/cgi/viewcontent.cgi?article=2497&context=mlr&seiredir=1&referer=http%3A%2F%2F.htm
45 Sara Sun Beale, A Response To The Critics Of Corporate Criminal Liability, 46 AM. CRIM. L.
REV. 1481 available at http://www.law.yale.edu/documents/pdf/cbl/Beale_paper.pdf
46 Lewis A. Kornhauser , An Economic Analysis of the Choice Between Enterprise and Personal Liability for
Accidents, 70 CAL. L. REV. 1345 passim (1982)
The legal difficulty arising out of the above situation was noticed by the Law Commission and in
its 41st Report, the Law Commission suggested amendment to Section 62 of the Indian Penal
Code by adding the following lines:
"In every case in which the offence is only punishable with imprisonment or with imprisonment
and fine and the offender is a company or other body corporate or an association of individuals,
it shall be competent to the court to sentence such offender to fine only."
As per the jurisprudence evolved till then, under the present Indian law it is difficult to impose
fine in lieu of imprisonment though the definition of 'person' in the Indian Penal Code includes
'company'. It is also worthwhile to mention that our Parliament has also understood this problem
and proposed to amend the IPC in this regard by including fine as an alternate to imprisonment
where corporations are involved in 1972 47. However, the Bill was not passed but lapsed. Such a
fundamental change in the criminal jurisprudence is a legislative function and hence the
Parliament should perform it as soon as possible by also considering the following arguments.
Till now, the Courts in India have been able to impose only fine as a form of punishment because
of statutory inadequacy and lack of new forms of punishments which could be imposed upon
corporates51. But the recent judgments in India make it clear that corporations are liable to be
prosecuted for offences under Indian Penal Code. With this, India is now in same platform with
other jurisdictions such as the US and the UK when it comes to law in relation to criminal
liability on corporation.
International Scenario
In the modern day world, the impact of activities of corporations is tremendous on the society. In
their day to day activities, not only do they affect the lives of people positively but also many a
times in a disastrous manner which come in the category of crimes. For instance, the Uphar
Cinema tragedy or thousands of scandals especially the white collar and organized crimes can
come within the categories that require immediate concern. Despite so many disasters, the law
was reluctant to impose criminal liability upon corporations for a long time48.
A basic principle of German law is societas delinquere non potest, which means that a corporate
body cannot be liable for a criminal offence. The argument is that the human element is missing
47 The proposed Indian Penal Code (Amendment) Bill, 1972, Clause 72(a) reads as hereunder:"Clause 72(a)(1) - In
every case in which the offences is punishable with imprisonment and fine, and the offender is a company, it shall be
competent for the Court to sentence such offender to fine only. (2) - In every case in which the offence is punishable
with imprisonment and any other punishment not being fine, and the offender is a company, it shall be competent for
the Court to sentence such offender to fine only. Explanation: - For the purpose of this section, 'company' means any
body corporate and includes a firm or other association of individuals."
48 Supra, note 6
and that the creation and operation of slush funds, as well as giving bribes, are all human acts
and not the acts of the company itself 49. But Germany has developed an elaborate structure of
administrative sanctions, which includes provisions on corporate criminal liability. These socalled Ordnungswidrigkeiten are handed down by administrative bodies. The key provision for
sanctioning the corporation is Section 30 Ordnungswidrigkeitengesetz, which calls for the
imposition of fines on corporate entities50.
The criminal sanctions are quite high and criminal liability of a company is recognized by the
Australian Legislation51. Moreover, the Australian legislature have introduced criminal liability
of directors.
For more than fifty years, most criminal law and corporate scholars in the United States have
been opposed to corporate criminal liability, arguing that it should be eliminated or at least
strictly limited52. In the US and the UK, it has been a settled principle that corporates can be held
criminally liable. Companies have been open to manslaughter proceedings since 1965. Until
then, English law abided by the principle laid out by a 17th century judge, who deemed,
"Companies have a soul to damn, but no body to kick". Way back in 1909, in New York Central
and Hudson River Rail Road Co v. United States 53, Supreme Court in the US had held that a
corporation is liable for crimes of intent and stated: "We see no good reason why corporations
may not be held responsible for and charged with the knowledge and purposes of their agents,
acting within the authority conferred upon them. Recognizing that the rights of corporations
should be respected, as are the rights of natural persons, the Court nonetheless stated that the law
"cannot shut its eyes to the fact that the great majority of business transactions in modern times
49 Supra, note 6
50 Konstantin Zens, Susan Watson, Enforcement instruments in transnational corporate bribery: an
overview, 2012 International Company and Competition Law Review 271 available at
www.westlaw.com
51 Markus Wagner, Corporate Criminal Liability National and International Responses, Background Paper for
theInternational Society for the Reform of Criminal Law 13th International Conference Commercial and Financial
Fraud: A Comparative Perspective Malta, 8-12 July 1999 available at http://www.icclr.law.ubc.ca/publications
/reports/corporatecriminal.pdf
are conducted through these bodies, and particularly that interstate commerce is almost entirely
in their hands54.
In HL Bolton (Engg) Co Ltd v. TJ Graham & Sons55, Lord Denning stated that, "The state of
mind of these managers is state of mind of company, and it is treated by law as such. So, in 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 company."Beginning in the 1970s, nations throughout western
European began creating or expanding corporate criminal liability, rather than contracting or
eliminating it56.
France had also not recognized corporate criminal liability since the French Revolution, the new
Code Pnal of 1992 makes specific mention of this concept in section 121(2) 57. The resistance to
not including corporate criminal liability in the criminal code had increased over the years, and
in 1982 the Conseil Constitutionnel had made it clear that the French Constitution did not
prohibit the imposition of fines on a corporation 58. 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, and this number is likely to increase in
the coming years59. Chinas 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 into
the Criminal Code in Article 3060.
54 New York Central R. Co. v. United States, 212 U.S. 481 (1909) available at
http://supreme.justia.com/cases/ federal/us/212/481/
55 Id. at 495
56 HL Bolton (Engg) Co Ltd vs TJ Graham & Sons, [1957] 1 WLR 454 available at http://www.justcite.com
/Document/b2ytmZytmSaaa/bolton-h-l-engineering-co-ltd-v-t-j-graham-sons-ltd
57 Thomas Weigend ,Soecietas delinquere no potest? A German Perspective, 6 J. INTL CRIM. JUST. 927, 928
(2008) (noting quick spread of corporate criminal liability to the Netherlands, Switzerland, Austria, and Italy)
available at http://www.law.yale.edu /documents/pdf/cbl/Beale_paper.pdf
60 Supra, note 54 at p.6. Also see. Ito, Kensuke. Criminal Protection of the Environment and the General Part of
Criminal Law in Japan. International Review of Penal Law, v. 65, n. 3-4, p. 1043
The Concept of Criminal liability of Corporation is also mentioned under various International
documents. A number of conferences have dealt with the same issues since the end of World
War II. Among them are the 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 199461. The Seventh
United Nations Congress on the Prevention of Crime and the Treatment of Offenders of
1985 in Milan mentioned that due consideration should be given by Member States to making
criminally responsible not only those persons who have acted on behalf of an institution,
corporation or enterprise, or who are in a policy-making or executive capacity, but also the
institution, corporation or enterprise itself, by devising appropriate measures that could prevent
or sanction the furtherance of criminal activities62.
In 1998, the Council of Europe passed the Convention on the Protection of the Environment
through Criminal Law, which stipulated in Article 9 that bothcriminal or administrative,
sanctions or measures could be taken in order to hold corporate entities accountable63.
61 Art. 30 of the Chinese Criminal Code reads: Any company, enterprise, institution, state organ, or
organization that endangers society, which is prescribed by law as a crime committed by a unit, shall bear
criminal responsibility.
62 Supra, note 54 at p.7
63 A/RES/40/32. Guiding Principles for Crime Prevention and Criminal Justice in the Context of Development
and a New International Economic Order. 29 November 1985 http://www.un.org/documents/ga/res/40/a40r032.htm
Conclusion
India is hunting to curb the incessant pace of corruption in its governance, which is generally
being hit by a spate of large-scale corporate scandals. In this context, to fix liability for
corruption and bribery offences, it becomes 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 societys 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. 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.
It is apparent from the current action that some serious measures must be taken in relation to the
criminal liability of corporation of India so that it could be stopped from the multiple dimensions
of the courts decision.