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PROJECT REPORT
ON regulating
white collar
crimes
SUBMITTED TO: SUBMITTED BY:

DR. BASANT TWINKLE MEHTA

UILS, PANJAB UNIVERSITY LL.M.(2 YRS.) 4TH SEM

CHANDIGARH 1876

ACKNOWLEDGEMENT
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In performing this assignment, I had to take the help and guidance of some respected persons,
who deserve my greatest and heartfelt gratitude. I would like to express my gratitude to my
Professor for guiding and inspiring me throughout the completion of my project .

I would also like to express our deepest and heartfelt gratitude to all the personages who have
directly and indirectly guided me in writing this project report.

I also thank this Institution, the faculty members without whom this project would had been a
distant reality.

I also extend my heartfelt gratitude to my family members for supporting us to do this project.

TABLE OF CONTENTS
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1) INTRODUCTION……………………………………………………………………………………….……..5
2) WHAT IS WHITE COLLAR CRIME?...............................................................................................6
3) REASONS FOR CIMMITTING WHITE COLLAR CRIMES………………………….………….7
4) TYPES OF WHITE COLLAR CRIMES COMMITTED IN INDIA……………………………..7
5) CONTROLLING WHITE COLLAR CRIMES………………………………………………………...9
6) INSIDER TRADING AND WHITE COLLAR CRIMES………………………….……..……….12
7) WHISTLE BLOWING AND REGULATIONS…………………………………………..………….14
8) LEGISLATING THE WHITE COLLAR CRIMES: THE ROLE OF GOVERNMENT…..17
9) JUDICIAL ATTITUDE TOWARDS WHITE COLLAR CRIMES……………………………..17
10) FAMOUS WHITE COLLAR CRIMES IN INDIA……………………………………………….…19
11) CONCLUSION AND SUGGESTIONS…………………………………………………………………20

TABLE OF CASES
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1) CBI, New Delhi v. Abdul KarimTelgi& others, 2005 Cri LJ 2868 (Bom)……..……11
2) Girish Saini v. State of Rajasthan, 2012 Cri LJ 246(Raj)……………………………11
3) Iridium India Telecom Ltd. v. Motorola Incorporated and Ors., 2011(1) SCC 74…..11
4) J. Jayalalitha v. Union of India, 2011 Cri LJ 1469………………………………….13
5) Jyoti Prasad v. State of Haryana, AIR 1993 SC 1167………………………………..10
6) Sahara v. SEBI, (2012) 10 SCC 603…………………………………………………13
7) Subramanian Swami v. Dr. Manmohan Singh, AIR 2012 SC 1207…...…………….13

INTRODUCTION
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The concept of White Collar Crimes found its place in criminology for the first time in 1941.
However, with the development of technology, White Collar Crime has become a global
phenomenon and in India it is increasing at a tremendous pace because of the increase in the
economical and industrial growth. There has been an unusual and unexpected increase in the
growth of computer specific white collar crime which brings a great challenge for the law
enforcement agencies as these crimes can be committed from anywhere in the world by any
anonymous person. There are many professions where criminal and unethical practices are
often going unnoticed. In order to gain more for them some unethical professionals indulge
into illegal activities without fear of loss of respect and prestige.

White collar crime is a crime committed by the people who belong to the higher class of society
and are from the reputable group of society. This crime is committed during the course of their
occupation. The people who are committing this crime have usually a better understanding of
technology, their respective field, disciplines etc. White collar crimes are largely evolved from
few years. And they are seen to be committed in large organizations that cover a large number
of activities. So we can say that these crimes are common to trade, commerce, education, health
etc. As the criminal profile has changed a lot in few years the traditional crimes have partially
switched by the white collar crimes in the country. The primary difference between the white
and the blue crime is that the ordinary i.e. the criminals of blue crime are people of under-
privileged section and upper class is involved in white collar crime and they commit the crime
in a very organized manner. They maintain their respect in the society until the crime is
discovered.1

White collar crime can have a large impact on the society and it does not only affect the
criminals. It is also called as a socio-economic crime because it has a direct impact on the
society. When a white collar crime is committed huge losses on business occur which have a
direct impact on the consumers and the society. There are various numbers of frauds and scams
that had been exposed in our country from the past few years like 2g scam, havala scam,
banking scam, fodder scam and many more. Due to these frauds and scams the economy of our
country has shambled. And then to make up these losses of fraud or any scams, they increase
the costs. This means higher prices for the consumers in the way of higher taxes, government
revenue, and increased insurance costs. The impact of white collar crime on society is great.

1 Available at http://www.legalserviceindia.com/legal/article-530-white-collar-crime-detail-study.html
(assessed on 1st April 2020)
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There is loss in every field from the costs of commodities to the securities and insurance. One
financial fraud can affect the businessmen, the investors and the government. All you need is
one bad employee who out of greed of money will commit a financial fraud and will cause
harm to the reputation of the company, lack of profits and gain of losses.

WHAT IS WHITE COLLAR CRIME?

What is meant by the term “white collar”? According to one dictionary, white collar is “Of or
pertaining to workers, salaried or professional, whose work usually does not involve manual
labor and who are expected to dress with some degree of formality.” At a minimum, white
collar people are employed, traditionally; they are middle or upper class, not lower class and
have a respectable status in the society. 2

❖ Edwin Sutherland, an American sociologist who first defined the white collar crimes in
the global. He described this crime to be committed by the person of high social status
as compared to those who commit ordinary crimes during the course of his
employment.
❖ Morris drew attention to the necessity of a change in emphasis regarding crime. He
arrested that anti-Social activities of persons of high status committed in course of their
profession must be brought with the category of crime and should be made punishable.
❖ Then, finally, E.H. Sutherland through his pioneering Work emphasized that these ‘
Upper Worked’ crimes which are committed by the persons of upper Socio-economic
groups in course of their occupation - violating the trust , Should be termed as “ White
Collar Crime “ So as to be distinguished from traditional crime which he called blue
collar crime.

REASONS FOR CIMMITTING WHITE COLLAR CRIMES

R2 Melissa L. Rorie, The Handbook of White Collar Crime, Wiley Publications at Pg.- 23-24.
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❖ Greed:

High class people are financially stable, however, they still commit crime because of their
greed to earn more. And for this purpose, they even choose illegal ways to have an economic
gain;

❖ Competition:

Darwin in his theory of evolution has stated that “survival of the fittest” is necessary and thus
there will always be competition for survival. However, some people for their own greed and
in order to get ahead of their peers commit crimes;

❖ No fixed laws or punishments:

After committing the crimes most of the offenders get away without getting any punishment
because there are not enough laws to deal with such kind of crimes. In many cases, because of
the supreme political connections most of the offenders get away without any punishment.
Moreover, in many cases there are no witnesses for the said offences as such offences are
committed in private.

TYPES OF WHITE COLLAR CRIMES COMMITTED IN INDIA

Some of the white collar crimes practiced in India are as follows:

Bank Fraud

Fraud is a crime committed with an intention to deceive and gain undue advantage. Bank Fraud
is a fraud committed on the banks. It is committed by the fraudulent companies by making fake
representations. It is also related to the manipulation of the negotiable instruments like cheque
bouncing, securities, bank deposits etc. Bank fraud is concerned to the public at large because
there is a relation of trust between the banks and the public. It is the most common type of
white collar crime and also a corporate crime. It harms public as well as the government of the
country.

Bribery:
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Bribery is also a very common type of white collar crime. By bribery we means giving money
or some goods to the person at a high position in return of a favor. In simple words bribery is
when one man gives money to the other which is in authority. It is done for the purpose of
insisting him to do something or to prevent him from doing something. It is the most common
income of most of the public officials of our country.

Cybercrime:

Cybercrime is the biggest cause leading to these type of crime in India. It is the latest problem
prevailing in the cyber world. Cybercrime is the crime which is related to ‘computer networks’.
With the rapid increase of advancement of technology there is also a rapid increase in the crime
related to the technology. Cybercrime involves the persons who are expert in computer related
technology. And it is committed against the victim directly or indirectly to cause a harm to his
reputation or to harm in physical or mental way using internet, networks and other
technological sources.

Cybercrime threatens the nations as well as the person’s security and financial status.
Cybercrime can cause huge financial loss to the country. Not only the financial loss but it can
also threaten the privacy of a person. Disclosure of confidential information can create privacy
problems. Also cybercrime against women is also rising. By the use of telecommunication
networks, mobile phones cyber stalking, sending obscene messages and pictures by criminals
to women is also increasing.

Money Laundering:

Money laundering is a crime in which the criminals disguise the identity of the money. In this
crime, criminals try to hide the original ownership of the money and the place where they
obtained that money by illegal means. Laundering is done with the intention of making that
money came from legal sources. In simple words money laundering means to show the
illegitimate money as legal money. For instance if a person obtain money from black
marketing, trafficking of illegal goods the money will be considered ‘dirty’ and he cannot
deposit into the banks as it may seem suspicious if he directly deposit money into the financial
institutions because he had to create statements and records stating that where the money came
from.
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Tax Evasion:

Tax evasion is committed with an intention to conceal one’s actual taxable income and one’s
original position to the authorities. This concealment of income is done to reduce the tax
liability in the eyes of government. In simple words it means to hide the money obtained from
the illegal means in order to reduce one’s liability to pay tax and to show low income to the tax
authorities. Tax evasion has a negative impact on the social values

Identity Theft:

Identity theft is one of the easiest type of crime these days. Due to advancement of technology
it is very easy to access personal information of anyone. Identity theft is the crime in which the
criminal access unauthorized information such as name, address, phone number etc. and use
this information to gain money. In simple words identity theft is committed by using some
other person identity to commit fraud or to gain money by illegal means.

CONTROLLING WHITE COLLAR CRIMES

Unlike ordinary street crime, there are two formal systems of controlling white-collar crime.
These systems are the criminal justice system and the regulatory system. The criminal justice
system controls white-collar crime by using criminal law whereas the regulatory system
depends mainly on administrative law and uses various ways such as financial penalties,
product recalls, and warnings to control white-collar crime. In this paper two formal justice
systems of white collar crime have been discussed. Although the criminal justice system, which
is the traditional means to control white-collar crime, can be a strong way to control white-
collar crime, it has some limitations. That is, the criminal justice system is difficult to apply to
the corporate world and it is the reactive response against white collar crime. In contrast,
although the regulatory system is the weak way to control white-collar crime, it has some
strength. That is, the regulatory system is a proactive response against white collar crime and
it can apply to the corporate as well as natural persons. The characteristics of the regulatory
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system make it better equipped to situational crime prevention theory compared to the criminal
justice system.

The Indian Penal Code 18602 is the earliest comprehensive and codified criminal law of India.
It also deals with many white collar crimes and punishment is provided for bribery and
corruption, counterfeiting of coins and government stamps, of offences relating to weights and
measures, offences relating to adulteration of food stuffs and drugs, misappropriation of public
property and criminal breach of trust, cheating, forgery and offences relating to documents and
counterfeiting of currency.

The provisions dealing with the Indian Penal Code have been time and again enforced by the
Judiciary through a catena of cases. Some of the cases dealing with white collar crime are as
follows:

In a landmark judgment of Jyoti Prasad v. State of Haryana,3 the accused were charged under
sections 254, 255, 258, 467, read with section 120-B of the Code and charges leveled against
them were that they had conspired to do the illegal act of counterfeiting of government
stamps but trial court acquitted them all. On appeal to High Court confirmed the acquittal
of all except the appellant who was convicted under section 258 and 259 of the Indian
Penal Code on the ground that being a stamp vender he had knowledge or at least reason to
believe that the stamps he was selling were counterfeit. On appeal to Supreme Court his plea
that he purchased stamps from the treasury was rejected as he neither produced register
maintained by him nor made any efforts to summon the treasury records, and conviction was
upheld.

The Supreme Court in a landmark judgment of CBI, New Delhi v. Abdul KarimTelgi&
others,4 whereTelgi along with other co- accused Abdul GafoorMujahid, Anand G Thorat,
SachinMunna and Ashfaq had floated a company, M/S Prime Services, located at Nehru Place
during 1997-98 for unauthorized trading and selling counterfeit stamps or non-judicial stamps
in various parts of Delhi and adjoining areas. The accused had caused huge loss to the State
exchequer by selling the counterfeit stamp papers. Telgi was held guilty under Sections 420
(cheating), 258 (sale of counterfeit government stamp), 259 (having possession of counterfeit
government stamp), 260 (using as genuine a government stamp known to be a counterfeit) and

3 AIR 1993 SC 1167

4 2005 Cri LJ 2868 (Bom).
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120 B (criminal conspiracy) of the IPC.The court upheld Abdul KarimTelgi's seven-year
imprisonment in the multi-crore scam.

In Girish Saini v. State of Rajasthan,5 a public servant was accused of not depositing nor
making entries of stationery required for official purpose. Accused public servant was in charge
of the store in the concerned department at the time of the commission of the offence. Hence
entrustment was proved. It was held accused could not take the benefit of misplacing of one of
registers of company as he could not prove maintenance of two registers by department. Hence,
the accused was held guilty of committing criminal breach of trust. It was further held by the
court that taking into consideration large scale increase in corruption in public life from top to
bottom and more particularly to fact that appellant being a public servant misappropriated
stationery article which was supplied for office purpose, hence the punishment awarded by trial
court cannot be said to be excessive. Hence, the punishment was sustained.

The Supreme Court of India in Iridium India Telecom Ltd. v. Motorola Incorporated and
Ors.,6 has held that deception is necessary ingredient under both parts of section. Complainant
must prove that inducement has been caused by deception exercised by accused. It was held
that non-disclosure of relevant information would also be treated a misappropriation of facts
leading to deception.

Hence, the Indian Penal Code was enacted in 1860. The word white collar crime is not
mentioned anywhere in the Code. But the dimensions of white collar crimes are so wide
that after analyzing the provisions of Indian Penal Code 1860 we may conclude that
certain offences under Indian Penal Code are closely linked with white collar crimes such
as corruption, bribery, counterfeiting of coins and government stamps, offences relating to
weights and measures, adulteration of food stuffs and drugs, misappropriation of property,
criminal breach of trust, cheating and dishonesty inducing delivery of property, forgery, etc.
After analyzing relevant provisions we may conclude that even though Indian Penal Code was
enacted in 1860 and though it has been amended here and there but its main structure has
continued intact during the last 154 years. It is an admirable compilation of substantive criminal
law and most of its provisions are as suitable today as they were when they were formulated.
But the social and economic structure of India has changed to such a large extent that in many
respects the Code does not truly fulfills the needs of the present day. It is dominated by the

5 2012 Cri LJ 246(Raj).

6 2011(1) SCC 74
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nation that almost all major crimes consist of offences against person, property or State.
However the Penal Code does not deal in any satisfactory manner with acts which may be
described as white collar crimes having regard to the special circumstances under which they
are committed and which have now become dominant feature of certain powerful sections of
modern society. The punishment prescribed for white collar crimes under Indian Penal Code,
1860 are proving inadequate. The specific Acts dealing with white collar crimes and the
provisions of Indian Penal Code should be harmoniously interpreted to control the problem of
white collar crimes. The provisions of Indian Penal Code dealing with white collar crimes
should be amended to enhance punishment particularly fine in tune with changed socio-
economic conditions.

INSIDER TRADING AND WHITE COLLAR CRIMES

An insider trading may be negative or positive. An insider trading may be called negative when
it harms the organisation or its stakeholders. On the other hand it may be positive when an
individual exposes an unpublished data of an organisation to the public which may protect the
interest of the common stakeholders. Insider trading is the act of buying and selling a
company’s stock on the basis of ‘inside’ information about the company. The “inside” or
“insider” information of a company is proprietary information which is not available to the
general public outside the company, but whose availability would have a material or
significant impact on the price of the company’s stock. Insider trading is not only illegal, it is
unethical too. The person, who trades on insider information, in effect “steals” information and
thereby gains an unfair advantage over the general public. Many people argue that insider
trading is socially beneficial and, on utilitarian grounds, it should not be prohibited but
encouraged. Insider trading is highly discouraged by the SEBI to promote fair trading in the
market for the benefit of the common investors.

Evils of Insider Trading

In majority of the cases, it is observed that the retail investors suffer loses. The big mutual fund
houses, foreign institutional buyers, and even the big investors have their own research team.
So they never indulge in this kind of hearsay or gossips in the market. Thus the major exertion
created by insider trading is a dearth of faith in the capital markets where these illegal or foul
trades carried on. Conviction is implied between a company and its investors.
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The company’s ordinary employee to an officer everyone is supposed to act in the best interest
of the shareholders of the company. Insider trading is a treachery of that conviction.

The insider is making profit at the cost of those innocent shareholders who had put trust on the
same company which is not only breach of trust but also immoral and unethical.

Benefits of Insider Trading

Occasionally it acts as a price accelerator and brings the price of shares to their correct level.
Insider trading is beneficial to the management because it sometimes acts as boost to them as
regards to the market capitalisation. They may have more bargaining power in money market
too. If non-public information is made public for the interest of common people without having
profit motive by an insider, it may be a boon to the ordinary investors. Also it is found that the
insider trading may be commendable for the market as it can provide increased movement of
price and volume of trade of a particular script which drives the market at a new high. Other
views about the possible benefits of insider trading included the observable fact that it is
beneficial for the people interested to get out of the script

FEW CASES OF INSIDER TRADING

❖ Merger of Reliance Petroleum Ltd with Reliance Industries Ltd

At the time of merger of Reliance Petroleum Limited (RPL) with Reliance Industries
Limited (RIL) in 2007, RIL had 4.1% stake in RPL in future market and also in spot market
to hedge a major slide in price of RPL shares. This transaction was carried through Reliance
Petro investment and as per SEBI’s calculation the amount involved was Rs. 4023 crore
from which RIL made a profit of Rs. 513 crore. This was declared as insider trading by the
market regulator

❖ ITC Limited, WIPRO Incorporation and Mahindra & Mahindra:

The executives and top officials of ITC, WIPRO and M&M were baaffled with the notices
from SEBI in mid-August, 2014 when the latter imposed ne on them. According to SEBI
those who were involved in illegal trade sold shares which either they bought from open market
or got under stock option scheme. All of them were aware of price sensitive information and
hence they violated the insider trading rule.

❖ A Case on Harshad Mehta

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In 1990 Harshad Mehta, an ordinary graduate in commerce, began trading heavily in the shares
of ACC the price of which rose all of a sudden from Rs. 200 to nearly Rs. 9000. That
mechanism was known as “ready forward” transaction nsnuanced by collateralised bank
receipts, which were in fact uncollateralised. In 1991 he got a nick name as “big bull” because
he was the cause of starting bull run in the market. Few high officials of banks were involved
with him. In 1998 SEBI initiated charge for insider trading against him and the executives of
three companies, namely Sterlite, BPL, and Videocon. Those companies resorted to insider
trading to push their scripts prices. Between April to June,1998 the share prices of those
companies rose up to 137%, 232%, and 41% respectively though BSE Sensex declined by 11%
due to the national and global uncertainties.7

RULES UNDER REGULATOR’S LENS

In India, the first set of regulations for insider trading was introduced in 1992 by SEBI. In our
country the chairman of SEBI Mr.U.K. Sinha is trying to enforce stricter rules to curb such
malpractices so that there will be a fair play in the share market. As per the notification of the
Union Government on 28th August, 2014 SEBI is now empowered to attach properties, arrest
defaulters and secure access to call data. This will enable SEBI to prove insider trading cases.

By imposing fine and sending the culprits in to prison, nothing can be changed until and unless
the moralities of those people are not being changed. So it is advisable that every company
should have certain codes of conduct and ethical practices. Not only that, each and every
employee should be aware of the consequences of not following the ethical practices and
particularly the consequences he may follow for not adhering to the insider trading rules.

WHISTLE BLOWING AND REGULATIONS

Whistle blowing may sometimes be used to settle personal vendettas or manipulate the stock
market. To prevent this from occurring, the audit committee that investigates the allegations
will examine them for their merit. If a complaint is proven to be frivolous, the complainant can
face a jail term of up to two years.8 The whistle blower policy in India is aimed to safeguard
the interest of general public. Employees who reveal fraud, corruption or mismanagement to
the senior management are called internal whistleblowers. Employees who report fraud or

7 Available at https://blog.ipleaders.in/white-collar-crime/ (accessed on 2nd april 2020)

8 https://www.livemint.com/
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corruption to the media, public or law authorities are external whistleblowers. Indian
whistleblowers are protected under the Whistleblower Protection Act India.

Laws relating to whistleblowing and protection of whistleblowers are inadequate in India.

However, the Companies Act, 2013 lays down provisions for whistleblowing and corporate
governance in India and the elimination of fraud by establishing adequate vigil mechanism.
Sections 206 to 229 of the Companies Act, 2013 lay down laws relating to Inspection, Inquiry,
and Investigation incorporate.

Section 208 of the Act empowers an Inspector to inspect company records and furnish any
recommendations to conduct investigations. Section 210 states that the Central Government
may order an investigation into the affairs of the company in the following cases:

• On receipt of a report by Registrar or Inspector of the company.

• On intimation of a Special Resolution passed by a company that the affairs of the

company must be investigated.

• To uphold the public interest.

The Serious Fraud Investigation Office (SFIO), a statutory body is created under Section 211
of the Act which has the power to arrest any person for fraud in the company. The auditors
have the responsibility to report to the Central Government if they have reason to believe a
fraud committed or being committed to the company.

Draft Rule 12.5 of the Companies Act, 2013 and Section 177(9) makes it compulsory for listed
companies, companies accepting deposits from public and companies borrowing more than Rs.
50 crore from banks or public financial institutions to have a whistleblowing policy and
establish a vigil mechanism for directors and employees to report their genuine concerns. A
vigil committee has to be set up to ensure the vigil mechanism in the company and
whistleblower policy is effectively implemented in the company.

Additionally, the Securities and Exchange Board of India (SEBI) amended the Principles of
Corporate Governance in 2003. Clause 49 of the Listing Agreement now includes the
formulation of a Whistleblower policy in Indian companies. A company may establish a
mechanism for employees to report concerns regarding unethical behavior, actual or suspected
 P a g e | 16

fraud or violation of the company’s code of conduct or ethics policy. However, it is currently
not mandatory for companies to have a whistleblowing policy in place.

The Whistleblower Protection Bill, 2011 which replaced the Government Resolution, 2004
has not come into force yet. The bill aims to balance the need to protect honest officials from
undue harassment with protecting persons making a public interest disclosure.

Shortcomings or wrongdoings in a company may lead to a loss of the company’s goodwill and
capital. It is important for every company to have a whistleblowing policy in place for both the
organization and employees. To encourage employees in raising their voices against
wrongdoing and reach the appropriate authority, a company must get a tailored whistleblowing
policy through an experienced corporate lawyer.

The whistleblowing policy must include stipulations that will ensure confidentiality and
anonymity of the informant. The policy must also include provisions for the establishment of
an internal committee of members from each level of management to deal with potential
whistleblowers.

However the challenges of whistleblowing in India are that even if a whistleblower reports a
fraud or even if there is a whistleblower policy in place the perpetrators of the fraud or the
higher management generally try to shut down the whistleblower and they also have this
apprehension that if they report the fraud they will be at the risk of losing their job as most of
the frauds in an organization are done by the higher management or board members. Though
there are certain enactments for the protection of whistleblower they always find themselves in
the dilemma of choosing between professional responsibility and organizational responsibility.

There have been instances of whistleblower cases in India wherein not only the employees but
the middle management and higher management has also been a whistleblower and reported
the fraud in the organizations. Whistleblower policy and protection of whistleblowers help and
motivate the whistleblower to come forward and report the incidents of fraud. If the incident is
reported in time it can stop the company from a big failure. 9

9Available at https://www.myadvo.in/blog/whistleblowing-policy-in-india-the-law-and-challenges/ (accessed

on 1st april 2020)
 P a g e | 17

LEGISLATING THE WHITE COLLAR CRIMES: THE ROLE OF

GOVERNMENT

The government of India has introduced various regulatory legislations, the breach of which
will amount to white-collar criminality. Some of these legislations are:

❖ The Essential Commodities Act 1955;

❖ The Industrial (Development and Regulation) Act, 1951;
❖ The Import and Exports (Control) Act, 1947;
❖ The Foreign Exchange (Regulation) Act, 1974;
❖ The Companies Act, 1956;
❖ The Prevention of Money Laundering Act, 2002.
❖ The Finance Act, 2019 : This Act is the Central Government’s endeavour to tighten the
gaps around the existing provisions of the Prevention of Money Laundering Act, 2002
(PMLA). Amidst the growing number of financial crimes and high-profile cases, the
2019 Act attempts to make the existing provisions stricter and better armoured to detect
suspicious transactions. Additionally, the Act, along with the other amendments, has a
greater aim of targeting money laundering and terrorist financing. The 2019 Act
attempts to remove the ambiguity in the existing provisions by amending eight clauses
of the PMLA.10

JUDICIAL ATTITUDE TOWARDS WHITE COLLAR CRIMES

Laws have no meaning without adequate enforcement, which is why our Constitution has put
in place an elaborate judicial system with the Supreme Court at the apex. As law abhors
vacuum, so therefore, when the Executive refused to act and legislature could do little about it,
Indian Judiciary stepped in to save the day. The public interest litigation has proved to be a
strong and potent weapon to control white collar crimes. Hawala scam, fodder scam, St. kits
scam, illegal allotment of government houses and petrol pumps scam have come to light
through public interest litigation.

10Available
at http://www.legalservicesindia.com/article/1378/White-collar-crime-and-its-changing-
dimensions-in-India.html (accessed on 4th april 2020)
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The present scenario of corruption in India has been depicted by Justice A.K. Ganguli in
Subramanian Swami v. Dr. Manmohan Singh,11 in following words:

“Today corruption in our country not only poses a grave danger to the concept of constitutional
governance, it also threatens the very foundation of Indian Democracy and the Rule of Law.
The magnitude of corruption in our public life is incompatible with the concept of socialist,
secular, democratic republic. It cannot be disputed that where corruption begins, all rights end.
Corruption devalues human rights, checks development and undermine justice, liberty,
equality, fraternity which are the core values of our Preamble. Therefore, the duty of the court
is that any anti-corruption law has to be interpreted and worked out in such fashion as to
strengthen the fight against corruption.

The Supreme Court of India in J. Jayalalitha v. Union of India,12 has held that “Corruption
corrodes the moral fabric of the society and corruption by public servant not only leads to the
corruption of the moral fabric of the society but is also harmful to the national economy and
national interest, as the person occupying high posts in government by misusing their powers
due to corruption can cause considerable damage to the national economy, national interest and
image of the country”.

In the case of Sahara v. SEBI13 which was a case of issuing misleading information and clause
in prospectus of company.

• Here the question raised that whether the private placement of shares can be treated as
offer?
• In this cases, Sahara India Real Estate Corporation Limited (SIRECL) and Sahara
Housing Investment Corporation Limited (SHICL) floated an issue of option of fully
convertible debenture (OFCD’s) to more than million investors and termed their issued
debenture as private placement, with a defense that the company did not intend to get
their OFCD’s listed because the security which have been issued is a Hybrid Security.
• During this period, the company had total collection of over Rs. 17,656 crore. This
amount was collected from 30 million of investors.

11 AIR 2012 SC 1207.

12 2011 Cri LJ 1469
13 (2012) 10 SCC 603
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• The Hon’ble Supreme Court on 31 st august, 2012 in one of the most anticipated
judgment of recent times has directed the Sahara Group and its two group companies
SIRECL and SHICL to refund around Rs. 17,400 crore to their investors within 3
months.
• Supreme Court also ruled that SEBI has myriad powers to invest listed and unlisted
companies functioning regarding the issue of securities in order to secure the interest
of investors. This was the landmark judgment in the field of Indian corporate Law.

FAMOUS WHITE COLLAR CRIMES IN INDIA

❖ Enron scandal, publicized in October 2001, eventually lead to the bankruptcy of the
Enron Corporation, an American energy company based in Houston, Texas and De-
Facto dissolution of Arthur Andersen.
❖ Satyam Scam, 2009. Satyam was the biggest scam in the history of India. The Satyam
scam of 2009 has shatter the peace and tranquility of investors in the share market. The
chairman Ramalinga Raju has manipulated the financial statement and the books of
accounts.
❖ Harshad Mehta Scam shocked the entire economy of India. He fooled many investors
by taking advantage of the loopholes of the system.
❖ 2G scam was basically a telecommunication and a political scandal. In this scandal
many Politicians and government were involved. The scam was about the allocation of
unified access service license. The former telecom minister A Raja has evaded norms
at every level and carried out the dubious 2G scam in the year 2008.
❖ There are many corporate scams which has taken our economy to a greater loss, Coal
Scam, Bofors scandal etc. were also famous in this regards.

CONCLUSION AND SUGGESTIONS

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To conclude we can say that White Collar Crimes are committed by various Individuals in
greed of self-enrichment. But when this crime is conducted collectively by group of people or
association in any business, then such crime becomes Corporate Crime. The loss being suffered
from other Conventional Crimes such as theft, trespass, burglary, arson, etc. is far less than the
loss being suffered from White Collar Crimes. It causes an adverse impact on the commerce
and economy of our country. And it also leads to loss of trust of the investors in the market.

What an Organization can do? Or what steps should be taken? Some of the suggestions
are as follows:

❖ Tone at the top: create an ethical environment.

❖ It should be lead by example.
❖ Corporate code of Conduct should followed.
❖ There should be strict rules regarding the Call in Service for Unethical Practices.
❖ There should be reliable Internal Control.
❖ Training courses should be organized, such as:
❖ Ethics Training
❖ Internal Controls
❖ Fraud Prevention
❖ Technological and Business changes
❖ Special trainings for Monitors.
❖ Reference check on New Employees should be done.
❖ Anti-Corruption & Anti-Bribery practices should be adopted.
❖ New Code of Governance should be developed.

BIBLIOGRAPHY
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❖ http://www.legalserviceindia.com/legal/article-530-white-collar-crime-detail-
study.html
❖ Melissa L. Rorie, The Handbook of White Collar Crime, Wiley Publications ,2018
❖ https://blog.ipleaders.in/white-collar-crime/
❖ https://www.livemint.com/
❖ https://www.myadvo.in/blog/whistleblowing-policy-in-india-the-law-and-challenges/
❖ http://www.legalservicesindia.com/article/1378/White-collar-crime-and-its-changing-
dimensions-in-India.html