DR. B.R.

AMBEDKAR NATIONAL LAW UNIVERSITY

Subject- Criminal Law I

Code- 503

PRINCIPLE OF LEGALITY, AND, CORPORATE CRIMINAL

LIABILITY

Submitted To Submitted By

Dr. Sonia Himadri Badoni

Date: 2nd November, 2022 Roll No.: 2001037

Section A

5th Semester

1
 ACKNOWLEDGEMENT

I express my gratitude towards my professor, Dr. Sonia Dahiya for assigning me this topic.
While working on this project, I not only enhanced my knowledge but also got a different
perspective on Criminal Law in India.

I am also grateful to the Hon’ble Vice-Chancellor of the institution

and my parents for providing me with adequate means to complete the assigned project.

Sincerely

Himadri Badoni

2
 CONTENTS

INTRODUCTION ................................................................................................ 4
PART A: THE PRINCIPLE OF LEGALITY ...................................................... 5
PART B: CORPORATE CRIMINAL LIABILITY ............................................. 9

3
 INTRODUCTION

According to the legality principle in criminal law, only the law has the authority to define a
crime and impose punishment (nullum crimen, nulla poena sine lege). It also represents the
principle that the criminal code must not be broadly applied, for example, by analogy, to the
injury of the accused. That rule states that a crime must have a specific legal definition. The
idea of law encompasses both written and unwritten law and suggests certain standards,
particularly those of accessibility and predictability. The prerequisites are met if the individual
can determine from the relevant provision's text and, if necessary, with the help of a court's
interpretation of it, what actions and failures may subject him to criminal liability. The
prohibition against applying the criminal code retroactively to an accused person's detriment is
likewise a part of the legality principle. Both the most significant international convention that
safeguards human rights and the constitutions of numerous nations both contain references to
this notion.

The guiding principles of our nation's governance, which also applies to corporations, are
accountability and responsibility. Due to the permission society has given companies to pursue
their own objectives and interests, it is legal to hold them accountable for any harm they create.
It makes sense that the boundaries of legitimate business behaviour are established when harm

to others first occurs because society typically bears the brunt of corporate harm. This is where
the idea of corporate liability first emerged. Theoretically, it is now unmistakable that a
company, as a legal person, can be held accountable for criminal offences.

Contrary to most legal systems throughout the world, this type of accountability is relatively
new in India. However, our Supreme Court has recently gone so far as to indict corporations
with a fine-only penalty when the offence calls for both a required prison term and a fine.
However, it is unclear what standard is being utilised by the courts in our nation to identify
corporate culpability when such a liability is still in its infancy. Even though there are generally
accepted guidelines for prosecuting corporations, the claim that penalising corporations also
harms their innocent stockholders must be taken into consideration as a strong argument.

This assignment attempts to understand the aforementioned principles in depth and gauge an
understanding of the same. Further, the assignment has been bifurcated into two parts for better
delivery of research.

4
 PART A: THE PRINCIPLE OF LEGALITY

Nullum crime sine lege or the principle of legality is considered a mandatory requirement for
a fair trial. Not recognizing the nullum crime sine lege will not only deprive individuals of the
ability to regulate their conduct, but will also remove the limits of the state’s penal
powers. And more generally, the principle is not limited to prohibitions on the application
of the law after the fact, but also implies other guarantees. The principle of legality
consists of the following four guarantees: first, the requirement that the criminalization of
certain behaviour must be foreseeable (nullum crimes sine lex praevia); second, the
requirement that laws must be interpreted restrictively, leaving no room for judicial creativity.

Furthermore, the principle of legality means that the criminal law that provides for an act or
omission to be a criminal offense must be enacted and executed before the offence is committed
(nullum crime sine lege praevia).

1. Nullum crimen sine lege; nulla poena sine lege

This maxim means that only the law can classify a crime and qualify a penalty, and it
is primarily viewed as a law adopted by a state legislature. In any case, the term "law"
refers to both written and unwritten law and implies qualitative requirements,
particularly those of accessibility and predictability. Accessibility requires that every
person should have the opportunity to learn about existing criminal laws, which
includes the obligation of the state to make them public in some way.

2. Nullum crimen sine lege certa; nullum crimen sine lege stricta

According to this principle an offence must be clearly defined in the law and this must be
foreseeable for any person. The requirement is satisfied where a person can know the
wording of the relevant provision and, if need be, with the assistance of the courts’
interpretation of it, what act or omission will make him criminally liable. But a consequence
of the principle that laws must be of general application is that the wording of the statues
is not always precise.

5
 ORIGIN AND CONCEPTION OF THE PRINCIPLE OF LEGALITY

13 trials were held at the Nuremberg trials in the late 1940s under the supervision of judges
from the four main allies: the United States, Britain, France, and the Soviet Union. 177
Germans and Austrians were charged in these trials. Of those, 35 were found guilty, 25 were
put to death, 20 were given life sentences, and the remaining 97 received lesser sentences. Low
level soldiers were also convicted in these trials. Prior to World War II, only senior
commanders or heads of state were subject to prosecution. In court, the prosecution of Nazis
invoked the defence of superiority, which was a recognised legal doctrine. On the grounds that
their actions were against humanity, the prosecution was not granted protection from this
retroactive criminal legislation throughout the trials.1

The Nuremberg trial served as a model for the 1948 Universal Declaration of Human Rights
(UDHR) and the 1949 Geneva Convention III.

The definition of the principle is structured by Article 11(2) of the Universal Declaration of
Human Rights (UDHR), which states:

‘No one shall be held guilty of a penal offence for an act or omission that did not constitute a
penal offence under national or international law at the time it was committed.’ ‘No harsher
penalty shall be imposed than that which was applicable at the time the penal offence was
committed.’2

1
Principle of Legality in International and Comparitive Criminal Law, available at:
https://www.cambridge.org/core/books/abs/principle-of-legality-in-international-and-comparative-criminal-
law/legality-in-criminal-law-its-purposes-and-its-competitors/E90DE2935156E2D2AD3EBD1E29C33A4B,
(last visited on October 31st, 2022)

2
Non Retroactivity of Criminal Law, available at: https://blog.ipleaders.in/non-retroactivity-of-criminal-law-
principle-and-its-position-in-constitution-and-international-
law/#:~:text=The%20nullum%20crimen%20sine%20lege,declares%20particular%20conduct%20as%20crimin
al.
(last visited on October 30, 2022).

6
 PRINCIPLE OF LEGALITY IN INDIA

The concept of legality, or nullum crimen, nullum poena sine lege, has been incorporated into
the Indian Constitution. No person shall be convicted of any offence except for violating a law
in effect at the time the Act charged as an offence was committed, nor shall they be subject to
a penalty greater than that which may have been imposed under the law in effect at the time
the offence was committed, according to article 20 (1) of Part 3 of the Fundamental Rights
under the Rights of Freedom in the Indian Constitution.

Article 20(1) of the Indian constitution can be understood in two parts:

• The first part implies that a person is only convicted of violating a law which was in
force when the act charged was being committed. A law enacted after, an act done
earlier (not an offence when done) as an offence, will not make the person liable for
being convicted under it. For example, ‘The Dowry Prohibition Act, 1961 came into
force from 20.5.1961. A person guilty of accepting dowry is punishable under the Act
after 20.5.1961 and not before 20.5.1961.’

• The second part immunes a person from a penalty more than what he might have incited
at the time of his committing the crime. Meaning that an ex-post-facto law or retroactive
law, cannot make a person suffer more than what he was subjected to at the time of
committing the offence. For example, Satwant Singh vs Punjab[7]. Satwant Singh was
charged according to section 420 of Indian Penal Code (IPC). According to Sec. 420
IPC, an unlimited fine can be imposed for offence punishable under this provision.
Later, an ordinance laid down the minimum fine which a court must inflict on a person
convicted u/s 420 IPC. The Supreme Court held that article 20(1) was not infringed by
the ordinance because the minimum penalty fixed by it could not be said to be greater
than what could be inflicted.

The definition in section 3 (37) of the general clauses act is applied as there is no definition of
offence in the constitution and for application of article 20(1) there has to be an ‘offence.3

3
Daniel Gradinaru, “The Principle of Legality” Grădinaru, Daniel, The Principle of Legality (November 20,
2018). RAIS Conference Proceedings - The 11th International RAIS Conference on Social Sciences, Available
at SSRN: https://ssrn.com/abstract=3303525

7
 CASES INVOLVING THE PRINCIPLE OF LEGALITY

Article 20(1) of the Indian envisages prohibition on conviction and enhancement of punishment
under an ex post facto law. Article 20 (1) provides as follows: “No person shall be convicted
of any offence except for violation of a law in force at the time of the commission of the Act
charged as an offence, nor be subjected to a penalty greater than that which might have been
inflicted under the law in force at the time of the commission of the offence.”

The Supreme Court of India in Rao Shiv Bahadur Singh v. Vindhya Pradesh held that the
principle of non-retroactive is of “paramount importance” and described the retroactive crime-
creation and punishment as “unjust and inequitable”. Further, the case of Soni Devrajbhai
Babubhai v State of Gujarat rejected the arguments of the appellants who had sought to apply
the provision of newly added provision related to dowry death under Section 304-B of the
Indian Penal Code to the alleged incident that occurred prior to the date of insertion. In the said
case, the alleged incident had taken place in August 1986 and Section 304-B was enacted in
November 1986. The Court held that application of Section 304-B retrospectively would result
in the denial of the protection given under Article 21(1) of the Constitution.

In the landmark judgment of Selvi v. State of Karnataka, the High Court held that the
guarantees under Article 20 are the ‘fundamental protections that control the interaction
between the individual and criminal justice system’. The Court while delineating the interplay
between guarantees of Article 20 and 21, emphasized that the duo has acquired the non-
derogable status even during the national emergency pursuant to the Forty-fourth Amendment
Act, 1978.

Notwithstanding the foregoing, the interpretation of the Supreme Court with respect to Article
20(1) has been viewed as being restrictive. According to Chandra and Satish, the Supreme
Court’s interpretation has caused ‘problematic distinctions between criminal and civil liability;
and procedural rules and substantive provisions’, thereby inhibiting, what otherwise is, the
broad scope of Article 20(1) guarantee. It has been argued by them that such an interpretation
of the Supreme Court is ‘insensitive to the material disadvantage it can cause to the accused’.
For example, on the basis of criminal-civil distinction, the Court has allowed retrospective civil
liability in contradistinction to criminal liability, or that ex-post application of tax penalties for
the failure to pay tax has been upheld by the Court. Similarly, on the basis of procedural-

8
substantive distinction, the Court has upheld ex post facto procedural changes (like change in
court) thereby holding no fundamental to of being tried by a particular court or procedure; and
the Court even upheld the application of a new evidentiary rule to the trial where the offence
has been committed earlier. Following Chandra and Satish, the Supreme Court’s very own
expansive ‘due process interpretation’ read into Article 21 in recent years needs to be deployed
as it has made room for the prohibitions which previously could not be made in view of the
formalistic distinctions mentioned hereinabove. Further, in absence of the fair notice of a
publicized law, the individuals are faced with the threat of the State’s excesses and are
retrospectively condemned for the exercise of their liberty.

Noteworthily, unlike the Indian Constitution, the American Constitution renders the
retroactivity as void and therefore such retroactive laws can be struck down on the touchstone
of constitutionality by the United States Supreme Court.4

PART B: CORPORATE CRIMINAL LIABILITY

Large businesses hold a dominant and substantial position in our economy, and they pose a
threat to our society, so they must be discouraged. Multinational corporations (MNCs) are
corporations that have assets and facilities in countries other than their home country and play
a substantial role in practically every aspect of modern society. Because corporations have their
own legal identity and are distinct from their members, it is difficult to hold them accountable
and punish them. In general, a crime is committed by a person with their own body and soul,
and it was previously thought that an organization could not be held accountable for
wrongdoing. Criminal offences need a goal, and an organization without a brain could not
formulate one. Furthermore, an enterprise lacked its own body that might be imprisoned. A
corporation, however, can commit a crime. Accepting companies’ complicity in criminal
activity, liability concepts have been developed in numerous jurisdictions by attributing actus
reus and mens rea to corporations.

4
Principle of Legality, available at : https://lawtimesjournal.in/principle-of-legality/ , (last visited on 31st
October, 2022)

9
Corporations have a separate legal personality distinct from natural persons like members,
directors, employees etc. who make the corporations. Due to this, liability on corporations is
imposed separately from any criminal liability which may be imposed on the individual
members for any wrongdoing. The basic rule of criminal liability is based on the maxim- actus
non facit reum nisi mens sit rea; an act is not wrongful unless accompanied by a wrongful
state of mind. Companies should be subject to criminal liability for offences that occur in the
course of their business operation for which they bear responsibility. Corporations may be
convicted in a criminal court for acts that violate the penal law of the jurisdiction in which it is
tried. 5

THE CONCEPT OF CORPORATE CRIMINAL LIABILITY

The essential cornerstone of corporate liability laws all around the world is the recognition of
the corporation as a separate legal entity. Courts, on the other hand, struggled to hold
corporations liable for acts that were considered criminal offences on two fronts:

1. assigning mens rea, or a criminal intent factor, to fictional entities such as corporations;
and

2. punishing corporations where statutory punishments were mostly corporal in nature,

requiring imprisonment.

The idea of corporate criminal liability arose in response to this necessity, allowing courts to
hold individuals accountable for illegal activities performed in the name of corporations. The
simple response the courts came up with for offences that did not require the proof of mens
rea was to create a modified version of the Doctrine of Vicarious Liability, under which the
company’s controlling persons would be held accountable.

However, soon after, business directors were held accountable for criminal activities for which
criminal intent had to be established. For this, the ‘Identification’ or ‘Attribution’ theory was
used, which is a modified form of vicarious responsibility in which the person in charge of the

5
India: Corporate Criminal Liability, available at: https://www.mondaq.com/india/crime/882614/corporate-
criminal-liability, last visited on 31st October 2022).

10
firm’s affairs and the corporation were deemed one and the same for the purposes of the
criminal act. The doctrine of attribution suggests that the criminal purpose of the company’s or
body corporate’s “alter ego”, i.e., the person or group of people, who run the company’s
operations, is ascribed to the corporation. On the basis of the company’s alter ego, mens rea is
thus assigned to it.

THE GENESIS AND DEVELOPMENT OF CORPORATE CRIMINAL

LIABILITY IN INDIA

In the past, Indian courts have held that corporations could not be tried for offences requiring
mens rea, which is an essential requirement for the bulk of crimes, and that corporations could
not be prosecuted for offences requiring imprisonment because corporations could not be
imprisoned. Furthermore, stakeholders argued that by dividing responsibilities among board
members, if the firm confronts criminal liability, the director assigned to manage that aspect of
its operation will be held criminally liable. The legal approach, on the other hand, has been a
little more difficult.

Two corporations were charged with fraud under the Indian Penal Code in A.K. Khosla v. T.S.
Venkatesan. The defendants’ counsel claimed in the Calcutta High Court, among other things,
that the corporations, as juristic persons, could not be punished for IPC offences requiring mens
rea. The court agreed, stating that there were two prerequisites for prosecuting corporate
bodies: mens rea and the ability to impose the mandatory sentence of imprisonment, and that a
corporate body could not be said to have the necessary mens rea or be sentenced to
imprisonment because it lacked a physical body.

Similarly, the court dismissed a case made against Zee Telefilms Ltd. under Section 500 of the
IPC in Zee Telefilms Ltd. v. Sahara India Co. Corp. Ltd. According to the lawsuit, Zee aired
a program that was based on lies and thereby defamed Sahara India. The court found that one
of the primary aspects of criminal defamation was mens rea, and that a corporation could not
have the required mens rea.

11
Thus previously, Indian courts only recognized that companies may act through their managers
and directors, but the judgments as it exists now solidifies the view that companies are just as
guilty as any living person and can be tried and punished for it.

This was governed by two major decisions in this regard. The first is the case of Standard
Chartered Bank v. Directorate of Enforcement, in which the Supreme Court’s constitution
bench held that no company is immune from prosecution for serious crimes simply because the
prosecution would result in a mandatory prison sentence. Large-scale financial irregularities
are perpetrated by numerous corporations that control a significant amount of the industrial,
commercial, and sociological sectors; therefore, the corporation’s compliance with criminal
law is necessary for a peaceful society with a stable economy and as a result, a corporation can
be charged with and convicted of a crime requiring a minimum sentence of imprisonment.

Secondly, in Iridium India Telecom Ltd. v. Motorola Inc., where the issue was whether a
company could be held liable under Section 420 of the Indian Penal Code, 1860, the Apex
Court answered affirmatively and clarified that even if the offence requires proof of mens rea,
a company can be held liable to the act as the guilty mind of the person in control of the
company will be ‘attributed’. As a result, the doctrines of attribution and imputation were
accepted.

THE ISSUE OF IMPRISONMENT

A person is defined in Section 11 of the Indian Penal Code, 1860 (“the Code”) as “any
Company, Association, or a group of persons, whether incorporated or not.” and according to
Section 2, every individual shall be liable to punishment under this Code. As a result, section
2 of the Code, with no exception for corporations, punishes everyone, which plainly includes
corporations.

By reading these two clauses, the notion of corporate criminal liability may be developed, albeit
it is not the only legislation that provides for the punishment of corporate bodies; others include
the Companies Act of 2013, the Income Tax Act of 2013, and so forth. However, in

12
circumstances when a corporation is accused under sections that require necessary
imprisonment, the courts have reached a dead end because the company, as a legal person,
cannot be imprisoned for its illegal activities and may only be fined.

The Supreme Court faced a similar problem in the case of M.V. Javali v. Mahajan Borewell
& Co. and Others, where the Company was found guilty under Section 276B r/w 278B of the
Income Tax Act, which requires a mandatory sentence of at least 3 months, but the Court was
stumped as to how to imprison a company and thus held that the only harmonious construction
that can be given to S. 276B is that the required term of prison and fine is to be enforced where
it is possible, such as on persons falling under categories (ii) and (iii), but where it is not
possible, such as on a company, the fine will be the sole sanction.

The 47th Law Commission Report also recommended that the criminal law be amended to the
point where corporations should be required to pay an additional fee instead of being
imprisoned. Unfortunately, the legislatures have ignored the law commission’s
recommendations, and the problem has returned to its previous state. Courts still have a tough
time punishing perpetrators. As a result, even if corporate crimes are popular today, the means
for combating them are still in their infancy. Furthermore, the Companies Act recognizes the
concept of criminal liability as well as the doctrine of corporate veil lifting. These principles
under the Companies Act have provided an option for punishing corporations that are not held
accountable under the IPC due to the ineffectiveness of the penalties imposed.

RECENT SCENARIO OF THE LIABILITY OF THE CORPORATIONS

By using the law of attribution, it is now obvious that a company can be found guilty of crimes
including mens rea. Thus, by attributing the criminal intent of the company’s directors or
officials to the corporation, the corporation can be held liable for offences committed in
connection with the corporation’s business by those in control of its affairs. The question then
becomes whether the opposite is conceivable, i.e., if corporate officials may be held liable for
the company’s actions.

13
The Supreme Court of India has answered this question in Sunil Bharti Mittal v. Central
Bureau of Investigation, ruling that an individual who commits an offence on behalf of a
company can be charged alongside the company. To hold an individual accountable, however,
there must be adequate evidence of his active engagement, as well as criminal intent, and/or a
provision must be deliberately integrated into the legislative system that attracts the notion of
vicarious liability. In the absence of any statutory provision to the contrary, the vicarious
culpability of the directors cannot be imputed automatically when the corporation is the
offender.

The question that emerges as a result of the preceding explanation is whether somebody who
is simply identified by the Company as an officer-in-default can be held criminally
accountable. The Supreme Court also stated in this case that the person to whom the company’s
acts must be attributed must be the company’s ‘alter-ego’, meaning that the degree of identity
between the company’s acts and the responsible persons “directing mind and will” must be
high enough for the courts to infer them as one and the same. Furthermore, just because
someone is in charge of things does not make them accountable for crimes requiring intent. As
a result, the Supreme Court decided that the special court was correct in refusing to accept the
charge sheet against the managing director just because he was the company’s CEO.

Therefore, an officer may be prosecuted by virtue of his or her position if he or she is in default
for violations that do not need proof of intent, but this is simply not true in cases when proof
of intent is required. As a result, the general rule is that, unless otherwise stated in a statute, a
director can only be held criminally accountable if there is proof of intent against the director.
The directors must take care to avoid committing such offences in the Company’s name;
however, the onus will remain on them to prove that the offence was done without their
knowledge or approval. However, given the recent approach of Indian courts, it is important to
note that a person cannot be held accountable just because of the title. A person who holds the
post of chairman or managing director cannot be presumed guilty only because of their
position. A person must meet both the ‘legal condition’ of being a person in law (under the
company statute) responsible to the company for the conduct of the company’s business and
the ‘factual requirement’ of being a person in charge of the company’s business.

14
In the recent case of Shiv Kumar Jatia v. State of NCT of Delhi, the Supreme Court rejected
criminal proceedings that were brought solely on the basis that the accused was the company’s
managing director and the only non-independent executive director. He was not, however,
vicariously responsible under the IPC since there was insufficient proof of his active
engagement combined with criminal intent.

Therefore, until there is adequate evidence against the individual in question, the Indian courts
have taken a cautious stance and have generally safeguarded corporate officials from
harassment by investigating authorities.

CONCLUSION

In summation, any neglect or repeal or dilution of the nullum crimen sine lege shall not only
ooze out rights guarantees under the principle that are recognized both in national and
international law; but also systematically disadvantages an accused in a criminal trial wherein
unfair, inequitable, and unreasonable burden is placed on him for proving his innocence. This
is coincidental with the abandonment of the idea of Rule of Law and embraces of an
authoritarian state as, in history, it was exemplified by Nazi law in 1935 by repudiating the
long-standing principle of legality in the German Criminal Code. Thus, this principle serves as
a necessary safeguard in a liberal constitutional order, where the State’s unconstrained and
indeterminate powers to criminalize are prohibited by upholding the liberty of an individual.

Moving on to the liability of a corporation, as previously stated, the primary premise of strict
interpretations of criminal statutes binds the hands of justice. With corporate scandals aplenty,
it’s more important than ever to revamp the regulatory regime and statutes to make corporate
criminal liability more robust and purposeful, while also striking a balance by relieving
executives of the fear of being held criminally liable simply because of their position. While
combating crime, it is critical for legislation to achieve a balance between the functioning of
society and the overall benefit of the economy.

15
As a result, major changes in relation to the criminal liability of Indian corporations must be
adopted in order to strike a balance, as the statutes are out of sync with these developments.

16
 SOURCES USED

1. SCCOnline
2. JSTOR
3. IPleaders
4. Mondaq.com
5. SSRN Journals

17