Chapter 6

Judicial Response to
White-Collar Crimes
 CHAPTER 6
JUDICIAL RESPONSE TO WHITE-COLLAR CRIMES

Judiciary is the third pillar of the democracy and is often regarded as the

custodian of the constitution and the rights of the people. Apex Judiciary not only

decides the cases on the basis of laws but also sets precedents for other courts which

become laws. The role of the judiciary is most critical in dealing with the problem of

white-collar crimes. As rightly said by the Apex court ―Let not the mighty and rich

think that courts are their paradise and in the legal arena they are the dominant

players119‖. The doors of the courts are opened for all as was made clear by the

Supreme Court in the above case. We have seen that even the Prime Minister can be

made answerable to the common man through the courts. The major problem that

the country faces today is that of increasing white-collar crimes as these crimes

affect the whole socio-economic condition of the society. These crimes also pose

great threat to the general psychology of the citizens. And amongst the various

white-collar crimes the most damaging is corruption. Corruption is the greatest

threat to the country. The corruption hampers and retards the growth, development

and welfare of the country the most and to the maximum extent120.

119
Rathinam v. State of Tamil Nadu and Anr, (2011) 11 SCC 140
120
Mota Ram v. State of Haryana, AIR 2010 SC 3780, (See also State of Madhya Pradesh v. Ram
Singh, AIR 2000 SC 870, Subramanian Swamy v. Manmohan Singh, (2012) 3 SCC 64).
Judicial Response to White-Collar Crimes 142

Source: www.mystudycorner.net

The corruption costs great to the economy of the country. The cost is both

direct and indirect. Direct impact is visible and can be assessed but the far greater

indirect impact is not only difficult to assess but is also more devastating. The

impact of corruption is on all the sectors of the economy whether Public or Private.

It impacts all sections of the society in one way or the other whether poor, middle

class or the rich and powerful. The degree of impact may vary but in one way or the

other all sections of the society are the victims of the corruption.
Judicial Response to White-Collar Crimes 143

Retrieved from:https://www.infographicszone.com/economy/the-cost-of-corruption-infographic
Source: KPMG

The Prevention of Corruption Act 1988 was for to fight the prevalence of

corruption which the country is facing from times immemorial. The strict vigilance

can be acknowledged through various important judgments by the different High

Courts and the Supreme Court. In the case of Subramanian Swami v. Manmohan

Singh121 Justice A.K. Ganguli Said ―corruption in our country today apart from

posing great danger to the concept of Constitutional Governance it threatens the rule

of law and the very foundation of the Indian Democracy. The magnitude and the

nature of the corruption is incompatible with the concepts of socialist, secular and

democratic republic imbibed in the Constitution and the Preamble. The rights end

where corruption begins is undisputed fact. The human and fundamental rights of

121
Subramanian Swami v. Manmohan Singh (2012) 3 SCC 64
Judicial Response to White-Collar Crimes 144

justice, liberty, equality and fraternity are undermined by the corruption. And hence

it is the duty of the courts to implement the anti-corruption laws in such a manner to

strengthen the fight against corruption‖122.

The Apex Court in J. Jayalalitha v. Union of India123 stated that ―corruption

corrodes the moral fabric of the society. It also said that that when a public servant

involves in corruption causes harm to the national economy and national interest and

also to the image of the nation in the world‘s eye‖.

As also in the case of Polla Aswarth Narayana v. State of Andhra

Pradesh124 held that ―demanding and accepting or receiving bribes cannot be part of

the official duty‖. While dealing with the issue of corrupt bureaucracy with hard

measures even the senior bureaucrats in the case of A. Watiao v. State of Manipur125

the accused was under government of Manipur was party to a conspiracy in

assigning contract to firm at extremely exorbitant rates. He was sentenced to pay Rs.

10000/- as fine and imprisoned till the rising of the court by the special judge. The

high upheld the decision. In the appeal to the Supreme Court the fine was upheld but

the imprisonment was increased to six months. The Supreme Court stated that

―while dealing with the cases of corruption of a responsible government employee

and punishment of imprisonment till the rising of the court is making a mockery of

the justice and the lower courts should have taken a serious note of such

122
AIR 2012 SC 1207
123
J. Jayalalitha v. Union of India, AIR 1999 SC 1912
124
Polla Aswarth Narayana v. State of Andhra Pradesh, 2012 Cri LJ 14 (A.P.)
125
A. Watiao v. State of Manipur, AIR 1996 SC 361
Judicial Response to White-Collar Crimes 145

happenings‖. In the case of Common Cause v. Union of India126 dealing with

liability of the public servants the court said that ―with the changing socio-economic

constraints the public servants are assigned with more discretionary powers while

dealing with disbursing of the public wealth in various forms‖. The Court stated that

―when any act or omission in relation to the abuse of his powers results in the injury

to an individual or the loss of public wealth and property, an action shall be

maintained against such public servant. The corrupt officials should be dealt with

severely and it should be ensured that provisions of the laws such as Cr. P.C. etc. do

not overrule the provisions of Prevention of Corruption Act as otherwise the motive

of the act would be defeated‖. In the case of Satya Narayan Sharma v. State of

Rajasthan127 the issue was taken up by the Apex Court. It stated that ―when the

prosecution is under the Prevention of Corruption Act the trial of the accused cannot

be stayed by filling revisions under Sec 397 of the Cr. P.C. or by filling an

application under Sec 482 of Cr. P.C‖. The court said that ―doing this shall violate

the provisions of the Sec19 (3) (c) of the Act. Another question of application of the

Probation of the Offenders Act is applicable on the offences under the Prevention of

Corruption Act‖. The Court in the case of State of Tamil Nadu v. Kalia Perumal128

held that ―the Sec 18 of the Probation of Offenders Act expressly bars the

application of the Act for the offences under the Prevention of Corruption Act‖.

Sec 19 of the Prevention of Corruption Act a prior permission is required

before prosecution against a public servant. In the case of Dilawar Singh v.

126
Common Cause v. Union of India, AIR 1997 SC 1886
127
Satya Narayan Sharma v. State of Rajasthan, AIR 2001 SC 2856
128
State of Tamil Nadu v. Kalia Perumal, (2006) 1 SCC (Cri) 615
Judicial Response to White-Collar Crimes 146

Parvinder Singh129 the Supreme Court held that ―the provisions of Sec 19 of

Prevention of Corruption Act shall have an overriding effect on the general

provisions contained in Sec 190 or 319 of the Cr. P.C. While trying an offence under

the Prevention of Corruption Act a special judge cannot summon another person and

proceed against him under the power given to him by Sec 319 of the Cr. P.C. if no

sanction has been granted by the appropriate authority for prosecution of such

person. The prior sanction is qua non for taking cognizance of the offence. But if the

officer has resigned before the prosecution begins then no prior sanction is

required‖. In the case of Subramanian Swami v. Manmohan Singh130 also known

as the 2G case where the Telecom Minister A. Raja resigned but continued to be

Member of Parliament, it was established by the court that no prior sanction is

required.

In the case of K. Ponnuswamy v. State of Tamil Nadu131 the accused was a

lecturer in Government Arts College with a very small salary. The financial

condition of the family was not good as the wife had minimal agricultural income.

The accused was in debts and was not in position to re-pay even small debts. The

accused was elected M.L.A. and was Deputy Speaker in the Assembly and later on

became the Minister of Education. During this period the accused acquired

disproportionate property in his name and in the name of his wife and daughter. The

trial court convicted the accused under the Sec 13(1) (e) read with Sec 13(2) of the

Prevention of Corruption Act and convicted the family members under Sec 109 of

129
Dilawar Singh v. Parvinder Singh, (2006) 1 SCC (Cri) 727
130
Subramanian Swami v. Manmohan Singh, AIR 2007 SC 18
131
K. Ponnuswamy v. State of Tamil Nadu, AIR 2001 SC 2464
Judicial Response to White-Collar Crimes 147

I.P.C. and under Sec 13(1) (e) and Sec 13(2) of the Prevention of the Corruption Act.

The atrial court convicting the accused confiscated of the pecuniary resources and

properties amounting to Rs. 77,49,337.37. An appeal was filed in High Court

challenging the judgment of the Trial Court and it was contested that the property of

the wife and daughter cannot be confiscated as they were gifted to them by their

nephew. The High Court acquitted the family members but upheld the conviction of

the accused on appeal. The High Court maintained the order of the confiscation of

the property and assets of the wife and daughter as it was established with evidence

that the property was transferred by the accused to his daughter and the wife during

and after the accused tenure. In the appeal to the Supreme Court upheld the decision

of both the Trial Court and the High Court. The court observed and did not believe

that the gifts were made out of love or affection by the nephew, but were transferred

to adjust disproportionate income by the accused during the period he was M.L.A.

The bribes are not only given in cash but also in the form of valuable items.

In a case of Delhi Administration v. S.N. Khosla the court decided that ―when a

valuable item is given without any consideration and the reminders and the receipts

are just a formality then the valuable item shall be considered as bribe. However if

the goods are merely taken on credit and there is no agreement but an intention to

pay it would not be considered as bribe‖132.

Another question arises who is a public servant under the Prevention of

Corruption Act. In the case of State of Maharashtra v. Prabhakar Rao133 the court

observed that ―public servant as defined in the Sec 21 of I.P.C. does not hold under
132
Delhi Administration v. S.N. Khosla, AIR 1971 SC 1480
133
State of Maharashtra v. Prabhakar Rao, AIR 1966 SC 424
Judicial Response to White-Collar Crimes 148

the Prevention of Corruption Act. Therefore a person who is not a public servant

under Sec 21 of I.P.C. can also be held liable for bribery under Prevention of

Corruption Act‖. Similarly in the case of Government of Andhra Pradesh v. P.V.

Reddy the court observed that ―the Prevention of Corruption Act was brought about

to fight the corruption and bribery effectively. In order to curb bribery and

corruption effectively not only in government sector and departments but also in

corporate companies and semi-government bodies also where the employees are

entrusted with public duties, a comprehensive definition has been given in Sec 2(c)

of the Prevention of Corruption Act‖.

In the case of Ram Narayan Poply v. C.B.I.134 the court said that ―offences

in the cases of white-collar crime are not of conventional or traditional types, the

ultimate objective is to use public money in a very carefully planned manner for

personal use with no right to do it. The entire country is affected if the white-collar

criminals are not dealt with properly. An economic offense is committed deliberately

and with a well-planned and cool set of mind and with disregard to the community

and the country for the personal use‖.

In the case of R. Sai Bharathi v. J. Jayalalitha135 the Supreme Court said

that ―minimum standards of behavior are merely described by the Criminal Law.

Whereas those who hold high public offices in public life should not take shelter

under the umbrella of criminal law but should act in a highly responsible manner.

134
Ram Narayan Poply v. C.B.I., (M.B. Shah, J.) 141 04
135
R. Sai Bharathi v. J. Jayalalitha, 2004 (2) SCC 9
Judicial Response to White-Collar Crimes 149

Putting ones self-interest before the interest of the country or society while using the

public and government resources should be strongly condemned‖.136

The corruption is in each and every sector whether public or private. Some

sectors receive more attention of the authorities and the law makers while corruption

in some sectors is literally unknown. It is the tendency to avoid or look over small

and less critical corruption, while we see the bigger scams in the political and public

sector. But the efforts should be made to curb the corruption wherever it is and no

matter how small or penny amount it involves before it grows out of proportion. The

most vigilant have to be the people themselves who should report the instances of

corruption wherever they experience it.

136
https://www.slideshare.net/gracemariajoseph/corruption-in-india-61154057
Judicial Response to White-Collar Crimes 150

In other white-collar crimes such as Food Adulteration the role of judiciary has

been pro-active. In the case of State of Orissa v. K.R. Rao137 the Supreme Court defined

the scope of the prohibition against selling adulterated food. The court held that not only

the vendor who sells adulterated food to the consumer establishes the fact that the food

was sold to the vendor by an agent than the agent shall be equally liable.

In the case of State of Himachal Pradesh v. Narendra Kumar138 where the

food adulteration occurrence took place approximately two decades ago. The accused

was acquitted by the lower courts though erroneously. Keeping in view the nature

and peculiar facts of the case the accused was sentenced 6 months RI and fine of Rs.

1000. The court by this sentence made it clear that the accused if moves to the

government to commute the sentence the accused shall not be set free and the

accused shall surrender to serve the sentence.

In case of Kesar Devi v. Union of India139 the Supreme Court while

upholding the forfeiture of properties of the offender that combining Sec 6(1) and

Sec 8 the competent authority should have reasons to believe that the properties

ostensibly standing in the name of the person to whom the act applies are occupied

illegally a notice can be issued to such person. After that the burden of proof to

prove that the properties are no illegally acquired lies on the accused. Under the act

the responsibility of the authority is not to establish the link between the money or

the property has a nexus or link with the corrupt practices. In this case the appellant

137
State of Orissa v. K. Rajeshwar Rao, 1992 (1) SCC 365
138
State of Himachal Pradesh v. Narendra Kumar and Another 2004 AIR SCW 1168 : 2004 ALL
MR (Cri.) 111 (S.C.)
139
Kesar Devi v. Union of India & Others, (2003) 7 SCC 427
Judicial Response to White-Collar Crimes 151

failed to prove that the properties in her name were bought by her own income. In

this case no other inference could be drawn and hence was established that the

properties were bought by the accused husband.

We from the above have seen that the courts from time to time have given

impetus to the laws and this has made the laws more efficient and strict. The escape

routes that the accused could have used through other laws were blocked by various

judgments. Although there is a saying that when one door is closes another opens

but at least through blocking escape routes one day we can reach a position where

the channels are very few and kept closed eye on. It is when all the three pillars i.e.

legislature in making laws, administration by implementing the policies and the

judiciary by providing effective and timely justice along with the people who can

develop feeling of honesty and above all patriotism the weed of corruption can be

permanently uprooted. Although a distant dream but not impossible.