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Companies are considered as separate legal entities u/s. 11 of Indian Penal Code (IPC) as established in the case of Iridium India Telecom Limited vs. Motorola Incorporated & Ors.  and are therefore capable of being held liable. Corporate criminal liability is imposed on companies where they are liable for the act of their employees. Corporate criminal liability is recognized in India under both criminal law and companies act. The companies act increases the punishment and expands the scope of liability of the company.

There are 2 models used to govern corporate liabilities in India:

1. Derivative model: this model is based on an individual specific approach. It identifies an individual at fault and holds the organization liable because the person has a connection with it. It is further categorized under 2 heads:

1. Vicarious liability: Vicarious liability makes the master liable for the deeds of its employee during the scope and course of its employment. It basically makes the respondeat superior. It is based on the phenomenon that the master has big pockets and therefore a higher chance of paying back and it should be held liable for the actions of its employee in the course and scope of employment.

2. Identification doctrine: this doctrine identifies certain people who are the key persons in the working of the company. Their conduct and state of mind are said to be linked to the working of the company and are accountable for all the major operations. They are considered liable for the act done by any employee. Its scope is considered narrower than vicarious liability because the liability only extends to the course and scope of employment as held in the case of Moore vs. Brisler.

2. Organizational model: this model is based on organization specific approach in contrast to the derivative model. Actus reus and mens rea are necessary elements. Even though actus reus is easy to prove, problem arises while proving mens rea because a juristic person cannot be expected to have mens rea and many cases have been dismissed on this principle but after the supreme court ruling in The Assistant Commissioner, Assessment-II, Bangalore & Ors. vs. M/s. Velliappa Textiles Ltd. & Anr. It was held that the mens rea of the person committing the offence will be taken in account as the company is a juristic person and cannot have mens rea therefore the doctrine of alter ego (which states the mens rea of the one in-charge of corporation should be applied) will apply.

Conditions necessary for establishing corporate criminal liability:

1. Act should be done by the servant

2. It should be done in the course and scope of employment.

3. It should be done in order to benefit the company/ organization.

Criminal liability under various acts:

1. NDPS: section 38 of the Narcotics and psychotropic substances (NDPS)act deals with the offences by companies and also defines what is meant by a company and directors. It states that: 

(1) Where an offence under Chapter IV has been committed by a company, every person, who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. (2) Notwithstanding anything contained in sub-section (1), where any offence under Chapter IV has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.—For the purposes of this section,— (a) “company” means anybody corporate and includes a firm or other association of individuals; and (b) “director”, in relation to a firm, means a partner in the firm

2. NEGOTIABLE INSTRUMENTS ACT: — Section 138 of NIA deals with offences committed by companies, it states that:

(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.—For the purposes of this section, — (a) “company” means anybody corporate and includes a firm or other association of individuals; and (b) “director”, in relation to a firm, means a partner in the firm.

3. BANK REGULATION: Section 46 (3), (4) and (5) carve out the procedure and liabilities if the defaulter of payment is a company. It states that:

(3) If any deposits are received by a banking company in contravention of an order under clause (a) of sub-section (4) of section 35, every Director or other officer of the banking company, unless he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent it shall be deemed to be guilty of such contravention and shall be punishable with a fine which may extend to twice the amount of the deposits so received. 

(4) If any other provision of this Act is contravened or if any default is made in- (i) complying with any requirement of this Act or of any order, rule or direction made or condition imposed there under, or (ii) carrying out the terms of, or the obligations under, a scheme sanctioned under sub-section (7) of section 45, by any person, such person shall be punishable with fine which may extend to 4 [one crore rupees] or twice the amount involved in such contravention or default where such amount is quantifiable, whichever is more, and where a contravention or default is a continuing one, with a further fine which may extend to 5 [one lakh rupees] for every day, during which the contravention or default continues.

(5) Where a contravention or default has been committed by a company, every person who, at the time the contravention or default was committed, was in charge of, and was responsible to, the company, for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the contravention or default and shall be liable to be proceeded against and punished accordingly

4. CHIT FUNDS: section 78 of the chit funds act deals with offences by companies and states the following:

(1) Where an offence under this Act has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. (2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer for the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

5. RBI: Section 58 (c) deals with the offences committed by companies and states that:

(1) Where an offence under this Act has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. (2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer for the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Standard defenses :

The standard defenses used during the trials are similar to those of general defenses under criminal law i.e intoxication, unsound mind, minority, necessity, mistake of fact etc.But there exists one defense particularly used for corporate criminal liability i.e the defense of ‘superior order’. Even though the defense of superior orders is an established doctrines internationally. It states that ‘a subordinate must not be held liable for any illegalities that may have been committed by him, acting in accordance with the orders of a superior.’ Even though this is not an established law in India but has been used by SEBI in issuing an order against Vijay Mallya and certain officials of United Spirits Limited (USL) involving diversion of funds to various domestic and overseas entities and potentially improper transactions. 

WEBLIOGRAPHY

• Corporate criminal liability in India. (2015, December 4). Retrieved from https://blog.ipleaders.in/corporate-criminal-liability-in-india/

• Corporate criminal liability in India. (2018, October 10). Retrieved from https://www.myadvo.in/blog/corporate-criminal-liability-in-india/

• Corporate criminal liability- white collar crime. Retrieved from http://www.legalserviceindia.com/legal/article-521-corporate-criminal-liability-white-collar-crime.html

• Offences and penalties. Retrieved from http://www.mca.gov.in/MinistryV2/offences+and+penalties.html

• Corporate India. Individual liability and the relevance of superior order defence. (2019, July 1). Retrieved from https://corporate.cyrilamarchandblogs.com/2019/07/superior-orders-defence-corporate-fraud/