Corporate Criminal Responsibility

Key takeaways

• A company can be held criminally responsible and found guilty for the illegal actions of any of its agents as long as those individuals acted within the bounds of their actual or perceived authority.
• Doctrine of corporate criminal liability is essentially the respondeat superior doctrine, which has been imported into criminal law from tort law.
• In the case of Iridium India Telecom Ltd. v. Motorola Incorporated & Ors, the Supreme Court of India established companies can also possess mens rea, a crucial element in the commission of a crime.

An separate legal entity known as a company is created by a registration procedure. They have different rights and liabilities from their shareholders. Some of these companies are regarded as multinational corporations because they have resources and facilities outside of their home country (MNCs). Today, multinational corporations have a significant impact on almost all facets of daily life. Over the past few of centuries, their powers have increased at an astounding rate; as a result, they are frequently compared to entire nations. As a result, every country should place establishing some kind of mechanism of accountability and control over these multinationals and corporations on its list of objectives.

In simple words, the respondeat superior doctrine, which has been imported into criminal law from tort law, is essentially what the doctrine of corporate criminal liability is. According to this doctrine, a company can be held criminally responsible and found guilty for the illegal actions of any of its agents as long as those individuals acted within the bounds of their actual or perceived authority. Actual authority is the power that a corporation deliberately entrusts to its agent or employee, as opposed to seeming authority, which is the power that an agent can be assumed to have by the ordinary reasonable person. To make things clearer, the corporation will be held criminally accountable for the employee's actions if a causal link can be drawn between the employee's criminal behaviour and his corporate responsibilities.

Section 11 of the Indian Penal Code, 1860 provides a definition of "person." Any company, association, or body of persons are included in this definition as stated in section 11. Additionally, it encompasses all body corporates, whether or not they are corporations. Therefore, the Indian Penal Code can be used to determine the criminal responsibility of corporations. In addition, the Companies Act, 2013's provisions hold corporate entities criminally accountable.

The application of general law, which is IPC, is minimised by the provision of special laws, such as the Companies Act in the case of corporations. However, the IPC can be used to deduce the idea of corporate criminal culpability. The maxim "Actus non facitreum, nisi mens sit rea," which states that an act will not be considered criminal until a guilty mind is present, serves as the foundation for the concept of criminal responsibility. As a result, in cases involving corporate criminal responsibility, the guilty intent of those who have the authority to manage the operations of the body corporate is taken into account.

Development of Corporate Criminal Responsibility

Prior to the 20th century, it was considered that a corporation lacked the mens rea necessary for the conduct of a crime and, as a result, could not be found guilty.The idea that “A corporation has no soul to damn, and no body to kick” was widely prevalent at that time.

Essentially, all directors, employees, and executives are held accountable for any crimes they conduct even if they had the lawful authority to do so, according to an ordinary reasonable person. Additionally, directors and officers may be held criminally liable under the "accomplice theory," which holds that they either authorised or directed a subordinate to commit a crime or failed to exercise reasonable care and supervision over them, which ultimately resulted in the crime being committed. According to this idea, a person is legally responsible for the misconduct regardless of whether he knew about it or not due to his "responsible relation" to it.

Today, for the doctrine of corporate criminal liability to be applicable, the criminal act of the employee must:

• Be committed with the intention of benefiting the corporation in some manner, or
• Be committed with the intention of increasing his own personal gain, and this conduct ultimately ends up benefiting the corporation as well.

Issues faced by the doctrine of corporate criminal liability

• The inability to determine or demonstrate a fictional, legal being's criminal intent. Finding the mens rea required for the commission of a criminal conduct proven to be quite the challenge because companies are intangible legal entities.
• Secondly, there's the issue of sanctions. Because a company cannot be imprisoned or executed, the threat of imprisonment, which is a key component of criminal law, could not be used in this situation. This raises the possibility that the application of criminal law to the implementation of this doctrine was inappropriate.
• In order for proceedings to begin, courts needed that the defendant in a criminal case be physically brought before them. Obviously, in the case of corporations, this was not practicable.

Models of Corporate Criminal Liability

Interpreting Section 11 of the IPC it can be understood that corporates can be prosecuted under the provisions of IPC. But while imposing punishments the courts had to discuss the scope of the same. The Courts have considered the following models in determining the corporate criminal liability.

1. Derivative Model and
2. Organizational Model

• Derivative Model– The derivative model concentrates on individual as the centre of the corporate and relates the acts of individuals in deriving criminal liability of the corporates. Thus, this model involves two doctrines:

(i) Vicarious Liability and (ii) Doctrine of Identification

• Organizational Model– The organizational model is different from the derivative model. This model concentrates on corporates. But this model has its own limitations as it is not workable when mens rea in an offence is considered.

Keeping in view the advantages and disadvantages of both the models, the courts have taken a balanced approach. Corporate Criminal Liability in India has been evolved through the judicial interpretations.

Corporate Criminal responsibility under CRPC

When a corporation is accused, Section 305 of the Code of Criminal Procedure, 1973 specifies the steps to take. Companies that are incorporated as well as other body corporates are considered corporations for the purposes of this clause. This clause gives the court the authority to choose the corporation's legal representative in situations when the corporation is the defendant.

The Supreme Court clarified the position of corporate criminal responsibility under the provisions of the IPC in the case of Iridium India Telecom Ltd. v. Motorola Incorporated and Others. The Court noted that mens rea offences can be tried against corporations just like they can against individuals. When pursuing such offences, the mens rea of the individuals in charge of the body corporate is taken into account.

Corporate Criminal Liability in the United Kingdom

It is not thought that criminally culpable individuals, such as directors, officials, workers, or shareholders, should be prosecuted in lieu of a company. The prosecution of such people acts as a powerful deterrent to future corporate malfeasance. In cases where criminal activity is committed for corporate advantage, adequate consideration is given to the company's potential liability when prosecuting individuals.

In the case of Tesco Supermarkets Limited v. Nattrass, Tesco relied on the defence of the “act or omission of another person” who in this case was a store employee, to show that they had taken all reasonable precautions and due diligence necessary to not be criminally liable. Lord Reid held that, in order for liability to attach to the actions of a person, it must be the case that “The person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company.”

In considering the seriousness of any offence, the courts consider whether the corporate entity’s culpability in committing the offence and any harm which the offence caused, was intended to cause or might, foreseeably, have been caused. Guidelines issued on the assessment of seriousness of any given offence identify four levels of culpability for sentencing purposes starting with intention to cause harm to negligence in committing the offence. The guidelines also refer to aggravating factors which are familiar territory: as whether the offence was planned, whether the offence resulted in high profit and whether there was a failure to respond to warnings or concerns expressed by others about the offender’s behaviour. The corporate entity’s level of co-operation with the prosecuting and regulatory authorities is also a factor in assessing the course of action taken by a regulator and the level of penalty appropriate where there has been corporate criminal offense. Penalties which corporate entities can face include fines, confiscation, compensation orders and debarment from public procurement.

Conclusion

Courts have established over time that companies can also possess mens rea, a crucial element in the commission of a crime. The Supreme Court of India made this decision in the case of Iridium India Telecom Ltd. v. Motorola Incorporated & Ors., proving that a company might participate in a conspiracy. Indian social legislation, such as the Essential Food Commodities Act of 1955, the Prevention of Food Adulteration Act of 1954, the Negotiable Instruments Act of 1881, and the Environment (Protection) Act of 1986, state that at the time the offence was committed, the company and every employee were deemed to be responsible for it. If found guilty, they could be sentenced to jail time in addition to a fine.

As a result, it is now conceivable to assign mens rea to a corporation's agents and workers and criminally prosecute them for the deeds carried out by them. Such a doctrine has taken crucial importance in corporate governance in this era of economic growth where companies have a say in nearly every element of life.