Legal Theory - Vicarious Liability.
Gopal Krishna Behera
(Querist) 09 June 2009
This query is : Resolved
Is the principle of vicarious liability applicable to criminal law?
Gopal Krishna Behera
(Querist) 09 June 2009
The person who comits the offence is alone liable according to the requirements of mense rea.
Criminal liability, as said is never vicarious.
A V Vishal
(Expert) 09 June 2009
If men at the helm of corporations read laws and recent Supreme Court judgements regarding their vicarious liability for wrongs done by persons below them, they might lose sleep despite counting sheep, or say, lawyers. The recent order to resume prosecution in Som Mittal Vs State of Karnataka overshadowed another important Supreme Court judgment delivered the same week, in which the Managing Director of Britannia Industries Ltd, Calcutta, was hauled to the court by a disgruntled sales agent for criminal breach of trust (S K Alagh vs State of UP). In the latter case, the court not only released the top executive from the litigative nightmare, but also emphasised certain principles which would come as a relief to those at the apex of large organisations.
Britannia terminated the dealership of an area wholesale agent in Uttar Pradesh and appointed another. However, the former agent sent two demand drafts for supply of goods. When the company did not respond, he filed a complaint before the magistrate alleging criminal breach of trust, Section 406 of the Indian Penal Code. Though the magistrate discharged him, the Allahabad high court let the prosecution revive. On appeal, the Supreme Court set aside the high court decision.
The Supreme Court noted that the drafts were drawn in the name of the company. The dealership agreement was also between the company and the agent. The company was not made a party in the complaint. The ire was against the executive. The judgment said that the Indian Penal Code did not contemplate any vicarious liability on the part of a person who is not charged directly for the commission of an offence. Since the drafts were drawn in favour of the company, the MD cannot be said to have committed the offence.
If and when a law contemplates vicarious liability on the part of the persons in charge of a company’s affairs, the statute specifically would say so. The penal code is not one such law. This ruling will thus protect top executives from direct hits for the offences committed by the company or its employees. However, there are several laws which create the legal fiction that the men in charge would be vicariously liable for the wrongs of the company. Some such statutes are: the Essential Commodities Act, the Employees’ Provident Fund Act and the Negotiable Instruments Act. Section 14A of the provident fund law specifically creates an offence of criminal breach of trust in respect of amounts deducted from the employees by the company.
A few months ago, the Supreme Court dealt with another case, Maksud Saiyed vs State of Gujarat, in which a former chairman and managing director of Dena Bank was accused of conspiracy, giving false evidence, providing false statements and a number of other criminal offences when the bank floated a public issue. The charges were made by a person who had taken a loan from the bank and who was summoned by the debt recovery tribunal. He found some mistakes in the prospectus and filed the complaint before the magistrate. The judge directed the police to investigate the allegations. The Gujarat high court quashed the charges. On appeal, the Supreme Court upheld the high court order and said that a bona fide mis-description of the pending case which did not materially influenced the decision of the investors did not give rise to a cause of action for filing a complaint. In the Jiyajirao Cotton Mills case (2005), the Supreme Court ruled that directors of a company could not be personally prosecuted for non-payment of wages, overruling the Madhya Pradesh high court.
There have been a number of cases recently where the directors of companies were accused of issuing cheques which were dishonoured for want of sufficient funds in the banks. In one of the leading judgments, the Supreme Court had laid down the principles to be followed in cases where the top executives are involved (SMS Pharmaceuticals vs Neeta Bhalla). However, more appeals have come from
N.K.Assumi
(Expert) 09 June 2009
You can also go through this article.
Corporate Criminal Liability - An Analysis
Category:
Article: Introduction
A generous and elevated mind is distinguished by nothing more certainly than an eminent degree of curiosity; nor is that curiosity ever more agreeably or usefully employed, than in examining the laws and customs of foreign nations.
Large-scale corporations are the defining force on the globe. They are everywhere, in almost every aspect of our lives. Parallel to this subtle and sometimes not so subtle dominance, corporations have become dangerous criminals as well. However, Corporations being non-human entities, their criminal behaviour is also out of the ordinary.
Corporate criminality “challenges or nags at our sense of reality.” It is this characteristic that makes corporate crime a tricky issue. The development of corporate criminal liability has become a problem which a growing number of prosecutors and courts have to deal with at the present time. In the common law world, following standing principles in tort law, English courts began sentencing corporations in the middle of the last century for statutory offenses. On the other hand, a large number of European continental law countries have not been able to or not been willing to incorporate the concept of corporate criminal liability into their legal systems. The fact that crime has shifted from almost solely individual perpetrators only 150 years ago, to white-collar crimes on an ever increasing scale has not yet been taken into account in many legal systems. At the same time, crime has also become increasingly international in nature.
Criminal Liability is what unlocks the logical structure of the Criminal Law. Each element of a crime that the prosecutor needs to prove (beyond a reasonable doubt) is a principle of criminal liability. There are some crimes that only involve a subset of all the principles of liability, and these are called “crimes of criminal conduct.”
The question of imposing criminal liability to a corporation for criminal offences committed by directors, managers, officers and other employees of the corporation while conducting corporate affairs has gained a lot of importance in the jurisprudence of criminal law. The very basis for the possibility of imposing criminal liability to a corporation is its independent legal personality.
Now the question is whether a corporation as an artificial person is capable of committing a crime and is criminally liable by the law or not. The traditional view was that a corporation could not be guilty of a crime, because criminal guilt required intent and a corporation not having a mind could form no intent. In addition, a corporation had no body that could be imprisoned.
Courts are especially likely to impose criminal liability on a corporation when the criminal act is requested, authorized, or performed by the board of directors, an officer or another person having responsibility for formulating company policy or high level administrator having supervisory responsibility over the subject matter of the offence and acting within the scope of his employment.
Assessing Common Law Theories Of Corporate Criminal Liability
The endorsement of criminal liability of corporations has largely been a twentieth century judicial development, influenced by the “sweeping expansion”[1] of common law principles. The majority of theories of corporate criminal liability are typical of common law developments; they have been constructed on a case-by-case basis. Despite their importance, these theories have proved to be ineffective, for their lack of strong theoretical basis and their individualistic roots. Examples of these models are the agency theory and, in a more elaborate form, identification and aggregation theories.
Agency Theory
The agency theory was first developed in tort law and gradually “was carried over into the criminal arena.”[2] According to this theory, the corporation is liable for
A. A. JOSE
(Expert) 09 June 2009
I think the question has been well dealt with by the experts herein above and I fully endorse their views.
