This article is written by Tejaswi Netam, LL.B. 2nd year studying at Campus Law Centre, Faculty of Law, University of Delhi during her Internship at LeDroit India
Abstract: When we imagine a criminal, we think about a person of bad reputation in shady clothes from poor background but sometimes criminals are from very high social standing about which general people cannot even think to be criminals. In this paper, we’ll discuss about the criminality of such high-status people which is termed as White-Collar Crimes. This paper seeks to define white collar crimes in layman’s terms, its development over time, the reasons of its occurrence, their effects on society and the measurements taken by the government to tackle it and the effectiveness of such measurements. While it was always present in India from the ancient times, the reemergence of it due to industrialisation and increasing materialism in people has been addressed in the paper. Along with it, several potential solutions are also discussed to tackle it more efficiently.
Keywords: White Collar Crimes; Scam; Economy; Crime; Corruption
HISTORY & BACKGROUND
LAW COMISSION OF INDIA in its 47th [1] report improvised the definition given by American Sociologist Edwin Hardin Sutherland who published several books related to white collar criminality –“ it as a crime committed in the course of one’s occupation by a member of the upper class of society.”
According to the 29th Report of LCI [2] “White Collar Crime is more dangerous, not only because the financial stakes are higher but also because they cause irreparable damage to public morals. Tax-evasion and avoidance, share-pushing, mal-practices in the share market and administration of companies, monopolistic control, usury, under-invoicing or over-invoicing, hoarding, profiteering, sub-standard performance of contracts of construction and supply, evasion of economic laws, bribery and corruption, election offences and mal-practices are some examples of white-collar crime”.
It is an undeniable truth that commission of crime has increased exponentially ever since human beings began to live together. A few kinds of crime are now deemed to be old while with the changing dynamic of our everyday lives, many new forms of crime continue to take shape in the deviant minds of the society. The concept of white-collar crime is definitely not a new phenomenon. There have numerous references to such crimes since the Vedic period in India’s ancient and medieval literature. Manu who is often accorded the title of being India’s great law-giver, held the view it was age to tendencies such as robbery, wrongdoing and fraud.
Why a person commits White collar crime
The reason for rapid growth in white collar crime in recent decades is often attributed to the fast-developing economy and industrial growth. The Santhanam Committee Report[3] drew a lucid picture of white-collar crimes committed by people belonging to higher social status. It includes businessmen, industrialists, contractors, suppliers and not surprisingly corrupt public officials. The Reports of the Vivin Bose Commission of Inquiry laid on table in Rajya Sabha on 23rd January 1963 which looked into the affairs of Dalmia Jain group of companies (1963)[4] sought to draw attention to how industrialists often indulge themselves in white collar crimes such as forgery, fraud, falsification of accounts, tampering with records for personal gains and tax evasion etc.
Moreover, recent developments in technology, especially in the closing years of the 20th century, have opened up new dimensions for deviants to further white-collar crimes. According to the report of Central Bureau of Investigation 6,533 cases of corruption have been registered over the last 10 years, from which 517 cases were recorded over the last two years. Usage of fake pan cards to show sales has been also estimated at more than 4000 Crores. The study also found that approximately 32 lakh people have lost their debit card details, which were stolen from the Bank ATMs. One can conclude from these kinds of reports that White Collar Crimes are rising in the country at a staggering rate.[5]
Various experts believe that Extreme greed for wealth and having strong desire to acquire money or to possess things can be attributed as the reasons of this kind of criminality which in turn is caused by increasing materialism in people and the lack of moral values. Otherwise, such high-status people don’t lack anything apart from the never-ending desires.
TYPES OF WHITE COLLAR CRIMES IN INDIA
White collar criminality is found in every occupation, as can be discovered readily in casual conversation with a representative of an occupation by asking him, “what crooked practices are found in your occupation?” It can be reduced to the following practices in different professions
White Collar criminality in a business is expressed most frequently in form of misrepresentation in the financial statement of corporations, manipulation in the stock exchange, commercial bribery, bribery of public officials directly or indirectly in order to secure favourable contracts and legislation, misrepresentation in advertising and salesmanship, Embezzlement and misapplication of funds, tax fraud, misapplication of funds in receivership and bankruptcies.
In Medical profession, illegal sale of narcotics and alcohol, abortion, illegal service to underworld criminals, fraudulent reports and testimony in accident cases, extreme cases of unnecessary treatment, fake specialist, fee-splitting and organ trafficking.
In other fields, there is violation of delegated or implied trust which can be reduced to two categories, Misrepresentation of asset values and duplicity in the manipulation of power.
Financial Cost of white-collar Crime
The order of SEBI in Satyam Scam [6] found the total unlawful gain made by the accused to be Rs 6,22,45,92,549/- (approx. 622.5 Crore).
The Report of CAG about 2G spectrum case [7] gave Rs 53,523 Crore as the potential loss to the exchequer.
The are only two cases of white-collar crimes which may be termed as tip of the iceberg. Comparing with other crimes such as theft and robbery etc, the amount of property wrongfully gained/lost is grossly disproportioned. Although a million-rupee burglar or robber is practically unheard of, these millions rupee scams are small-fry among white collar crimes.
White collar crime violate trust and therefore create distrust, which lower social morale and produces social disorganisation on a large scale. Other crimes produce relatively little effect on social institutions or social organisation. These crimes are thus against the economy of the whole country whereas traditional crimes being only against some particular person.
REGULATORY FRAME WORK
Generally, in criminal laws, the Latin maxim of “Actus non facit Reum, nisi mens sit rea” is followed which means that act itself doesn’t make the person guilty unless there is intention to commit that offence. However, this maxim is not followed in White collar Crimes due to the general reason that a person cannot do such crimes unintentionally.
The presumption of “Innocent until proven guilty” of general criminal law is also now followed in white collar crimes as evident from the Section 24 Prevention of Money Laundering Act 2002.
The law commission in its 47th report discussed punitive measurements followed at that point in time and recommended
- Provisions for Minimum imprisonment in Central excise and salt act,1944
- Minimum imprisonment and increased imprisonment in offences related to Foreign Exchange regulation act,1947, Essential Commodities act, 1955
- Public condemnation of corporations convicted in FERA,1947
- Increase of departmental proceedings up to 5 times in FERA,1947
Along with various other recommendations to streamline the proceedings.
Which were followed by the parliament as the acts were reenacted later.
The Following major enactments are checking the white-collar crimes
- Prevention of Money Laundering Act,2002. Although very controversial due the political usage, this act is very effective in curbing all activities involving money laundering and black money. This Act is intended to put an end to black money in India and convert it into legitimate currency by the process of attachment of property used in the offence of money laundering. The term Money laundering in this act is of very wide ambit and includes any and every property associated with any crime mentioned in the schedule to the act.
- Prevention of Corruption Act 1988 As the name suggests this act criminalises corruption and ill practises associated with it. The Act defines terms like public duty, public servant, and public authority, which broadens their scope for combating white-collar crime, as indicated by the Sanathan Committee report in 1964. Although initially enacted in 1947 it was re-enacted with major changes in 1988 along with further amendments in the recent years.
- The Companies Act,2013 aims to reduce corporate white-collar crimes such as noncompliance with the requirements, mismanagement and oppression, and company frauds, as well as to provide for expedited trials in the public interest.
- Bhartiya Nyaya Sanhita,2023: This Act has numerous laws concerning money laundering, cheating, fraud, wrongful gains and losses, bank fraud, forgery, credit, criminal breach of trust and prohibit dishonest misappropriation of funds all of which are principles of the white collar crime. IPC acts as a form of staple which is always attracted to majority of white collar crimes.
- Information Technologies Act 2000 plays a much larger role in keeping track of the cybercrime and computer related crime aspect of white-collar crimes as Sections 43 and 44 detail various offences and their penalties such as illegal extraction of data, hacking, piracy, fraudulent virus and malicious websites, illicit damage of computer system, unauthorised and illegal access, and so on.
- Securities and Exchange Board of India Act 1992 serves to support the interests of investors and other stakeholders. Insider trading contributes significantly to the rise in white-collar crime. The well-known Hindustan Lever case was the first in which SEBI punished the defaulters for white-collar crimes.
- Foreign trade (development and regulation) Act 1992 governs white-collar crimes in relation to trade by imposing restrictions on unfair imports and exports.
- The Central Vigilance Commission Act 2003 makes supervision to be carried out by the Delhi Special Police Establishments, because the police are currently doing patchy work due to low conviction rates for White-Collar crimes, according to a report.
Practicality of Punishments under WCC
There are always speculations about powerplay in prosecution and favour from the government when it comes to punishments in such cases. Regarded a heinous crime because of it affecting nation at large still it is a debatable topic that the punishments awarded to White Collar criminals are not stricter as they should be. It is evident from the decisions of the Satyam Scandal or 2G spectrum Case.
Although B Ramalinga Raju (the founder of Satyam computer services ltd) was found guilty along with 9 other accused and was sentenced to 7 years of rigorous imprisonment, he was granted bail within a month of conviction by metropolitan sessions court and he continued his business from his house.[8] According to Money Control, Raju’s family is one of the richest in Hyderabad, with his older son and daughter-in-law running successful agriculture and healthcare businesses, respectively.
In the 2G spectrum case, On 21 December 2017, a Special CBI Court acquitted all the persons accused in the case. [9]
It shows the practicality of the white-collar criminal system and the prosecution of such offences. Moreover, the theory of rehabilitation (on which lenient sentence system is based) shall not be a guiding factor in such crimes due to the reason that the criminals in such cases are person of high status and respect who own a lot of assets and knowledge and should therefore be presumed to know the seriousness and consequences of their actions.
Suggestions for effective adjudication and Reduction of crimes
- It is a common law principle in tort law that makes the master liable for the wrong of a servant committed during the scope of servant’s duty. Naturally it is duty of every master to see whether the acts are being done with due care and without any compromise. Therefore, superior of the offender shall be vested with duty to check the criminality in the course of business and similarly he shall be answerable in case of misconduct of powers.
- Res Ipsa Loquitur is another tortuous maxim that means that the thing speaks for itself. If implied in white collar criminality, the burden of proof itself falls on the accused to rebut the presumption of guilt.
If these two principles are applied in white collar criminality, the system shall be such that whenever a Scam or other white collar crime is discovered, the management of the entity is to be presumed guilty of the offence. It fades the possibility of findings as found in majority of cases. For example in the 2g spectrum case the special court acquitted all 18 accused by finding- “There is no evidence on the record produce before the court indicating any criminality in the acts allegedly committed by the accused persons.”[10]
These principles may appear very strict but the impact of such crimes shall be kept in mind during the prosecution and stricter sentences will prevent others from following in the footsteps of criminals. Moreover, it would increase the duties of management in fields of checking internal lapse of duties and would encourage honesty and publication of financial accounts that would be beneficial in maintaining the level of work.
Conclusion
White collar crime is a real crime. Conviction in criminal court is not the adequate criteria for its qualification of being a crime because large proportion of those who commit these crimes are not convicted in criminal courts. It being a crime against the economy of the whole nation shall be addressed properly by reforming the criminal justice system to make it both efficient and just in dealing with white collar criminality.
Referrals
1. https://cdnbbsr.s3waas.gov.in/s3ca0daec69b5adc880fb464895726dbdf/uploads/2022/08/2022080816-1.pdf
2. https://cdnbbsr.s3waas.gov.in/s3ca0daec69b5adc880fb464895726dbdf/uploads/2022/08/2022080834-1.pdf
3. https://www.indianculture.gov.in/reports-proceedings/report-committee-prevention-corruption
4. https://rsdebate.nic.in/bitstream/123456789/545811/1/PD_44_14081963_2_p288_p328_24.pdf
5. https://ijcrt.org/papers/IJCRT2107246.pdf
6. https://www.sebi.gov.in/enforcement/orders/nov-2023/order-in-the-matter-of-satyam-computers-services-limited_79496.html
7.https://cag.gov.in/uploads/download_audit_report/2010/Union_Performance_Civil_Allocation_2G_Spectrum_19_2010_chapter_5.pdf
8. https://www.bustle.com/entertainment/byrraju-ramalinga-raju-in-prison-now-bad-boy-billionaires
9. https://www.businesstoday.in/industry/telecom/story/2g-scam-verdict-a-raja-kanimozhi-cag-vinod-rai-spectrum-87503-2017-12-21
10. https://www.thehinducentre.com/multimedia/archive/03217/CBI_Vs__A__Raja_an_3217296a.pdf
