This article on ‘CONCEPT AND THEORIES OF CORPORATE CRIMINAL LIABILITY‘ is written by Shruti, an intern at Legal Upanishad.
Any person committing a crime is punishable under law. The question is if a company that has no soul or body commits a crime, can be liable in the same manner as a human? The answer is yes. This concept of a company committing a crime is covered under corporate criminal liability. Certain principles can be applied to determine whether a company is criminally liable and whether there are appropriate sanctions available to punish it. This concept is not a universal feature, some countries do not recognize any form of corporate criminal liability and impose administrative penalties for the acts of certain employees.
This article will focus on what is corporate criminal liability, its necessity, theories of corporate criminal liability, and the punishment available for it.
Criminal liability is when someone is legally responsible for the act or omission to another or to society which is criminally punishable. Corporations have their own separate legal entity which is different from their members and are treated as a separate personalities in law. They are criminally liable same as an individual for any wrongdoing.
A corporation can be held liable for the acts or omissions by the individual or association of persons who are employed under it for business gains or common purposes. The legal maxim “actus non facit reum nisi mens sit rea means” means, an act is not wrongful unless it is done with a wrongful state of mind. The crime should be done during the course of employment for which the company is responsible and can be liable even if there is no intention involved. corporations are liable for mostly all wrongs other than bigamy, murder, rape, etc.
NECESSITY OF CORPORATE CRIMINAL RESPONSIBILITY:
- It provides the officers with a great income to supervise the people under them very closely to keep themselves out of all the liability of paying profits.
- As a punishment, if a company is supposed to pay a fine and knows the risks involved, the company may raise the price of its services and goods. But this would eventually lead the consumers to search for another source which will also lead to bankruptcy.
- Corporate criminal liability destroyed the practice of physically being present in the court.
THEORIES OF CORPORATE CRIMINAL RESPONSIBILITY:
As a company has its own legal personality, it can be held criminally liable. But this concept brings confusion in deciding who the controlling mind is. There are common law theories extending criminal liability to body corporate. They are:
1- VICARIOUS LIABILITY (AGENCY THEORY):
This theory is also covered under the criminal aspect which was first developed in torts. The principle “Respondeat Superior” basically means let the master answer. The Supreme Court, under section 145 of the Negotiable Instruments Act, held that the person who is in charge and responsible for the conduct of the business of the company can be held liable for vicarious liability.
According to this theory, criminal violations involve two elements, actus reus (performing a legally prohibited act) and mens rea (criminal intent). Since corporations do not have their mental state, the only way of performing a criminal act with intention would-be employees. Therefore, the intention of the employee as part of the corporation is the intention of the corporation itself. The punishment here can be fine and seizure of the property.’
2- ATTRIBUTION OR ALTER EGO (IDENTIFICATION THEORY):
This theory depicts that the companies should take responsibility for the persons who have the authority to make decisions rather than the person who implements the work. It focuses on the directing minds of the company as results of the employees are possible only by intention and action of the company. A guilty mind is an underlying principle under this doctrine. This theory led to the construction of a direct liability theory. Anyways, this theory has been criticized for its limited application.
3- AGGREGATION THEORY:
Here, the corporation collects information from different officers. The company aggregates all mental elements and acts of different persons to see if they would amount to a crime if they were all committed by one person. It doesn’t matter whether employees who administer one part of the activity know another aspect of the operation.
This theory imposes a fine on the company that is criminally liable. This creates problems in fixing the amount of fine that is fair for punishing a corporate body.
There are several other requirements for establishing corporate criminal liability, they are collective blindness, wilful blindness, conspiracies, merges, dissolution, misprision of felony, and act for the benefit of the company.
Appropriate sanctions are the greater problem and have been the reason for rejecting this criminal liability. Imprisonment is surely not an option but the court can charge a greater amount of fines when compared to a person who is imprisoned for the same offense. A proper threat to a person may be the loss of liberty, in the same way for a company it is the loss of profitability as it affects the essential purpose of the company.
Other sanctions can be suspension of operation, prohibition of selling on the specific market, dissolution, retractions of a license, to put under supervision.
CONCLUSION AND SUGGESTIONS:
Suggestions like proper discretion to be given to judges to impose penalties as they deem fit for the case should be taken into consideration. Apart from fines, there can be any other punishments such as temporary closure of the corporation, winding up of the company, compensation to the victims, thereby stepping on the weakness of the corporation there would be a deterrent effect on the corporate and the aim of punishing the corporate can be achieved. Still in India, the corporations are not properly liable. Therefore, we could conclude by saying that, legislatures have to incorporate these provisions available and make it easier for the court to punish the offenders.
- Kiranpreet Kaur. (2020, February 10). Corporate Criminal Liability.
- Allens Arthur Robinson. (2008, February). ‘Corporate Culture’ as a basis for the criminal liability of corporations.
- Glanville Williams. (2015, December 4). Corporate Criminal Liability in India.
- Akhil Mahesh. (2015, February 4). Corporate Criminal Liability.
- Ayushi Dubey. (2019, June 21). Corporate Criminal Liability.
- [Tira Syada]. (2016, May 24). Corporate Criminal Liability [Video File]