White Collar Crimes- Indian Perspective

A natural crime such as murder can be committed in the heat of the moment but white collar crimes are committed with a cool calculation and planned strategy to gain personal profits, which can be hidden, designed in such a manner so as to get overlooked from the eyes of a normal vigilant person. Such design containing the feature of a crime all the more becomes more important to be tracked down and brought to justice to have overall trust and transparency in the system. White collar crimes are not a new phenomenon in India. The Indian Penal Code, 1860 is the earliest comprehensive and codified criminal law of India. It contains various white collar crimes of bribery, corruption, counterfeiting of coins and government stamps, offences relating to weighs and measures, offences relating to adulteration of food and drugs, misappropriation of public property, criminal breach of trust, cheating forgery, offences relating to documents and counterfeiting of currency. Among these, corruption being the major issue and having an impact of corroding the moral fabric of the society is most discussed and prevalent among the white collar crimes in India as it not only has wider damage to society as a whole but causes considerable damage to the national economy, national interest and image of the country.

DYNAMICS OF WHITE COLLAR CRIMES IN INDIA

The Santhanam Committee Report for the first time attached great importance to the emergency of offences and mal practices of ‘white collar crimes’, which was further acknowledged by the 29^th Law Commissioner Report of 1972. The Santhanam Committee report recognized the emergency of mass Society with small controlling elite, encouraging growth of monopolies and the deviance from ethical behavior which lead to growth of white collar and economic crimes. The report emphasized its concerns towards such crimes by opinion that this crime was more dangerous, not only because the financial stakes were higher but also they caused irreparable damage to public morals. According to the Report of EY, between 2004 to 2016, the serious fraud investigation office was asked to probe 469 cases, of which 184 companies were alone probed in 2015-16. The report titled “The changing dynamics of white collar crimes in India shows that over the past 10 years, the Central Bureau of Investigation (CBI) has prepared 6,533 corruption cases, of which 517 have come up in the past two years. Further, estimated Rs. 4,000/- crore of trading is carried out on the BSE using fake or duplicate PAN Cards and online fraud is on the rise. In 2015, India ranked 76^th on Transparency International’s Corruption Perception Index (CPI), up from 85^th in 2014. Few of the legislations in India pertaining to the white collar crimes are being briefly discussed hereinunder.

THE PREVENTION OF MONEY LAUNDERING ACT, 2002 (PMLA)-WHITE COLLAR CRIMES

The Act came into force w.e.f. 01.07.2005, was enacted pursuant to the India’s International obligations under the Vienna and Palermo Conventions, The Political Declaration and Global Programme of Action 1990 and also to give effect to the recommendations made by the Financial Action Task Force for combating money laundering. The ‘charging provision’ under Section 3 of the PMLA inter alia provides that whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the ‘proceeds of crime’ including its concealment, possession, acquisition or use and projecting or claiming it as untainted property, shall be guilty of offence of money-laundering. The PMLA defines ‘proceeds of crime’ as any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a ‘scheduled offence’ or the value of any such property, or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad. The 2019 amendment to the PMLA also clarified that “proceeds of crime” includes property that is not only derived or obtained from the ‘scheduled offence’ but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence. The PMLA can be triggered only if the alleged commission of any of the offences listed in the schedules to the PMLA has been registered with the jurisdictional police, or is pending enquiry/ trial. since the passing of the PMLA in 2002, the statute has been amended 11 times, to revamp various vital aspects like the definition of ‘proceeds of crime’, list of Scheduled Offences, attachment of property, adjudication, etc. From the initial list of Scheduled Offences under only 6 legislations, these subsequent amendments have now populated the Scheduled Offences list to cover offences under 29 different legislations – thereby ensuring that the PMLA net is cast much wider, when compared to what was originally envisaged in 2002.

THE FOREIGN EXCHANGE MANAGEMENT ACT, 1973 AND PMLA

As the successor to the Foreign Exchange Regulation Act, 1973 (“FERA”) (which provided for a stringent exchange control framework), the FEMA sought to liberalise the regulatory architecture and facilitate FDI and external trade. Whilst the FERA was a quasi-criminal statute, the FEMA had initially only provided for civil penalties in all circumstances, irrespective of the nature or gravity of the contravention. Whilst the FEMA’s liberalised provisions were presented as a necessity in India’s post 1991 economic landscape, the legislative policy surrounding blanket decriminalisation of foreign exchange violations and de-linking of PMLA and FEMA (by not adding FEMA as a Scheduled Offence) did not receive universal acceptance. By way of the 2015 Amendment, Section 13 of the FEMA was amended, and a new Section 37A was introduced, which inter alia provides for imposition of criminal liability for acquisition of any foreign exchange, foreign security or immovable property outside India, in a manner that contravenes Section 4 of the FEMA. The scope of Sections 13 and 37A are detailed below:

1.   If any person is found to have acquired any foreign exchange, foreign security or immovable property, situated outside India, of the aggregate value exceeding the threshold prescribed under the proviso to Section 37A(1), he shall be liable to a penalty up to three times the sum involved in such contravention and confiscation of the value equivalent, situated in India, the foreign exchange, foreign security or immovable property.

2. If the Adjudicating Authority, in a proceeding under Section 13(1A) above, deems fit, he may, after recording the reasons in writing, recommend for the initiation of prosecution; and if the Director of Enforcement is satisfied, he may, after recording the reasons in writing, direct prosecution by filing a Criminal Complaint against the guilty person by an officer not below the rank of Assistant Director.

3. If any person is found to have acquired any foreign exchange, foreign security or immovable property situated outside India, that has aggregate value exceeding the threshold prescribed under the proviso to Section 37A(1), he shall be, in addition to the penalty imposed, punished with imprisonment for a term which may extend to five years and with fine.

4. Section 37A also provides that in case of acquisition of any foreign exchange, foreign security or immovable property outside of India in contravention of Section 4, the Authorised Officer also has the power to seize the value equivalent, situated within India, of such foreign exchange, foreign security or immovable property.

As such, the Government has post the amendments in 2015, moved away from its previous policy of complete decriminalization of foreign exchange violations.

CORPORATE FRAUD UNDER THE COMPANIES ACT, 2013

The Companies Act, 2013, is the legislation which focusses on issues related to corporate frauds. Fraud in relation to affairs of a company or any corporate body as defined in S.447 of the Companies Act 2013, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss. In order to amount to Fraud, an act must be confined to acts committed by a party to contract with an intention to deceive another party or his agent or to induce him to enter into a contract. Fraud, which vitiates the contract, must have a nexus with the acts of the parties entering into the contract. This definition highlights the precondition to prove the intention of the person who has committed fraud. If that person has willingly committed a fraud, then he will be punished. Here the person means himself or his agent. The acts which include fraud are wrong suggestions or concealment of facts or false promises or any fraudulent act to deceive others. As the punishment for fraud is both imprisonment and fine, it is considered a non-compoundable offence. It shows that, the commission of fraud has become a serious offence in the eyes of law. The Act has provided punishment for fraud under section 447 and about 20 sections of the Act talk about fraud committed by the directors, key managerial personnel, auditors and/or officers of company. Thus, the new Act goes beyond professional liability for fraud and extends it to personal liability, if a company contravenes such provisions. Here, the contravention of the provisions of the Act with an intention to deceive are also considered as fraud; to name a few acts amounting to fraud:

            Although there are number of other areas including cyber crime as one of the other major part defining the white collar crimes in India, there is a need for addressing the issues in a more comprehensive manner. More stringent actions on behalf of the Government and through legislations in a proper manner and its implementation can only be the story in achieving success in curtailing white collar crimes in India. Not only this, the white collar crimes in the field of socio-economic offences should be further recognized and brought to law in times to come. A comprehensive chapter can also be inserted under the IPC dealing specifically with the white collar crimes so as to codify and identify such offences as one and exclusive. Apart from above, the Investigating Agencies requires more reforms to strengthen the timely delivery of justice and also to shorten the time limits involving white collar crimes.