Introduction
“A company can only act through human beings and a human being who commits an offence on account of or for the benefit of a company will be responsible for that offence himself. The importance of incorporation is that it makes the company itself liable in certain circumstances, as well as the human beings”- Glanville Williams
The debate surrounding corporate criminal liability under various laws such as competition, securities, cyber laws, environment has evolved in the last few decades in India as well as overseas. Assigning criminal liability on corporations generates considerable debate because it is difficult to do as opposed to imposing liability on employees and managers. Participants to the debate have not comprehensively analysed why the idea of corporate criminal liability exists even though corporations cannot be sent to jail. This raises another question which is whether corporate criminal liability is an effective way to influence behaviour of corporations or not.
In this background, it is prudent to compare the advantages and disadvantages of imposing criminal liability than other alternatives such as forms of corporate civil liability, personal liability, third-party liability and sanctions of an administrative nature. The effort should be made to determine the best strategy or a mix of strategies for society.
In terms of Indian Law, Section 11 of the Indian Penal Code (hereinafter “IPC”), 1890 defines person as being inclusive of a company or association. The section reads, “the word person includes any Company or Association or a body of persons, whether incorporated or not.” Further Section 2 of the IPC provides that “Every person shall be liable to punishment under this Code.” Thus, we see that the IPC mandatorily provides for punishment of every person including a company. The concept of corporate criminal liability can thus be easily derived from a joint reading of the above quoted sections of the IPC. The IPC is not the sole legislation which deals with corporate criminal liability. Some of the other legislations which deal with the punishment of corporate body are the Companies Act, 2013, Income Tax Act, 1961 etc.
Corporations are now an integral part of our society, they have become a significant factor in our economy. However, with considerable development of corporations, the society runs the risk of being oppressed by these corporations. Deterrence becomes very important in this scenario. Imposing punishment upon offenders may be understood by various rationales of criminal law jurisprudence, but deterrence is the rationale which applies to these economic entities. Companies have their own separate legal personality which is different from their members, it is hence, possible to make them liable and censure them.
Criminal Liability can be understood as “the obligation or accountability imposed on one to another or to society at large. It is enforced by punishment of criminal nature.” Deriving from this definition, “Corporate Criminal Liability is the extent to which a corporation, in its capacity as a legal person can be held liable for its criminal acts and omissions and also for the actions of those natural persons employed by it under the guise of employment.”
Historical Development of Corporate Criminal Liability
In the early sixteenth and seventeenth centuries, it was a general notion that corporations could not be made criminally liable. Hence, it was difficult to assign corporate criminal liability on corporations. There were four obstacles during the early 1700s. These were:
- Attributing acts to a juristic fiction
- Assigning moral blameworthiness necessary to commit crimes of intent.
- The doctrine of ultra vires
- Literal understanding of the courts of criminal procedure
Though there were four obstacles, the main issues were the first two viz. attributing acts and assigning criminal intention. By far these two obstacles were the most important.
Public Nuisance
The first instances of imposing corporate criminal liability first took place in England and the United States. These were imposed in cases involving non-feasances of quasi-public corporations (municipalities and the like), which resulted in public nuisances. Thereafter, by 1800s, the courts started assigning criminal liability to commercial corporations for the sort of public nuisances which were inflicted by quasi-public corporations. These were invariably, the first cases in which corporate criminal liability was imposed and these cases of assigning corporate criminal liability did not fall foul of the first two obstacles. First, “no individual agent of the corporation was responsible for the corporation’s omission.” Second, “there was no imputation of guilt from agent to principal” because “only the corporation was under a duty to perform the specific act in question.”
Crimes Not Requiring Criminal Intent
Further down the line, as was inevitable, the corporations became more and more prominent in terms of presence and importance. As the corporations started having more impact on public life, courts extended corporate criminal liability from public nuisances to all offences which did not require the presence of criminal intent. In the pre-1800s, it was unclear and questionable whether corporations could be held criminally liable for misfeasances (positive acts) as well as non-feasances (omissions). However, in 1846, Lord Denman ruled in The Queen v. Great North of England Railway Co.that corporations cannot escape criminal liability for misfeasances. The American courts followed suit. This was a new development in this field and eventually this prompted the courts to extend the assigning corporate criminal liability to all crimes which did not require intent: “Once the principle that corporations could be convicted of misfeasance for creating a nuisance was establishes, there was no theoretical impediment to imposing liability for other acts of misfeasance….”
Fastening liability was tricky in these situations, however, the courts relied on the principal-agent relationship to impute agent conduct to corporations, however, such fastening would not be possible without the doctrine of respondeat superior. The doctrine came to the picture when the courts first tried corporate misfeasance cases in the mid-1800s. The development of the doctrine came at such a time that it coincided with the growth and importance of corporations. Increasing growth and importance of corporations led to the demand for regulation of business activities.
Crimes of Intent
The Courts were slow in extending corporate criminal liability to crimes requiring intent. It was then when the Supreme Court of the United States in New York Central & Hudson River Railroad Co. v. United States in 1909 held a corporation liable for a crime of intent. The case was before the Supreme Court on an appeal against New York Central’s conviction in a violation of the Elkins Act.
In the appeal, it was asserted that Section 1 of the Elkins Act, which specifically held the officers, agents and employees of a common carrier to be the acts of the company itself, was unconstitutional. It was argued that “…to fine the corporation for the acts of its employees…amounted to taking money from a punishing innocent stockholders without due process of law.” The Court did not agree and held that Congress was within its power to impose liability on corporations in this manner.
The rationale behind the judgment was that for effective enforcement of provisions of such legislations as the Elkins Act, the corporations had to be held liable as they were the beneficiary of unlawful practice. The judgment paved the way for the courts to impose criminal liability on corporations in ways not possible before. The impact was so great that the courts became willing to hold liable, the corporations for all crimes except crimes of malicious intent, such as rape, murder, bigamy etc.
Rationale behind development of Corporate Criminal Liability
Initial doubts were expressed regarding the attempt to extend vicariously, corporate liability to crimes not requiring intent. Later on, however, it was established that imposition of such liability served a useful purpose and hence, was justified. Doubts echoed even louder when corporate criminal liability was extended to crimes of intent. The extension of corporate criminal liability met with resistance from critics who put forward the argument that imposing corporate criminal liability for crimes of intent defeated the aim of criminal law, which was, punishing the morally blameworthy. The critics argued that extending criminal liability to corporations meant that they were being held guilty on vicarious guilt and not on personal fault. Thus, early commentary during the mid-1800s focused mainly on extending vicarious corporate liability in the criminal context or extending corporate criminal liability to crimes of intent.
A question comes forward, that why corporate criminal liability exists at all when corporate civil liability also exists. This question is a strikingly good question, given the fact that most of the doctrines used to fasten corporate criminal liability were borrowed from civil law (such as respondeat superior). To look into this issue, a hypothesis is necessary to be framed taking into account the nature and type of wrongs, to address which, corporate criminal liability was developed.
There is a trend that can be seen in the early instances of criminal liability being fastened to corporations. Most of the cases arose out of public harms eg. nuisance. Private enforcement was unlikely for crimes of this nature. Public enforcement, hence, became necessary in order to ensure that the corporations properly avoided causing harm to the public during conducting business.
Hence we see that from the late 1600s to the early 1900s, public enforcement was carried out through criminal proceedings. Only the area which was left outside the ambit of criminal liability due to inapplicability was dealt with civil liability. This is due to the notion that public harm must be dealt by public enforcement. This essentially circumvented the problem when the culpable individual who operated within the corporate hierarchy was unidentifiable by imposing liability on the corporation. Corporate criminal liability arose as the only viable option to meet the need for public enforcement as well as corporate liability especially since civil liability was not widespread during the 1900s.
Corporate Criminal Liability in India
Section 11 of the IPC gives the definition of person. It reads “the word person includes any Company or Association or a body of persons, whether incorporated or not.” Further Section 2 reads, “Every person shall be liable to punishment under this Code.” Thus we see that the IPC imposes no problems when it comes to assigning criminal liability to a corporation. Section 2 provides no exceptions to a body corporate and provides for punishment of every person which includes a juristic person as well. It is noteworthy that this is not the only legislation which deals with punishment of corporate bodies. The Companies Act, 2013 and the Income Tax Act, 1961 are a few of the other legislations which deal with this issue.
The Supreme Court addressed the complexity surrounding the issue of criminality of a body corporate in the nase of Iridium India Telecom Ltd. v. Motorola Inc.Further the Apex court decided on the criminal liability of corporate officers for actions of the company and also examined the principle of alter ego in the case of Sunil Bharti Mittal v. Central Bureau of Investigation (hereinafter “CBI”). In this case the court, relying upon the Iridium case delved into the issue of corporate criminal liability and gave it a wider connotation.
Identification of persons as discussed under the principle of attribution is instrumental in identifying the persons whose acts can be considered instrumental in fastening criminal liability on the company. The concept of Mens Rea attributable to companies was dealt with extensively in the case of Iridium and Bharti Mittal.
Prior Judicial and Jurisprudential Stand
As is well established, companies were understood to be juristic persons and the prevalent view regarding juristic persons, specifically a company was that the company could not be charged with criminal offences as the it would create a lot of procedural problems such as of arrests, actual punishment etc however, primary among these concerns where the requisite intention or lack thereof of a company to commit crimes. Hence, criminal liabilities could not be fastened upon them.
In the case of Assistant Commissioner, Assessment-II, Bangalore v. Messers Velliappa Textiles Ltd, the Supreme Court endorsed the theory of alter-ego. However, the majority opinion in this judgment was that companies could not be held liable for offences the punishment for which was only imprisonment or mandatory terms of imprisonment along with fine. However, the position changed soon as just after the elapse of one year, a five-judge bench of the Supreme Court overruled Velliappa Textilesand from then onwards the judicial interpretation has changed and moved forward towards determining the issue of corporate ccriminal liability and has provided jurisprudential value through Iridium and Sunil Bharti Mittal rulings.
Development of Corporate Criminal Liability and hurdles
Criminal liability comprises of two elements: actus reus (guilty act) and mens rea (guilty mind). The question that arose before the Courts was whether a corporation as an artificial person was capable of committing a crime and could be thus held criminally liable under the law or not.
Corporate Criminal Liability has evolved from its infancy into an established doctrine. By definition it is “a socially injurious act committed in the course of employment by people who are managing the affairs of the corporation to further their business interest.” The extent to which a fictional person can be held accountable for the acts and omissions of its hired natural persons is decided by corporate liability in criminal law. Further, it has been defined as “the conduct of a corporation or of employees acting on behalf of a corporation, which is prescribed and punishable by law.”
Imprisonment
A company is a jurisitic person and hence, has to face punishment as provided by various provisions under various acts. The Companies Act, 2013 for example, holds the company liable for its wrongdoings. However, there are certain provisions which mandate imprisonment for a person such as Section 447 of the Companies Act, 2013 as well as Section 420 of the IPC and Section 276(B) of the Income Tax Act, 1961.
In situations like these, it has been time and again found that it cumulates in a dead end as companies cannot be arrested, they can only be fined. The Supreme Court was face to face with a similar difficulty in the case of M.V Javali v. Mahajan Borewell & Co. and others. Here, the Company was found guilty under Section 276B r/w Section 278B of the Income Tax Act, which mandates punishment with a minimum sentence of 3 months. Mukherjee J. stated, “Even though in view of the above provisions of Section 278B, a company can be prosecuted and punished for an offence committed under Section 276B the sentence of imprisonment which has got to be imposed there under cannot be imposed, it being a juristic person and we are of the opinion that the only harmonious construction that can be given to Section 276B is that the mandatory sentence of imprisonment and fine is to be imposed where it can be imposed namely on persons coming under categories (ii) and (iii) above, but where it cannot be imposed, namely on a company, fine will be the only punishment.”
Therefore, the solution derived at that point was that a juristic person liable for punishment relating to imprisonment would only be liable for fine as physical punishment would not be attracted. The reason why corporate criminal liability is arduous is because a corporate or company has no physical existence. Hence its actions and decision-making processes are limited to the decisions of human beings that it employs.
Mens Rea and the Alter-Ego doctrine
Mens Rea is essential for many crimes. However, it is also a concept which is extremely difficult to assign to juristic persons. Unlike natural persons, juristic persons are not organic, sentient beings. Hence, at the time it was established that corporations cannot be charged for crimes requiring the Mens Rea factor.
The Bombay High Court in Motorola Inc v. Union of India, quashed criminal proceedings against a corporation for the offence of alleged cheating. It was held that prosecution under Section 420 of the IPC could not be done. Later however, with Lord Denning’s view in H.R. Bolton (engg.) Co. Ltd v. T.J. Graham, the notion that corporations could not have Mens Rea came to an end. In the judgment it was held that,
“A company may in many ways be likened to a human body. They have a brain and a nerve centre, which controls what they do. They also have hands, which hold the tools and act in accordance with directions from the centre. Some of the people in the company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will. Others are directors and managers who represent the directing mind and will of the company and control what they do. The state of mind of these managers is state of mind of company and it treated by law as such. So you will find that in case where the law requires personal fault as a condition of liability in tort, the fault of the manager will be the personal fault of company.”
Subsequently, the concept of alter-ego was developed and established in India. Through this doctrine, the legal body can be personified. The doctrine itself is centred around the personification of the legal fiction. Under this doctrine, guilt can be attributed to a company for criminal acts of the individual within his scope of duty. In Assistant Commissioner, Assessment-II, Bangalore & Ors. v. M/s. Velliappa Textiles Ltd. & Anr.it was held, “Though, initially, it was supposed that Corporation could not be held liable criminally for offences where mens rea was requisite, the current judicial thinking appears to be that the mens rea of the person in-charge of the affairs of the Corporation, the alter ego, is liable to be extrapolated to the Corporation, enabling even an artificial person to be prosecuted for such an offence.”
Thus, the doctrine of alter-ego paved the way for courts to try corporations for offences which required mens rea as an essential ingredient. The courts were now free to assign criminal liability for most offences on corporations. Overtime, the courts have taken an increasingly stern stance in holding a corporation criminally liable for acts or omissions by its management or agents. Primarily it is the person who is responsible for carrying out business of the company who is held liable. Only if the accused can justify that he is oblivious to the crime or that the act was done even though due diligence was instructed to be followed can he claim defence.
Secondly if proven that the offence has been accomplished “with the consent or connivance of”, or is “attributable to” negligence of manager, secretary, director or other officers of the corporate such individuals may be held liable by the court. In progression, the company is held responsible, regardless of whether any individual is held liable or not. The jurisprudence on corporate criminal liability is not only limited to the Indian Penal Code 1860, but it is also spread and dispersed across a surfeit of statutes with specific provisions for the same.
Mens rea is a crucial element for majority of the offenses related to criminal liability in India, the punishment for which offences consist of imprisonment or penalty. In the case Zee Tele films Ltd. v. Sahara India Co. Corp. Ltd , the charge levelled against Zee was that it had aired a show which was based on falsity, thereby leading to defamation of Sahara India. The court rejected the complaint filed against Zee under Section 500 of the IPC. The court adhered to ‘mens rea’ being a fundamental component of the criminal defamation while stating that a corporate could not have a guilty mind.
However, in Standard Chartered Bank v. Directorate of Enforcement, the petitioner opposed the charges and contended that their company was not accountable to be accused under Section 56 of FERA,1973. Since the minimum sentence in section 6(1)(i) under the Act states imprisonment for a period which is lesser than six months with fine. Therefore the petitioner applied for a special leave from the Supreme Court and held that no criminal proceeding can begin. The court decided that the statutory intent needed to be taken into consideration also all the penal provisions should be interpreted in accordance with all other statutes to reflect upon the judicial intent stated in the enactment.
Since then the SC has gradually advanced in resolving the problem of corporate criminal liability and has delivered jurisprudential worth through the ruling of Iridium and Sunil Bharti Mittal. Furthermore it has enhanced and added a new element to the jurisprudence concerning corporate criminal liability in India in relation to mens rea (criminal intent). Maintaining the stand that even though it is a legal fiction, a corporation could possess the necessary mens rea to commit an offence.
The Iridium Case – Mens Rea Solved
The case of Iridium India Telecom Ltd. v. Motorola Inc.is of utmost prominence as the question of liability of corporations in crimes involving mens rea as an essential ingredient was dealt with once and for all. In this case, Iridium India Telecom Ltd. had moved criminal proceedings under section 120 r/w section 420 of the criminal statute, the IPC.
The proceedings were started but were later quashed by the High Court on grounds that a company cannot have a guilty mind and hence, no offence under Section 420 can be made out against it. Iridium India Telecom Ltd. then approached the Supreme Court in an appeal. The Supreme Court considered two main questions viz.
- Whether mens rea can be attributed to companies for the purpose of criminal liability?
- What is the extent of criminal liability for misstatements in the transaction of securities offerings made on a private basis?
In terms of corporate criminal liability as a concept, the first issue is of special interest. The “principle of attribution” was invoked. The principle applies when the issue of whose mental element is to be assigned to the company for fastening criminal liability arises. The court held that the person who is:
- In direct control and is in-charge of the company’s affairs and,
- The degree of control being so pervasive and intense that the company itself is said to be acting through that person
is the person whose mental element has to be taken into account. The Court ruled on two fronts. Firstly, it held that a company is perfectly capable of having requisite mens rea and secondly, that the “test of identification” has to be applied in a rigid manner to identify the individual who directs the mind of the company and this person’s mental element has to be used to determine the requisite mental element.
The Court had relied on Tesco Supermarkets Limited v. Nattrass, to establish that the people who have been specifically entrusted with powers and duties under the Memorandum of Association (hereinafter MOA) and the Articles of Association (hereinafter AOA) or by directors or general meeting are to be held liable as their acts and omissions coupled with mental element can be used to attribute mental element to the company. Iridiumgoes a step ahead of this rationale, and goes on to establish that any natural person accountable and who attributes liability to the company on behalf of their actions while being in charge or practicing pervasive control should be held liable. Hence, according to the ruling, criminal liability can be fastenend to companies as they are perfectly capable of possessing requisite mens rea for committing offences.
Upon analyzing, it is seen that Iridium strictly applied the directing mind and will of the company test. Undoubtedly, this approach rings true to tackle the Indian scenario. The judgment is in line with criminal jurisprudence. Another question, which arises was left unanswered by the judgment, which is for what acts or omissions of the directors, the company would not be criminally liable.
The difficulty in the case of under what conditions would a corporation not be responsible for the actions of the directors, etc. was overlooked by the court.
Though the Supreme Court’s judgment is an imperative step that India has taken towards attributing mens rea to Corporates, it is essential to observe that the Supreme Court did not lay down guidelines based on which mens rea of a company can be proved. Furthermore the Apex Court overlooked the risk factors and clauses enclosed in the Private Placement Memorandum of the Iridium project, although these provisions warned the investors of uncertainty. The decision passed does therefore clarify the Supreme Court’s stand on criminal liability of company and the possible guilty mind that a corporate could be held liable of having. The prosecution of officers of the corporation or promoters for the criminal acts of the company would depend on the facts and circumstances in each case, is not likely to be widely applied.
Sunil Mittal Bharati Case
In the case of Sunil Bharti Mittal v. CBI and othersthe principle of alter-ego was held to be only applicable to make a company liable for acts and omissions committed by an individual or a group of persons who have pervasive and intense control over the company such that these persons or individual represents the alter-ego of the company. However, this doctrine cannot be applied in a reverse manner to make the directors of a corporation criminally liable for offences committed by the company. It was clarified by the Supreme Court that holding directors vicariously liable for an offence committed by the company cannot be done unless a statute provides for such a liability. The Court hence, set aside the summons issued to the directors of the company.
Following the dicta of the Supreme Court in the case of Centre for Public Interest Litigation and Ors v. Union of India and Ors, the CBI investigated into several irregularities and anomalies in the grant of licences and spectrum allocation 2G telecom band. A charge-sheet was filed before the Special Judge. Mr Shyamal Ghosh along with three companies viz. M/s Bharti Cellular Ltd, M/s Hutchinson Max Telecom (P) Ltd and M/s Sterling Cellular Ltd we named, alleging commission of offences under Sections 13(2) and Section 13(1)(d) of the Prevention of Corruption Act, 1988 read jointly. The Special Judge was of the opinion that the directors acted in their capacity in such a manner that they could be considered to the the directing mind and will of the companies. In essence, he held that these persons were the alter-ego of their respective companies. The order was challenged before the Supreme Court.
The issues to be decided were:
- Whether the principle of attribution/alter ego can be applied in reverse to hold directors liable for offences committed by the company?
- When can a director/person in charge of the affairs of the company be prosecuted for an offence committed by the company?
AK Sikri J., speaking on behalf of him and his colleagues struck down the summons which the Special Court had issued. Further, it was held that the doctrine of alter-ego was erroneously applied by the Special Court. The doctrine could not have been used to implicate the directors for offences committed by the companies.
The decision in decision in Iridium India Telecom v. Motorola Incorporated and Others was applied. The question of whether a company could be prosecuted for offences which required mens rea was dealt with. However, it was noted that the principle is used to attribute criminal intent to the company on account of its alter-ego but not the other way round. So, essentially, the court opined that the principle of attribution cannot be applied in a reverse manner to fasten liability on directors for offences committed by the company.
The Court observed that a director/person in charge of the affairs of the company may also be prosecuted with the company, however, such is possible only when certain criteria are met. These criteria are:
- If sufficient evidence is present of his active role coupled with criminal intent;
- Where legislation or law imposes liability specifically.
In regard to the first aspect, the Court was of the opinion that the Special Judge had not satisfied himself regarding presence of incriminating material on record to successfully fasten liability on the directors.
In regard to the second aspect, it was noted, as a cardinal principle of criminal jurisprudence that vicarious liability cannot be imposed unless there is legislation/statute which specifically provides for it. Thus, when company commits criminal offences, the vicarious liability does not automatically incriminate the directors in the absence of a statutory provision.
Analysis
The Court relied upon the case of Tesco Supermarkets Limited v. Nattrass where it was held that the person whose mental aspect or mens rea is to be attributed must be the directing mind and will of the company. An interesting point to note is that the Privy Council held in Meridian Global Funds Management Asia Limited v. Securities Commission, which is a subsequent judgment that “the company builds upon the primary rules of attribution by using general rules of which are equally available to all natural persons, namely, the principles of agency” thereby making the rules of attribution flexible and one to be decided on each case according to a case by case basis.
It can be safely said that the decision of the Supreme Court has clearly brought a lot of clarity and dispelled the confusion surrounding vicarious liability and the principle of attribution in the context of corporate criminal liability vis-à-vis strict liability under a statute.
Internet and Corporate Criminal Liability
The advent of computer technology has been a been a boon to students, lawyers, businessmen, teachers etc. However, the downside of technology is its misuse. Computer technology has also made committing crimes easier and evading justice even easier. The internet has become a way of life for many people across the globe and also a haven for criminals. The crime rate on the Internet is increasing at 4.2% per week.
To a technical person, the internet is a global network spread computers based on the TCP/IP and other communication protocols. This network has millions of users which are served through equally numerous nodes. However, with the freedom internet provides it also exposes users to dangers. There are various crimes like frauds, virus attacks etc. that are quite prevalent on the internet.
The internet era re-defines corporate criminal liability like never before. As the expansion of familiar crimes over the new medium is taking place, so must the law keep its pace with the changing times. The Information Technology Act, 2000 is the statute which regulates computer and internet usage in the country. The Ministry of Electronics and Information technology is the apex body in the regulation of computers and internet.
The Information Technology Act, 2000 very clearly under Section 85 provides for the doctrines of attribution and alter-ego under Section 85. Under this section, liability can be imposed on companies for offences committed under the Act. The proviso also protects against reverse application of the doctrine of alter-ego.
Corporate Espionage
Corporate espionage is a new and typically clandestine and discrete form of information warfare between companies, states, organizations or any combination of these. Corporate espionage is dealt with under the Information Technology Act, 2000 under Section 43 r/w Section 85. Under these jointly read provisions, any company hiring or operating cells for the sake of corporate espionage can be held liable provided there is a contravention under Section 43 which prohibits unauthorized access, downloads etc of information from a computer without the owner’s permission. Section 66 lays down the punishment for contravention of Section 43. The perpetrator can be imprisoned for upto three years or be liable to fine upto five lakh rupees or both. In addition to this, Section 72 and 72A lay down the provisions for imposing penalty for breach of confidentiality and privacy and also disclosure of information in breach of a contract.
An interesting question which arises is what happens if espionage takes place in a cross-border scenario. The answer is not simple, however, it is very interesting to answer. The Ministry of Electronics and Information Technology has set-up a Computer Emergency Response Team (hereinafter CERT) in accordance to international norms. The CERT in India is called CERT-In. This team is to remain vigilant against any cyber attacks on infrastructure, banking, defence, finance and other sensitive sectors. The CERT-In specializes in neutralizing virus attacks on India’s infrastructure. It is to be noted that most of these attacks are by private parties, even though they may be state funded. This brings Corporate Criminal Liability into picture. CERT-In, though not officially tasked to counter-attack, however, the usual course of action after neutralizing an attack from a foreign actor is to quickly mount a counter attack in order to deter or locate the miscreants. In the absence of any international regulations prohibiting state actors from counter-attacking in cases of breach of cyber security, this is the most viable course of action.
The other forms of threats CERT-In deals with are by Cyber Terrorists and Organized Criminals. The CERT-In has different policies for tackling each of these threats. It is proposed that the Cert-In will expand to zone wise, state wise or sector wise units in order to better protect the country against cyber attacks.
Intermediaries and Corporate Criminal Liability
Intermediaries, for the purposes of corporate criminal liability are nothing but corporations. They provide services in cyberspace and collect information in order to serve the users. The definition of intermediaries was inserted by the Information Technology (Amendment Act), 2008 which replaced the previous definition in the original act. Under the new definition, any person providing any service with respect to electronic communication including receiving, storing or transmitting the information qualifies to be an intermediary. The provisions which regulate the actions of these intermediaries are Section 43A, Section 66E, Section 72 and Section 72A. The intermediaries are exempted from liability in certain cases defined under Section 79. Under the exemption, “safe harbour protection” is afforded to intermediaries who only act as facilitators of data or information. The “safe harbour protection” is subject to removal of unlawful content by the intermediary on being notified by the Central Government or concerned agency.
The provision was an addition and was not present in the original Act. It was inserted via Information Technology (Amendment) Act, 2008 on the demand of the software industry for protection against dissemination of user generated material.
Safe-Harbour Protection
In Avneesh Bajaj v. State, Avneesh Bajaj, the CEO of Baazee.com which was an auction portal was arrested for an objectionable and obscene clip which appeared on the site for sale by a user. According to Section 79 of the Act, the network service provider will not be liable for any third party information or data simply made available by the service. The intermediary however, will lose the “safe harbour protection” if it has conspired or otherwise aided or abetted the unlawful act on the network service. The concept of “notice and take down” was also coined after the incident as is applicable in many foreign jurisdictions. Under this concept, an intermediary is to take down unlawful material from its service upon receiving actual knowledge. If this is not complied to by the intermediary, it loses its “safe harbour protection”. The Information Technology (Intermediary Guideline) Rules, 2011 further lays down the rules for this provision. Also, under the rules every intermediary has to appoint a grievance officer and provide his name and details on the website. The officer has to redress such complaints within 30 days from receipt of complaint.
Constitutional validity of Section 66A
Section 66A made sending “offensive” messages punishable under the Act. The main problem around this provision was the vagueness regarding the word “offensive” and the wide connotation it has. In Shreya Singhal v. Union of India, the provision was struck down to the relief of private persons and intermediaries both. The reasons for striking down the provision were the ambiguity in its phraseology and imposition of statutory limits on the exercise of internet freedom. It was held to be violative of Articles 14, 19 and 21 of the Constitution.
Conclusion
Corporate criminal liability has served in protecting society against public harm by corporations since the early 1600s. However, with the advent of the internet age, the applicability of corporate criminal liability must widen to keep up with the times. Handling of sensitive information by intermediaries and attacks on the country’s infrastructure by foreign based corporations are some of the new issues which need to be dealt with in this day and age. Corporate Criminal Liability must hence be applied more strictly to crimes committed over the internet.
However, leaps without bounds must not be made and hence, laws should be framed within the vires of the Constitution and must not encroach on right to privacy, freedom of speech and expression and right to life of the individuals. Striking down of Section 66A was a reality check which was needed and has definitely restored the faith of the public and legally compliant businessman in the judicial system.
The judiciary must strictly apply corporate criminal liability to those corporations which commit public harm as public enforcement is the only way forward. On the other hand it must balance the legislative aspects with the constitutional aspects and must strike down either in entirety or by severing laws which are outside the vires of the Constitution.
References
Statutes
Companies Act, 2013
Indian Penal Code, 1860
- Prevention of Corruption Act, 1988
- Information Technology Act, 2000
Articles
- John T. Byam, The Economic Inefficiency Of Corporate Criminal Liability (Vol. 2), 1982, Pp. 582-585.
- Satish Padhi, Ashish Kabra And Vyapak Desai, ‘CORPORATE CRIMINAL LIABILITY: PRINCIPLES OF ATTRIBUTION AND VICARIOUS LIABILITY CLARIFIED’, Nishith Desai Associates
- Corporate Criminal Liability: Revisiting Iridium, PSA Legal, E-Newsline, August 2015.
- 2G Spectrum Case: Court Discharges Bharti, Vodafone, Ex-Telecom Secy | Cfo-India.In. (2015, October 15).
- Braithwaite, J. (1984). Corporate Crime In The Pharmaceutical Industry (1st Ed.).
- Siegel, L. J. (2000). Criminology. Belmont, CA: Wadsworth/Thomson Learning.
- Shekhawat, D. S. (2015, August 27). Corporate Criminal Liability: Revisiting Iridium – Criminal Law – India.
Written by
Mihir Kunal Ekka,
M.P Ranchi.
