A criminal act is an act that
endangers public welfare and safety. The consequences of having a criminal act are
far graver both for the victim and the accused brought to law. Therefore, in
order for the act to qualify as a criminal one, certain essentials have to be
satisfied. These essentials are actus reus (the guilty act) and mens
rea (a guilty state of
mind). In order to establish the act, further three stages are to be satisfied.
These are the preparation, attempt and commission or completion of the offence.

liability of corporate entities and individuals

Establishing a criminal act and
intention and attributing individual elements therein is easier when there are
individuals in question. This is because these activities are being carried out
by individuals who are directly responsible for their actions and form an
intention to commit a certain criminal act by virtue of application of their
own mind. However, applying this concept of “act” and “intention” to a
corporate entity becomes problematic since a body corporate isn’t a living and
breathing entity and does not have a mind and body of its own to form a guilty
intention or to take any steps towards commission of a crime.

In light of the above it becomes impossible
to hold a company criminally liable in light of the concept of a corporate veil1. Corporate veil establishes a
company as an independent legal entity, distinct from its directors,
shareholders or those working for or associated with it. However, with the aim
of doing justice, the courts have come to realise that for sake of justice, this
veil may be and has to be lifted in cases special cases since it is essentially
directors that direct the actions of the company and the servants, agents or
employees of the company that physically act on behalf of the company or body corporate.
The Doctrine of Identification and the Organic theory propounded by Lord
Denning recognise these concepts in Leonard’s Carrying Co. Ltd. v
Asiatic Petroleum (Pvt.) Ltd. and Bolton Engineering Co. Ltd. v. TJ Graham & Sons Ltd.  Criminal Liability is
basically defined as the liability of a person authorized by the company, and
the liability is such that the provisions of the Indian Penal Code can be
actually applied for the individual act he committed, in isolation of the fact
that the person was acting for a company. Just as individuals owe a duty not to
harm or injure others in society without justification, so do companies owe a
duty not to poison our water and food, not to pollute our rivers, beaches and
air, not to allow their workplaces to endanger the lives and safety of their
employees and the public, and not to sell commodities, or provide transport,
that will kill or injure people.

criminal liability of

The Indian law governing companies
and corporate entities is in recognition of these concepts. We see their application
in Standard Chartered v. Directorate of Enforcement2 and Iridium India Telecom Ltd.
v. Motorola Inc. & Ors.3 The Companies Act, 2013 has
tightened this on corporate bodies grip by increased monetary penalties and
imprisonment. It has increased the scope of attributing criminal liability from
mere directors to Key Managerial Personnel and Officer in Default resulting in heightened
corporate governance requirements even for start-ups and unlisted
companies, even though there is no public money invested. . “Officer
in default” would are essentially whole-time directors, Key
Managerial Personnel (KMP) and such other directors as specified by the Board
in the absence of KMP and every director who is aware of contravention of law
by virtue of receipt of board proceedings or participation therein without
raising any objection or where non-compliance has taken place with his consent
or connivance. Directors of a company may also incur criminal liability apart
from civil liability under the Companies Act or Common law by way of fine or
imprisonment.  He may be held criminally
liable for any of the act committed by company where he has aided, abetted or
procured the commission of such act. There may also be investigations done on
them and may also be prosecuted or fined by criminal or regulatory authorities
over acts or omissions. Authorities such as the Companies Investigation Branch
(CIB) of the Department for Business, Enterprise & Regulatory Reform, have
wide powers of investigation that they are not afraid to use.
these provisions make the directors are also bound for their acts relating to
the company, to the state, for; the Government is concerned with the affairs of
the company in the interest of the public. The penal sections dealing with
offence imposing punishment are mainly sections 44, 63, 68, 70, 84,105, 202,
203, 207, 209, 210, 211, 217, 221, 240, 248, 250, 295, 371, 407, 420, 68 A,
606,614 A, 615 and 628. There is constant interaction between the company, the
State and the public be it incorporation or raising capital or rendering services
or products to its customers. These provisions deal with inviting share capital
via a prospectus, misstatements therein, distribution of dividends, appointment
of directors, supply of information to the Central Government or auditors,
manner of accounting and auditing etc.

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