sem_4-white_collar_crime_project.docx

White Collar Crime

- An Insight into its current state

- Author (Abhilash Panickar)LLB SEM IV Lords Universal College

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Table of Contents1 INTRODUCTION......................................................................................................4

1.1 Aims and Objectives...........................................................................................5

1.2 White Collar Crime – Relationship to other types of Crime.................................5

1.2.1 Blue-collar crime...........................................................................................5

1.2.2 Corporate crime............................................................................................5

1.2.3 State-corporate crime...................................................................................6

1.2.4 Public a victim of white collar crime..............................................................6

1.2.5 How workers/employees of a company can be victims of white collar crime6

1.2.6 Occupational Crime......................................................................................7

1.3 Causes of White Collar Crime.............................................................................7

1.3.1 Situational (Opportunity)...............................................................................7

1.3.2 Personality....................................................................................................8

1.3.3 The Culture of Competition...........................................................................8

2 WHITE COLLAR CRIME IN INDIA...........................................................................9

3 INFAMOUS SCANDALS.........................................................................................14

3.1 The Enron Scandal...........................................................................................14

3.2 The 2G Scam....................................................................................................15

4 JUDICIAL RESPONSE - LEGISLATION................................................................17

4.1 Prevention of Corruption Act.............................................................................18

4.2 Prevention of Food Adulteration Act.................................................................23

4.3 Other statutes...................................................................................................24

5 ANALYSIS OF DATA..............................................................................................25

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6 CONTROL POLICIES TO BE UNDERTAKEN TO ERADICATE WHITE COLLAR

CRIMES.........................................................................................................................32

7 CONCLUSION........................................................................................................33

8 REFERENCES.......................................................................................................35

8.1 Webliography....................................................................................................35

8.2 Bibliography......................................................................................................35

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1 INTRODUCTION

“Power tends to corrupt and absolute power corrupts absolutely.”

Where ever law ends, tyranny begins…

Within the field of criminology, white-collar crime has been defined by Edwin Sutherland

as "a crime committed by a person of respectability and high social status in the course

of his occupation" (1939). Sutherland was a proponent of Symbolic Interactionism, and

believed that criminal behavior was learned from interpersonal interaction with others.

White-collar crime, therefore, overlaps with corporate crime because the opportunity for

fraud, bribery, insider trading, embezzlement, computer crime, copyright infringement,

money laundering, identity theft, and forgery are more available to white-collar

employees.

White-collar criminals are opportunists, who over time learn they can take advantage of

their circumstances to accumulate financial gain. They are educated, intelligent,

affluent, confident individuals, who were qualified enough to get a job which allows them

the unmonitored access to often large sums of money. Many also use their intelligence

to con their victims into believing and trusting in their credentials. Many do not start out

as criminals, and in many cases never see themselves as such.[1]

This is a non doctrinal research. The Empirical Research Methodology is used and data

has been collected by a survey done with approximately 20 people of different age,

background and profession. The research is based on actual experience rather than

theory or belief. People were asked to give their true opinions and comments. Visits to

government establishments and common man interviews like shopkeepers was

undertaken to get a first hand picture and opinion and experience of common man with

respect to white collar crime.

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1.1 Aims and Objectives

The aims and objective of this study is to draw a sketch of the prevailing white collar

crime in India and specifically Mumbai and the steps that can be taken to identify and

prevent it.

1.2 White Collar Crime – Relationship to other types of Crime

1.2.1 Blue-collar crime

The types of crime committed are a function of what is available to the potential

offender. Thus, those employed in relatively unskilled environments and living in inner-

city areas have fewer "situations" to exploit (see Clarke: 1997) than those who work in

"situations" where large financial transactions occur and live in areas where there is

relative prosperity. Blue-collar crime tends to be more obvious and thus attracts more

active police attention (e.g. for crimes such as vandalism or shoplifting, where physical

property is involved). In contrast, white-collar employees can incorporate legitimate and

criminal behavior, thus making themselves less obvious when committing the crime.

Therefore, blue-collar crime will more often use physical force, whereas in the corporate

world, the identification of a victim is less obvious and the issue of reporting is

complicated by a culture of commercial confidentiality to protect shareholder value. It is

estimated that a great deal of white-collar crime is undetected or, if detected, it is not

reported.

1.2.2 Corporate crime

Corporate crime deals with the company as a whole. The crime benefitting the investors

or the individuals who are in high positions in the company or corporation. The

relationship white-collar crime has with corporate crime is that they are similar because

they both are involved within the business world. Their difference is that white-collar

crime benefits the individual involved, and corporate crime benefits the company or the

corporation.

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1.2.3 State-corporate crime

The negotiation of agreements between a state and a corporation will be at a relatively

senior level on both sides, this is almost exclusively a white-collar "situation" which

offers the opportunity for crime. White-collar crime has become a priority of law

enforcement; however evidence shows that it continues to be a low priority.

When senior levels of a corporation engage in criminal activity using the company this is

sometimes called control fraud.

1.2.4 Public a victim of white collar crime

Common misconception about corporate crime and white collar time is that its effects

are mainly financial. However, they can cause harm to the general public, workers and

consumers. For example false claims made by pharmaceutical companies about their

products or the dumping of toxic wastes. Another good example includes the Hooker

Chemical Company dumping toxic waste into the abandoned Love Canal in Niagara

Falls and later selling the land after knowing of the problem but choosing not to warn

health officials. It was later sold to a private housing developer in the 1950’s and in the

1970’s the families starting experiencing major health problems such as miscarriages

and birth defects.

1.2.5 How workers/employees of a company can be victims of white collar crime

Some ways that employees of a company can become victims of white-collar

crime can be that workers are being exposed to the harms and risks of being

involved in a crime. Even if the workers are unaware of the crimes his or her

corporation is committing, this poses a threat to their job security. Essentially, if a

company is charged with a white-collar crime, such a fraud or embezzlement,

and loses copious amounts of money forcing the company to declare bankruptcy,

the employees are at risk of losing their jobs. Another harm making employees

victims of white-collar crime can be when employers are aware of a physical

harm that can affect their employees. An example of this danger can be depicted

with miners in Newfoundland who were exposed to Radon gas, which the

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company (and the Canadian government) were aware was a danger to people’s

health, yet there was nothing done to protect the employees.

1.2.6 Occupational Crime

Individuals who commit crime during the course of their employment roles. The

two most common forms are theft and fraud. Examples of occupational thefts are

removal by employees of job-related items from the workplace. There are

obviously varying degrees of theft ex. from a pencil to furnishings to a car. Most

employees do steal and the expense is high. An example of fraud is insider

trading. This occurs when an employee uses information not available to the

public to gain personal advantage over others in the buying and selling of stock.

1.3 Causes of White Collar Crime

1.3.1 Situational (Opportunity)

As the well known white-collar crime theorist, James Coleman, has noted, all

criminal behavior requires that two basic elements -- motivation and opportunity

-- must be brought together for a crime to occur.

He also claims that this doesn't necessarily create a dividing line between social–

psychological causes (having to do with motivation), and structural causes

(relating to opportunity). The two may be intertwined in the case of white-collar

(and other) crimes.

That is, an opportunity must somehow become psychologically relevant to a

potential offender, and the roots of motivation may be found in the culture of

society. Thus where such motivations come from is important. Similarly, the

origin of breakdowns in controls that would restrain such behaviors is equally

important. In India the breakdown of roles are very important as this is a single

and all reaching phenomenon in India.

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Individual personalities certainly play a role here, but it is important to understand

how persons construct such personal realities that ultimately guide their behavior

— good or bad. This is quite relevant to the study of white-collar crime, as most

people typically see criminals as possessing “different personalities” from

“normal” or conventional individuals. When the person is a white collar criminal,

however, such “psychological determinism” simply collapses. The criminal seems

to have the same conventional lifestyle and “personality” as the law-abiding

individual.

Sutherland pointed out that the psychological normality of white-collar

criminals argued against the psychological explanation of any crime. He said, “

The criminal behavior of businessmen cannot be explained by feeble-

mindedness or emotional instability. We have no reason to believe that General

Motors has an inferiority complex or that Aluminum Company of America has a

frustration–aggression complex”

1.3.2 Personality

Wheeler argues that such persons may be “risk seekers” who derive pleasure

from adding to their wealth without a real concern over the utility of such marginal

gains. The question of, “How much is enough?” is irrelevant. Their personalities

are characterized by greed; the more they have, the more they want. Most

persons would probably see this as a general explanation of most white-collar

crimes.

In contrast, however, Wheeler posits another motivation in some white-collar

crimes, which he labels “fear of falling.” Individuals characterized by this

personality trait are not greedy as much as they are afraid of losing their wealth

and status, which motivates them to commit white-collar crime.

1.3.3 The Culture of Competition

Most people cite economic reasons, which are tied to what Coleman calls the“

culture of competition,” for the motivations that lead to white-collar

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lawbreaking. This replicates in large part the statements of the classical school of

criminology (Jeremy Bentham and Cesare Beccaria), in that people will violate

the law when they believe that they will receive greater pleasure and less pain

than from other courses of action. Moreover, getting rich quick (making a “fast

buck”) may be a motivating factor in many white-collar crimes, but other financial

motivations may be present in others (for example, fear of losing what they have

legally gained.

Competition is seen as a healthy individual pursuit, rather than a negative or

selfish activity. Competition is seen as building individual character, and also

produces maximum benefits for the entire society. The most capable and

hardworking individuals (that is, the most competitive) are seen as the winners

and rewarded accordingly. This belief also allows the legitimation of inequality in

society: The poor are seen as the “losers” who occupy their position because

they are lazy or incompetent.

2 WHITE COLLAR CRIME IN INDIA

‘White-collar crimes account for enough violations of law. By comparison, the

instances of white-collar crimes are more then the conventional type of crimes

such as theft, burglary, and arson. The loss incurred through white-collar crimes

is far higher than that of the conventional type. In the American Context, it has

been estimated that losses from such crime may be as high as 200 billion dollars

every year. In India also, such type of crime on increase, but no attempts to

quantify it have been made, which shows the apathy towards curbing white collar

crime. Given the prevalence in India in almost anything and everything, it is likely

to be a percentage of the national GDP. That is the enormous amount of white

collar crimes committed in India.

Let us address the intricacies involved in white-collar crimes. The analysis of

White-collar crime will differentiate between individuals who steal, defraud and

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cheat in and out of an occupational context and those who commit the variety of

offences attributed to business corporations.

White collar crimes are to be considered as a global phenomenon to which India

is no exception. White collar crimes emerged in India with the advent of the

British colonisation during the period of industrial capitalism. Prior to that,

instances of men working with the District treasury embezzling with the money

kept under his safe custody or bribing practised among the officials were found.

Therefore, the white collar crimes were confined to this limit. Thus, the people

indulging in the white collar crimes then can to said to be mere ‘grass eaters’ the

people in the modern times have reached the stage of ‘meat-eaters’.

Thus the white collar crimes become phenomenon to be reckoned with industrial

revolution. Modern industrial capitalist economy which evolved with time became

complex in nature as it developed a growing commercial nexus among

insurance, banking, stocks and related corporate matters. This in turn, gave rise

to critical legal intricacies relating to property rights and other legal matters which

paved the way for the birth of a new class of professionals of advocates who in

the name of providing justice started abetting in the wrong and thereby pursued

their own narrow interest. A large number of advocates evolved who forget the

pious oath of serving the society and start looking for the legal loopholes and

concentrate mainly in helping out the rich entrepreneurs to grow richer. They

make extensive study to try out ways for maximum tax evasion for these rich

corporate personalities as well as for themselves. The white collar crimes

committed by these legal practitioners are not only confines in sorting out illegal

methods of tax-evasion. There are very frequent instances of unscrupulous and

unethical practises like that of fabricating false evidence, engaging professional

witnesses, thereby violating ethical standards of legal profession and dilatory

tactics in collusion with the ministerial staff of the courts.

Next to the instances of white collar crimes committed in the Indian society by the

lawyers, there lie the shameful illustrations of Magistrates and judges involved in

committing crimes. They in the name of interpreting the laws often act as the

protective shield for the goons having or not-having any political colour and allow

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them to go free whereas they should have been subject to deterrence. It is the

most unfortunate situation at the same time devastating, because here the

crimes are committed by those individuals who are being given by the State the

responsibility to ensure justice.

In India, the white collar crimes are so wide spread that it does not confine itself

in the legal arena. Similar unfortunate instances can be drawn from other

professions too, like that of medical practitioners, engineers, educationalists,

businessmen, politicians and the list goes on. The medical practitioners are often

found involved in issuance of false certificates, carrying out illegal abortions,

selling out sample drugs and medicine, even in some cases adulterated drugs

and medicines to the patients. Dilatory tactics are often adopted by them in

providing treatment to their patients with a mens rea to extract huge amount of

money, no matter the person has good practice. Some of the notorious instances

are like that of Nithari case, where the medical professionals put up before the

society the optimum level of brutal character they can reach for the crave of

making money. Misleading and fake advertisement claiming absolute cure is also

one of the frequent malpractices being carried out in the medical profession. The

problem lies in the fact is, they often escape punishment, since they cannot be

said to have violated the letter of law, but, by violating the spirit of law, they

commit crimes which are truly anti-social and creates enormous damage to the

public health and safely at large.

Speaking of the engineers’ role in having their role to play in white collar crimes,

we often find instances of underhand dealing with contractors, suppliers, passing

of sub-standard works and maintenance of bogus reports of the labour work.

They financially earn more for their low grade works from the contractors, than

they can earn for the genuine work. Therefore, many of them, out of the greed of

earning more and more, play dangerously with thousands of lives of the

individuals.

When the matter comes to the white collar crimes educational institutions do

come in the league to operate with impunity. A nastier role is played by the

private institutions who are least bothered in providing the education, but only

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concentrate of making business at the cost of the children’s future. Even rackets

operate in these institutions for procuring students to appear in the examinations

on the basis of manipulated eligibility certificates, thereby damaging the standard

of education in India. When it comes to the Governmental institutions, the

teachers and staffs of the institutions are often found to be involved in

unscrupulous practices, since they can hardly make fortune from the inadequate

salary they receive from the government. Teachers often drag the students for

taking private tuitions and even go to the extent of blackmailing them of ruining

their future, if they deny doing so.

These are only a handful of instances of white collar crimes practised in day to

day life by certain professionals in the course of their profession. The major role

in committing white collar crimes are played by the business tycoons and

politicians, whose greed and wants multiply with the more they acquire. In India,

whenever any major scandal comes to the media focus, a though investigation

always finds an unlawful involvement of political parties in it. So far as the

businessmen are concerned, their acts of white collar crimes go beyond count.

They are termed as the corporate criminals who more often than not are involved

in illegal contracts, combination and conspiracies of trade restraints, unfair labour

practices, selling of adulterated foods and drugs, bribing of public officials so on

and so forth. They take advantage of the corporate veil and indulge in a number

of crimes. the recent Satyam scam case is one of the worth-mentioning

illustrations, where it was seen how an individual, hiding himself in the veil of

incorporation, indulge in defrauding crores of money.

The white collar crimes are often master minded and are carried out in a planned

manner by technocrats in the form of scams, frauds, etc. facilitated by

technological advancements. In these types of offences not only the individual is

being with pecuniary loss but also, such offences like peddling drugs and

narcotic substances, counterfeiting of currency, financial scams are some of the

crimes which evoke serious concern and impact to the national security and

governance. Violation of foreign exchange regulations, and import and export

laws are frequently resorted to for the sake of huge profits.

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Another major white collar crime very common among the individuals, no matter

he/she belongs to the middle or upper strata of the society is that of evading

taxes. The complexity of the taxation laws provided a number of loopholes

through which many individuals tried to escape. A tax-evasion has known no

professional or class boundary in our country. Be it an engineer, doctor,

advocate, a business tycoon or a simple small industry trader-all has learnt the

trick of evading taxes. The main difficulty posed before the Income Tax

Department is to acquire true information of the real and exact income of these

professionals. It is often alleged that only an insignificant amount of their total

income is posed a income before the Income Tax Department and the rest

therefore goes into the circulation as black money. The frequent modifications in

the tax-laws of the country has been able to add very little to put a check on this

continuing menace which is throwing a great negative impact in the

Governmental revenue and thereby the growth of the country.

The Santhanam Committee Reportin its finding presented a clear picturesque

description that in India the white collar crimes so defined, are mostly rampant

among the businessmen, industrialists as well as corrupt officials and private

practitioners. Highlighting the magnitude of the crimes in India, the Commission

on “Prevention of Corruption” in its report quoted,

“The advancement of technological and scientific development is contributing to

the emergence of ‘mass society’ with a large rank of file and a small controlling

elite, encouraging growth of monopolies, the rise of the managerial class and

intricate institutional mechanisms. Strict adherence to high standard of ethical

behaviour is necessary for the even and honest functioning of the new social,

political and economic processes. The inability of all sections to appreciate this

need in full results in the emergence and growth of white collar and economic

crimes renders enforcement of all laws, themselves not sufficiently deterrent,

more-difficult. Tax evasion and avoidance, share-pushing, malpractices in the

share market and administration of companies, monopolistic control, usury,

under-voicing or over-voicing, hoarding, profiteering, substandard performance of

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contracts of constructions and supply, evasion of economic laws, bribery and

corruption, election offences and malpractices are some examples of white collar

crime.”

It was on the basis of the report of this Commission that a new chapter was

suggested to include into the Indian Penal Code, 1860 by making amendments

to the Act. The motive behind such suggestion was to bring white collar crimes

under the purview of the criminal law and at the same time broadly classify the

offences that can come under the purview of white collar crimes. The matter was

referred to the Law Commission by the Government of India for considering it.

However, the Law Commission disagreed with the proposal and observed that

such offences which are put under the banner of white collar crimes are to be left

to be dealt with by special and self-contained enactments which act as

supplement to the basic criminal law. The reason behind that was, as discussed

earlier, there have been a lot of debates regarding criminalising acts constituting

white collar crimes.

However, in the Report of the Vivian Bose Commission of Inquiry highlighted how

the industries indulge into white collar crimes such as fraud, falsification of

accounts, tampering of records for personal gains, tax evasion, so on and so

forth.

3 INFAMOUS SCANDALS

3.1 The Enron Scandal

The first major scandal of the first decade of 21st century is that Enron

Corporation, which has been called ‘one of the most intricate pieces of financial

chicanery in history and for investors in its stock and its employees. The Enron

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sandal did tremendous damage to the company created a crisis of investor’s

confidence the links of which has been seen since the great depression.

Enron was a $100 billion corporate empire that had more then 200,000

employees in 40 countries and controlled about one quarter of all trading in

natural gas and electricity in the United Status. The company poured millions of

dollars into political campaign and lobbyists arguing of further deregulation of

energy markets. The Enron hierarchy

expected the never-ending innovation and growth from its executive to feed this

monster enterprise. In response executives created imaginary markets, ‘paper

partnerships’ and phantom growth that enabled them to report profits that did not

exist and to hide debts hat did. Executives were accomplished at cooking the

financial books in many ingenious ways, which kept Enron’s stock prices rising

and thus their own compensation. Because mush of the competition received by

Enron’s executives was stock based, they had major incentives to make the

company look as good as possible to investors by reporting high profits.

3.2 The 2G Scam

This is also a case of political graft along with White Collar Crime where several

prominent Industrialists were involved. In 2007-08, when the government issued

122 new telecom licences, several rules were violated and bribes were paid to

favour certain firms. Several licences were issued to firms with no prior

experience in the telecom sector or were ineligible or had suppressed relevant

facts, CAG report said.

The violations cost the exchequer $39 billion in lost revenue, the auditor said,

equivalent to India's defence budget. The telecom ministry's process of issuing

licences "lacked transparency and was undertaken in an arbitrary, unfair and

inequitable manner," the auditor said. Police have accused Andimuthu Raja, the

then-telecom minister, of having taken bribes from two firms which are now the

local joint venture partners of Telenor and Etisalat .

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What was the fallout?

The report sparked political outrage and the main opposition Bharatiya Janata

Party all-but-shut an entire session of parliament demanding a special

parliamentary probe. Raja was forced to resign and was arrested over the report.

The telecom ministry is considering whether to cancel some 85 licences which

the audit report says were issued to firms which were ineligible for them. Many of

India's biggest business names have been questioned, including billionaires Anil

Ambani, chairman of Reliance ADA group, and Prashant Ruia, chief executive of

Essar Group. A parliamentary panel probing the scandal questioned Ratan Tata

as well as Anil Ambani.

What does it mean for politics?

Singh and the ruling coalition have been weakened by the events, and the BJP is

seen as having regained political momentum it had lost after defeat in the 2009

federal elections. The Supreme Court criticised Singh for not acting quickly

enough against Raja, a rare censure that was picked up by the BJP to accuse

the government of shielding corrupt officials. The attacks have nearly paralysed

the government but it is not in danger of collapsing as its slim majority is not

expected to see defections by coalition partners and no one, including the BJP,

wants a federal election now.

The scandal has also touched Raja's regional DMK party, a leading ally of the

ruling Congress party. Police say some of the bribes were routed through the

DMK's television channel, controlled by the wife and daughter of the DMK party

chief. DMK rules the large southern Tamil Nadu state, which goes to polls in

April. The corruption cases could affect the electoral performance of the DMK-

Congress coalition there.

What does this mean for investment in India?

While corruption itself has been largely shrugged off by investors, the regulatory

uncertainty from the review of past government decisions is a source of concern

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to investors. The benchmark Mumbai stock index ended the March quarter as the

world's worst performer, weighed down in part by worries over fallout from a

spate of scandals. If the telecom ministry does decide to cancel some or all of the

85 licences it is scrutinising, questions will be raised on whether foreign investors

can trust Indian government contracts. The licences under review include those

now held by Telenor and Etisalat's local ventures. It is too early to know whether

licences will be cancelled, but pressure will be on the government not to do so

because operators have invested millions of dollars in rolling out networks and

cancelling them will inconvenience subscribers. The telecom ministry is also

mulling imposing charges for spectrum it granted to telecom firms in the past and

has levied fines on newer firms for not rolling out networks quickly enough. For

years, India gave operators spectrum beyond contracted levels free of cost as

they added subscribers. If the spectrum charges are imposed, market leaders

Bharti Airtel and Vodafone would have to pay hundreds of millions of dollars in

back-charges. For newer entrants, hefty fines could strain their finances and

force them to exit.

Decision : Pending

4 JUDICIAL RESPONSE - LEGISLATION

The judiciary has taken a serious note of the growing intensity of the white-collar

crimes. For the sake of convenience the judicial response in this regard can be

classified under the following there headings:

Judicial response under the Prevention of Corruption Act, 1988,

Judicial response under the Prevention of Food Adulteration Act, and

Judicial response under other statutes dealing with white- collar crime.

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4.1 Prevention of Corruption Act

The strict judicial vigilance over corruption is reflected in various judgments of the

Apex Court.

In J.Jayalalitha v U.O.I the Supreme Court observed: “The legislature has

enacted the Act and provided for speedy trial offences punishable under the Act

in public interest as it has become aware of rampant corruption amongst the

public servants. While replacing the 1947 Act by the present Act, the legislature

wanted to make the provisions of the Act more effective and also to widen the

scope of the act by giving a wider definition to the term “public servant”. The

reason is obvious. Corruption corrodes the moral fabric of the society and

corruption by public servants not only leads to corruption of the moral fabric of

the society but is also harmful to the national economy and national interest, as

the persons occupying high posts in government by misusing their powers due to

corruption can cause considerable damage to the national economy, national

interest and image of the country”.

In State of Maharashtra v Prabhakar Rao the Supreme Court observed that the

definition of public servant u/s 21 of I.P.C is of no relevance under the Prevention

of Corruption Act. This means that a person may be held liable under the Act

even if he is not a public servant within the meaning of section 21 of I.P.C.

In Govt of A.P v P.V.Reddy the Supreme Court observed: “The Prevention of

Corruption Act, 1988 was brought into force with the avowed purpose of effective

prevention of corruption and bribery. The said Act, with a much wider definition of

“public servant” was brought into force to purify public administration. Under the

repealed Act of 1947, the definition of public servant was restricted to public

servant as defined in Section 21 of I.P.C. In order to curb effectively bribery and

corruption not only in government establishments and departments but also in

other semi-governmental authorities and bodies and their departments where the

employees are entrusted with public duties, a comprehensive definition of public

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servant has been given in section 2(c) of the Act. When the legislature has given

such a comprehensive definition of public servant to achieve the purpose of

punishing and curbing growing corruption, it would be appropriate not to limit the

contents of the definition clause by construction which would be against the spirit

of the statute. The definition of public servant, therefore, deserves a wide

construction. The court is required to adopt a purposive approach as would give

effect to the intention of the legislature. Employees or servants of a cooperative

society, which is controlled or aided by the government, are covered by the

Section 2(c) (iii) of the Act and hence are public servant”.

In Ram Narayan Poply v C.B.I the Supreme Court, defining the object and

purpose of the Special Court (Trial of Offences Relating To Transactions in

Securities) Act, 1992 observed that the Act was promulgated with a view to

recover public monies lost by certain banks and financial institutions in securities

where such losses arose as a result of such transactions. The Court further

observed: “It is equally trite to state the contrary proposition that where there are

no losses at all, the institution of the special court was wholly unnecessary and

the special court was not to try such transactions even if they amounted to some

technical offences”.

The court further defined the purpose of section 13(2) of the POCA by

mentioning that it intends to deal with aberrations of public servants. The court

held that he appellant in furtherance of criminal conspiracy, in his capacity as a

public servant abused his position by causing and/or allowing MUL’s funds to be

utilized for the wrongful gain of appellant 5. Thus, the court held that the

provisions of section 13(1) (c) read with section 13(2) are clearly applicable.

Referring to the nature and the adverse affect of white collar crimes, the court

observed: “The offences in these cases were not of conventional or traditional

types, the ultimate objective was to use public money in a carefully planned

manner for personal use with no right to do it. The cause of the community

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deserves better treatment at the hands of the court in the discharge of its judicial

functions. The community or the State is not a persona non grata whose cause

may be treated with disdain. The entire community is aggrieved if the economic

offenders who ruin the economy of the State are not brought to book. A murder

may be committed in the heat of moment upon passions being aroused. An

economic offence is committed with cool calculations and deliberate design with

an eye on personal profit regardless of the consequences to the community. A

disregard for the interest of the community can be manifested only at the cost of

forfeiting the trust and faith of the community in the system to administer justice

in an even handed manner without fear of criticism from the quarters which view

white collar crime with a permissive eye, unmindful of the damage done to the

national economy and national interest. Unfortunately in the last few years, the

country has seen an alarming rise in the white collar crimes, which has affected

the fiber of the country’s economic structure. These cases are nothing but private

gain at the cost of public and lead to economic disaster”.

The Supreme Court, however, preferred to apply “reformative theory” instead of

the punitive theory of punishment in this case. The court observed: “Normally, in

cases involving offences which corrode the economic stability are to be dealt with

sternly. However, considering the fact that the occurrence took place a decade

back, and the trial has spread over a few years, and the death of one of the

accused, we feel custodial sentence for the period already undergone would

meet the ends of justice. While fixing the quantum of sentence, we have duly

considered the fact that in the instant case the amount has been paid back”.

In Vivek Gupta v C.B.I the Supreme Court considered the scope of the

jurisdiction of special court dealing with corruption cases. The court held that

even if the appellant was not charged under the POCA but under sections 120-

B/420 of I.P.C, the special judge has the power to try the appellant with other co-

accused who, in addition to the said sections, were also charged under section 3

and 4 of POCA. The court, applying the provisions of sections 3and 4 of the Act

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and section 220 and 223 Cr.P.C, held that such recourse is available to the

special court.

In State of M.P v A.K.Gupta the Supreme Court dealt with criminal misconduct

committed by the public servant while holding their offices. The court observed:

“Section 13 of the Act deals with various situations when a public servant can be

said to have committed criminal misconduct. Section 13 (1) (e) is applicable

when the public servant or any person on his behalf, is in a possession or has, at

any time during the period of his office, been in possession for which the public

servant cannot satisfactorily account pecuniary resources or property

disproportionate to his known source of income. Section 13 (1) (e) corresponds

to section 5 (1) (e) of the POCA, 1947 (old Act). But there have been drastical

amendments. Under the new clause, the earlier concept of “known source of

income” has undergone a radical change. As per the explanation appended, the

prosecution is relieved of the burden of investigating into “source of income” of

an accuse to a large extent. The prosecution cannot be expected to know the

affairs of an accused person. These will be matters “specifically within the

knowledge of the accused”, within the meaning of section 106 of the Indian

Evidence Act, 1872. The legislature has advisedly used the expression

“satisfactorily account”. The emphasis must be on the word “satisfactorily” and

the legislature has, thus, deliberately cast burden on the accused not only to offer

a plausible explanation as to how he came by his large wealth, but also to satisfy

the court that his explanation was worthy of acceptance”.

In R.Sai Bharathi v J.Jayalalitha the Supreme Court observed: “The criminal law

merely prescribes the minimum standards of behaviour. While in public life, those

who hold high offices should not take shelter under the umbrella of criminal law

but stand by high probity. Further, criminal law is meant to deal with criminals

ordinarily. Persons in public life are expected to maintain very high standards of

probity, and, particularly, when there is likely to be even the least bit of conflict of

interest between the office one holds and the acts to be done by such person,

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ought to desist himself from indulging in the same. Such standards of behaviour

were scrupulously observed in the earlier days after independence, but those

values have now dwindled and instances of persons holding high elective offices

indulging in self-aggrandizement by utilizing government property or in

distribution of the largesse of the government to their own favourites or for certain

“quid pro quo” are on the increase. We have to strongly condemn such actions”.

In this connection it is essential to refer the offence as specified under section

169 of I.P.C. Section 169 specifies that for the completion of offence under

section 169 the following conditions must be fulfilled:

(1) the person should be a public servant,

(2) in such capacity he is legally bound not to purchase or bid for “certain

property”, and

(3) either in his name or in the name of another or jointly, or in shares with

others.

The offence u/s 169 is incomplete without the assistance of some other

enactment, which imposes the legal prohibition required. Section 481 of the

Cr.P.C, Section 189 of the Railways Act, 1989 and Section 19 of the Cattle

Trespass Act, 1871, and instances of that nature in several enactments are

available in which persons mentioned therein shall not directly or indirectly

purchase any property at a sale under those Acts. It is fairly clear that prohibition

should flow from a law as ordinarily understood, that is to say, an enacted law or

a rule or regulation framed under such law. The rules and administrative

instructions governing the public servants holding the civil posts have no

application in this case.

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4.2 Prevention of Food Adulteration Act

The object and purpose of the POFAA (Act) are to eliminate the danger to human

life from the sale of unwholesome articles of food. It is enacted to curb the

widespread evil of food adulteration and is a legislative measure for social

defence. It is intended to suppress a social and economic mischief- an evil that

attempts to poison, for monetary gains, the very sources of sustenance of life

and the well being of the community. The evil of adulteration of food and its

effects on the health of the community are assuming alarming proportions. The

offence of adulteration is a socio-economic offence. The construction appropriate

to social defence legislation is, therefore, one, which would suppress the mischief

aimed at by the legislation and advance the remedy. The offences under the Act

are really acts prohibited by the police powers of the State in the interests of

public health and well-being .The prohibition is backed by the sanction of a

penalty. Intention or mental state is irrelevant.

In State of Orissa v K.R. Rao the Supreme Court defined the scope of the

prohibition against selling of adulterated food. The court observed: “In the

absence of any provision, express or necessarily implied from the context, the

courts would not be justified in holding that the prohibition was only to apply to

the owner of the shop and not to the agent of the owner who sells adulterated

food. The Act is a welfare legislation to prevent health hazards by consuming

adulterated food. The mens rea is not an essential ingredient. It is a social evil

and the Act prohibits commission of the offence under the Act. The essential

ingredient is sold to the purchaser by the vendor. It is not material to establish the

capacity of the person vis-à-vis the owner of the shop to prove his authority to

sell the adulterated food exposed for sale in the shop. It is enough for the

prosecution to establish that the person who sold the adulterated article of food

has sold it to the purchaser”.

In Delhi Administration v Manohar Lal the supreme Court held that the High

Court, in exercise of its revisional jurisdiction, has no power to itself decide to

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commute the sentence imposed under sections 16/7 of the Act and direct the

convict to deposit in trial court a specified sum as fine and inform the government

of such deposit for formalizing the matter by passing appropriate order u/s 433(d)

of Cr.P.C.

In State of H.P v Narendra Kumar the Supreme Court observed: “The occurrence

of adulteration took place nearly two decades back, and the courts below

acquitted the accused, though erroneously. Therefore, keeping in view the nature

of violation and the peculiar facts and circumstances of the case while

sentencing the accused to undergo 6 months RI and fine of Rs 1000, we make it

clear that if the accused moves the appropriate government to commute the

sentence of imprisonment the same may be considered subject to such

conditions or terms as the government may choose to impose. For a period of 3

months the accused need not surrender to undergo sentence. During this period

it shall be open to him to move the appropriate government for commutation. The

fate of the order of commutation, if any, shall be operative. If no order in the

matter of commutation is passed by the appropriate government, the accused

shall surrender to serve the remainder of the sentence”.

4.3 Other statutes

There are other statutes as well which deal with white collar crimes. For instance,

the Conservation of Foreign Exchange and Prevention of Smuggling Activities

(COFEPOSA) and Smugglers and Foreign Exchange Manipulators (Forfeiture of

Property) Act, 1976(SAFEMA) also deal with white collar crimes.

In Safiya v Govt of Kerala the Supreme Court observed that the court could not

lost sight of the fact that those who commit economic offences do harm to the

national interest and economy. The High Court came to the conclusion that the

detenue has violated the provisions of the law (COFEPOSA) and his activities

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are not in the larger national interest. The court should be slow to come to the aid

off the detenue in such cases.

Similarly, in Kesar Devi v U.O.I the Supreme Court while upholding the forfeiture

of the properties of the offender observed: “The combined effect of section 6(1)

and section 8 is that the competent authority should have reasons to believe that

properties ostensibly standing in the name of a person to whom the Act applies

are illegally acquired properties, he can issue a notice to such person.

Thereafter, the burden of proving that such properties are not illegally acquired

properties will be upon the person to whom notice has been issued. Under the

scheme of the Act, there is no requirement on the part of the competent authority

to mention or establish any nexus or link between the money of the convict or

detenue and the property sought to be forfeited. In the present case, the

appellant is the wife of the detenue and she has failed to establish that she had

any income of her own to acquire the three properties. In such circumstances, no

other inference was possible except that it was done so with the money provided

by the husband”.

5 ANALYSIS OF DATA

The Empirical Research Methodology was used and the survey was done with approximately twenty people.

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Analysis: A more than ninety percent of the participants have indicated the seriousness

of white collar crime in India and the threat it poses to society. This indicates an

awareness of society about the extent and consequences of white collar crime.

Analysis: A near overwhelming percent of the participants have indicated the extent of

white collar crime in India is more than that of the street crimes. Indicates general

populace is aware of the problem it poses to society and the extent to which the

problem has spread.

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Analysis: Respondents opine that the most frequently overpaying and bribing affect

them followed by assault and theft. This also suggests that populace is more generally

falling victim to white collar crime than to street crime.

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Analysis: Respondents opine overwhelmingly that promoters vanishing after collecting

funds from investors cannot be done without the knowledge of regulator. This again

strengthens the theory that regulator and unscrupulous promoters are hand-in-glove.

This seems to reflect the same story as in question 8 where the authorities themselves

are facilitating white collar crime.

Analysis: Police seem to be completely (100%) ineffective in dealing with white collar

crime. 100% tells a significant story. This reflects the sentiment in question 8 where

participants opine that police is an active participant and facilitator for white collar

crimes.

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Analysis: Respondents opine that the most frequently overpaying and bribing affect

them, followed by assault and theft. This also suggests that populace is more frequently

falling victim to white collar crime than to street crime.

Analysis: The net majority overwhelmingly opine that current statutes for punishments

and fines are not enough to serve as any deterrent to curb White Collar Crime. An

organisation that deals with Crores of Rupees and people holding key positions to deal

with organizations money will never find the punishments proportionate to the gains of

white collar crime. As such it makes business sense to indulge in white collar crime and

pay the paltry fine and punishment if found guilty. This process actually makes people

look smart and intelligent to be able to deal in white collar crime thus fuelling the

individual’s monetary, self actualization and mental needs. The are looked up in society

with respect. Fines need to be defined as four to five times the sum involved of notional

gain to be of any deterrent

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Analysis: Police seem to be hand-in-glove according to an overwhelming majority. This

response makes sense and is in line with question 4 where the authorities are

themselves participating and facilitating white collar crime.

Analysis: Majority has opined that white collar crime persists in more than 75% of the

corporate and an overwhelming majority 87% opines that more than half the corporate

commit white collar crimes. These are dangerous signals that convey that our business

environment in not trustworthy. Trust is fundamental to the well being of any economy

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and these numbers spell doom for business prosperity in the long run. No wonder most

of the best recalled brands are foreign brands in India.

Analysis: The near uniform distribution shows how white collar crime is affecting their

day to day life. Some of the respondents gave further examples of parking fees, school

donations etc to demonstrate the deep extent to which lives are affected by white collar

crime.

Survey available online at http://www.surveymonkey.com/s/3T7VP2S

http://www.surveymonkey.com/s/3T7VP2S

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6 CONTROL POLICIES TO BE UNDERTAKEN TO

ERADICATE WHITE COLLAR CRIMES

As has been studied so far, white collar crimes are not consequences of any

drive of necessity. It is simply greed for multiplying wealth and to retain so called

meaningless status in the society by pursuing rivalry with the competitors. These

people indulging themselves in these activities are to be considered to the

leeches, sucking blood of the society and in turn creating grave hindrances to the

progress of the society. Since their acts rarely affect an individual directly, these

are often ignored of by a common mass and thereby no single individual takes

the pain of prosecuting against the offender. But it must not be forgotten that

these crimes and criminals are slowly and steadily spreading their wings towards

the society at large and much wrong has already done by now. Therefore, there

is an immense need to curb it making no waste of time; otherwise it might totally

paralyze and ultimate ruin the society.

The biggest hindrance that lays in the prevention of white collar crimes is the lack

of public awareness. Since the individuals involved in these acts, do not

generally affect a single individual, an urge of eradicating them, do not usher.

Moreover, white collar crimes are yet not considered to be as grave as that of

traditional crimes, so to it’s certain characteristics as mentioned earlier. Though

they are likely to take shape of heinous crimes in times to come, yet there lie

certain obstacles in considering them at par with traditional crimes. The acts

coming under the purview of white collar crimes cannot be termed as crimes in

the strict sense of term. Therefore apart from having the stringent penal or

regulatory laws for deterring the persons involved in them, there is a first and

foremost need of raising public awareness regarding the issues. The government

has a comprehensive role to play in doing so through media or by initiating task

forces who would act as watch dogs. Proper and methodical string action should

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be used randomly so as to catch the individuals involved in the white collar

crimes red-handed.

7 CONCLUSION

White collar crime is something nearly everyone has to deal with today in India.

The complete ineffectiveness of the police machinery and the judiciary is dealing

with white collar crime not only spells doom to the economy but also lowers the

quality of life of the average Indian. From the national perspective intelligent and

productive children of the soil are sucked up into this grind of corruption, that they

cannot bring about innovation and reforms necessary to keep India progressive.

Our economies and systems are collapsing & drowning into white collar crime. If

the rot is not stemmed early our system will come to a grinding halt like

Afghanistan. Fed up with the state of affairs in the country and jobs scene, bright

Indians have already made foreign countries their safe haven.

Therefore, to conclude, it can be inferred that whatever reasons of justifications

are there for the methods used for the control of white collar crimes, the

ambivalence of the social response to this sort is so related to wider social

factors which have both objective and subjective dimensions. As has been so

mentioned a more subjective source of ambivalence in the social response to

white collar crimes is the assumption that there is less public concern about

these behaviours so termed as white collar crimes, and therefore there is a less

support for severe sanctions than in the cases of crimes which are traditional

street crimes. But even if there was greater public ambivalence towards white

collar crimes in comparison to the traditional crimes, writers such as Box has

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regarded this as a further challenge ‘to sensitize people to not seeing processes

in which they are victimised disasters or accidents.’

Therefore, the motto should always be prevention is better than cure. Since the

acts involved defrauding public faith and belief, public as a whole mass should

come forward to protect the whole society from these greedy people who are

destroying the ethics and morality of the society slowly and slowly for their sole

aim of pursuing narrow self interest. The general sentiment in India is that if

someone indulges in white collar crime, even those people who are aware of it

hardly take any steps due to the following

1. The singular loss to them is not significant.

2. If they complain or take action, they will look like fools, while those who

adjust and comply in the pretext of ‘duniyadaari’ appear the smarter lot. It

also appears foolish to even support those who fight. The general

perception is be stay away and ‘appear smart’.

This sentiment of appearing ‘smart’ by refraining from fighting white collar crime

should change polarity. The common masses should have the intellect to fathom

that it is actually the ‘pinnacle of foolery’ to comply and participate into the

demands to white collar crime.

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8 REFERENCES

8.1 Webliography

http://india.indymedia.org

http://jurisonline.in/2011/02/white-collar-crimes-in-india/

http://en.wikipedia.org/wiki/White-collar_crime

http://learn.uci.edu/oo/getDemoPage.php?

course=OC0899020&lesson=3&topic=1&page=1

8.2 Bibliography

Indian Penal Code, 140(2010).

http://learn.uci.edu/oo/getDemoPage.php?course=OC0899020&lesson=3&topic=1&page=1

http://learn.uci.edu/oo/getDemoPage.php?course=OC0899020&lesson=3&topic=1&page=1

http://en.wikipedia.org/wiki/White-collar_crime

http://jurisonline.in/2011/02/white-collar-crimes-in-india/

http://india.indymedia.org/

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