Criminal courts in this respect can be contrasted with

Criminal liability of directors in
Indian Company law arises at two levels. Companies are made criminally liable
for the offences committed by its employees within the scope of their
employment. Further, certain key employees of the company are also made
criminally liable for the offences of the company. The first kind of vicarious
criminal liability has not created much controversy in India. Indian courts
have upheld the notion that companies can be held vicariously liable for the
offences committed by their employees, and it is no defence to argue that the
relevant statute imposes only a custodial sentence on the offenders.

The situation regarding the
second kind of vicarious criminal liability, what has been termed as special
vicarious liability in this essay, is more complicated. Where there is no
legislation providing for special vicarious liability, Indian courts have
refused to hold the directing minds of companies vicariously liable for the
crimes committed by their companies. The cautious attitude of the Indian courts
in this respect can be contrasted with the U.S. Supreme Court cases following
the so-called Park doctrine that makes corporate officers in a responsible
relationship to the activities leading up to the crime committed by a company
vicariously liable for the same. However, the Park doctrine, if interpreted as
a negligence standard of criminal liability, is not strictly a case of
vicarious liability. Indian statutes have a long history of imposing special
vicarious liability for a number of offences relating to tax evasion, money
laundering, securities related offices and corporate fraud. Corporate officers
are statutorily liable for their company’s offences if they are in charge of
and responsible to the company for the conduct of the business of the company.
This is a case of strict vicarious liability because no particular wrong doing
is required of the corporate officers. Their liability is based on the powers
and responsibilities assigned to their positions in the company. Unlike the
strict vicarious liability provisions, this kind of liability requires some
wrong doing on the part of the corporate officer, although the wrong doing
required has a low threshold (for example, consent is sufficient). Indian
courts have interpreted the special vicarious liability provisions quite
strictly and have pointed out that even if the corporate officer is formally
responsible to the company for the conduct of the business of the company, the
prosecution has to prove that in fact the corporate officer was in charge of the
overall (not merely one part of the business) day to day business of the
company. This is likely to be a high threshold and would, in all probability,
cover only the top management of the company such as the managing director and
the whole-time directors. Very recently the Companies Act, 2013 has brought in
harsher provisions regarding the vicarious criminal liability of corporate officers.
Instead these statutes impose liability on the corporate officers for the
offences committed by the company only if they have consented to or connived in
the commission of the offences or their negligent behaviour has led to the
commission of the offences. However, UK Courts have interpreted this provision
in such a way that the position of a corporate officer would in most instances
be the single most important factor in determining his vicarious liability.
Special vicarious liability for corporate management continues to raise
questions about the reach of criminal law.

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We conclude that, none of the
three situations discussed are ideal. The first approach, pioneered by the U.S.
Supreme Court, imposes vicarious criminal liability as a judge made doctrine,
which is too precarious a foundation to rest the onerous consequences that
would ensue for the corporate officers if they are held liable for the offences
committed by their companies. The second approach, enunciated in the most
recent Indian legislation on corporate law, imposes criminal sanctions
primarily based on the positions occupied by persons employed by companies.
Such position-based liabilities might result in innocent directors being held
liable for the misdeeds of rogue employees. The third position adopted by UK
legislation is to move away from position responsibility and focus on the wrong
doing of directors but the UK Courts have interpreted the legislation in such a
way that the test of wrong doing would be inevitably fulfilled if a corporate
officer occupied a responsible position in the company. Ultimately, special
vicarious liability suffers from an irredeemable violation of natural justice:
corporate officers are potentially subject to criminal liability for offences
with which they would at most have only a remote connection based essentially
on the fact that the perpetrator and the corporate officer happened to have a
common employer. The Law Commission’s recommendations that the special
vicarious liability provisions in the POCA bill be deleted as they impose
unfair legal consequences on corporate officers are steps in the right
direction. The government must consider doing away with similar or identical
provisions in other statutes as well.

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