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Although considerable debate surrounds society’s increasing reliance on criminal liability to

regulate corporate conduct, few have questioned in depth the fundamental basis for imposing
criminal liability on corporations. A generous and elevated mind is distinguished by nothing
more certainly than an eminent degree of curiosity; nor is that curiosity ever more agreeably or
usefully employed, than in examining the laws and customs of foreign nations.

Corporate law abounds with legal fictions, commencing with the notion of a corporation, which
is itself a creation of the State. One legal construct that is commonplace in corporate law is that
governing criminal corporate liability. Under current federal law, a corporation, no matter how
large or small, is criminally liable if a member of that societal construct commits a crime within
the scope of employment and at least in part with the motive to benefit the company. The theory
that has evolved is simple and seemingly logical: a corporation, being merely a person in law
only, and not a real one, can act only through its employees for whom it should be held
responsible. Thus, if criminal corporate liability is to exist at all, then the corporation must be
responsible for the actions of its employees through which it acts.

In a company has none of features that characterize a living person, a mind that can have
knowledge or intention or be negligent. But company, being a body corporate can sue and be
sued in its own name. In the statutes defining crimes, the prohibition is frequently directed
against any person who commits the prohibited act, the endorsement of criminal liability of
corporations has largely been a twentieth century judicial development, influenced by the
“sweeping expansion” of common law principles. The majority of theories of corporate criminal
liability are typical of common law developments; they have been constructed on a case-by-case
basis. Despite their importance, these theories have proved to be ineffective, for their lack of
strong theoretical basis and their individualistic roots. Examples of these models are the agency
theory and, in a more elaborate form, identification and aggregation theories. The corporate
personality of a company is different and separate from the promoters, directors or owners of the
company. This is a widely known principle in law and has its source in the celebrated case of
Solomon v. Solomon. In this case, the Court held that the corporate entity is different from the
people who are in the business of running of the company. The misuse of this principle led to
“Lifting of the Corporate Veil” wherein the shareholders or creditors of the company are
protected if the company is engaged in any fraud or other criminal activities. The imposition of
criminal liability is only one means of regulating corporations. There are also civil law remedies
such as injunction and the award of damages which may include a penal element. Generally,
criminal sanctions include imprisonment, fines and community service orders. A company has
no physical existence, so it can only act vicariously through the agency of the human beings it
employs. While it is relatively uncontroversial that human beings may commit crimes for which
punishment is a just desert, the extent to which the corporation should incur liability is less clear.
Obviously, a company cannot be sent to jail, and if a fine is to be paid, this diminishes both the
money available to pay the wages and salaries of all the remaining employees, and the profits
available to pay all the existing shareholders. Thus, the effect of the only available punishment is
deflected from the wrongdoer personally and distributed among all the innocent parties who
supply the labour and the capital that keep the corporation solvent.
Using the civil law

With the lower burden of proof and better case management tools, civil liability is easier to prove
than criminal liability, and offers more flexible remedies which can be preventative as well as
punitive. But there is little moral condemnation and no real deterrent effect so the general
management response may be to see civil actions as a routine cost of business which is tax

Using Criminal laws

Most jurisdictions use criminal and civil systems in parallel, making the political judgment on
how infrequently to use the criminal law to maximize the publicity of those cases that are
prosecuted. While others enact specific legislation covering health and safety, and product safety
issues which lay down general protections for the public and for the employees. The difficulty of
proving a mens rea is avoided in the less serious offences by imposing absolute, strict liability, or
vicarious liability which does not require proof that the accused knew or could reasonably have
known that its act was wrong, and which does not recognize any excuse of honest and reasonable
mistake. But, most legislatures require some element of fault, either by way of an intention to
commit the offence or recklessness resulting in the offence, or some knowledge of the relevant
circumstances. Thus, companies are held liable when the acts and omissions, and the knowledge
of the employees can be attributed to the corporation. This is usually filtered through an
identification, directing mind or alter ego test which proves that the employee has sufficient
status to be considered the company when acting. The scope of corporate criminal liability in
India is very broad. A corporation may be criminally liable for almost any crime except acts
manifestly requiring commission by natural persons, such as rape and murder. Similarly, the
standards that courts use to attribute liability to a corporation are easily satisfied. Corporate
liability in the India is based on the imputation of agents’ conduct to a corporation, usually
through the application of the doctrine of respondeat superior. Under this doctrine, three
requirements must be met in order to impose liability on a corporation. First, a corporate agent
must have committed an illegal act (the actus reus) with the requisite state of mind (the mens
rea). If a particular agent, regardless of rank in the corporation, had the necessary state of mind,
this mens rea can be imputed to the corporation. Alternatively, mens rea can be shown “on the
basis of the ‘collective knowledge’ of the employees as a group, even though no single employee
possessed sufficient information to know that the crime was being committed.” Second, the
agent must have acted within his scope of employment. The scope of employment includes any
act that “occurred while the offending employee was carrying out a job-related activity.” In fact,
this requirement is so broad that courts may hold corporations liable even when corporations
have forbidden the wrongful activities. Finally, the agent must have intended to benefit the
corporation. Under this easily met standard, the employee need not act with the exclusive
purpose of benefiting the corporation, and the corporation need not actually receive the benefit

Procedural Characteristics

Right to a jury trial may, arguably, be available to corporate defendants.216 Assuming that jury
trials are more expensive than nonjury trials due to jury selection, sequestering, and other costs, a
criminal case will generally be more costly to prosecute than will a civil case. It is not clear that
these extra costs are justified. There is no controversy when fine is only punishment given under
any statute. There is also no lis when statute entrusts the court with discretion to inflict fine or
imprisonment, as in this case court shall inflict only fine on company. Because a company being
a Juristic person cannot obviously be sentenced to imprisonment as cannot suffer imprisonment.
Judicial controversy lies in that situation when statute prescribes mandatory imprisonment with
fine as a punishment for an offence.

The Delhi High Court, in Vishnu Prakash Bajpai v. SEBI, seems to have widened the scope of
the vicarious liability of persons for offences by companies, under section 27 of the Act. The
issue came before the Court by virtue of a petition for quashing of criminal proceedings, under
section 482 of the CrPC filed by Mr. Bajpai. The crux of the matter was the level of involvement
required to be established in order to render a person vicariously liable under section 27 of the

Wholesale adoption of vicarious liability agency principles flies in the face of the precepts that
govern criminal liability. Curtailing the current practice of imputing the acts and intent of an
employee to the employer finds support in the traditional goals of the criminal law as well as in
Supreme Court interpretations of certain civil statutes, which has led, remarkably, to a narrower
interpretation of corporate vicarious liability in certain civil contexts than in criminal cases.
Notably, since the Supreme Court has yet to address the proper scope of vicarious liability in
criminal corporate cases, examining the first principles of the criminal law and Supreme Court
precedent in civil cases is particularly appropriate in assessing the current scope of criminal
corporate liability articulated by the federal appellate courts. Large multinational corporations
have come to dominate the national and global economic scene. The scale of their operations is
enormous. The largest have grown into enterprises of astonishing magnitude that in their
economic dimensions are fully comparable to nation states.

Corporate criminal liability is an institution of considerable antiquity. However, there is little

understanding of what, if anything, it is designed to achieve. The historical development of
corporate criminal liability suggests that it may have arisen in order to use public enforcement
and later developed to exploit the greater information-gathering powers it possessed relative to
corporate civil liability. However, as time passed, corporate civil liability acquired a public
enforcement apparatus and made strong pre- litigation information-gathering possible. Thus, the
question has become whether corporate criminal liability serves any purpose now. From the
above analysis, it is clear that ‘corporate criminal liability’ is not an alien term. This category of
liability existed since time immemorial. However, the legislature kept its mouth shut when the
question of imposing punishment arose with respect of corporate liability. With the evolution of
various theories, the most vital issue with regard to corporate criminal liability settled i.e., the
issue of mens rea.