Author : Siddhi Gupta
INTRODUCTION:
An ounce of prevention is worth a pound of cure and in today’s era we find white collar crimes as sickening reality which is difficult crime to detect and prevent. Not every crime involves smoking the gun. Some crimes are committed under the nose of the victim without a single shot fired. White collar crime is nonviolent in nature and is done for the financial gain. These crimes are criminal acts that are nonviolent and financially motivated. These are committed by the government professionals and businessmen, through deceptive practices, for the purpose of financial gain. They are able to do so as they are able to access to large amount of money. These crimes are characterised by violation of trust, concealment of facts and deceit. White collar crime is often associated with the educated and affluent people ever since the term was coined in 1939 as a crime committed by a person of high statues and social sociability. In the decades since, range of white collar crime has expanded to a great extent, this is because of the advent of new technology and new financial products and arrangements that have inspired a host of white collar crime offenses .Federal bureau of investigation defines these crimes as including large scale fraud perpetrated by corporate or government institutions. In fact, the agency names these crimes in their highest enforcement priorities. This is because it not only brings significant loses to individuals but also to investors. Type of Whitecollar crime include wage theft, fraud, Ponzi schemes, insider trading, cybercrime, identity theft, and forgery.
Corporate crimes often overlap with white collar crime because majority of the individuals who act on behalf of the organization and also represent the interest of the organization are white collar professionals. Also it overlaps with organized crimes the criminals may set up corporations either for the purpose of crime or as a vehicle for rendering the proceeds of crime.
The first successful trial of financial scandal in independent India was the Mundhra Scam, in which hon’ble justice M.C Chagla made critical observation about the businessmen magnate Mundhra who wanted to build an industrial hub through the dubious ad deceptive ways. The deceptive practices that led to the downfall of ENRON is an example of corporate fraud, due to deceptive accounting practices and widespread use of loopholes the company hide debt from failed deals as a result the sum of debt reached to billions of dollars.
The companies act 2013 is the legislation that focuses to the issues related to the corporate fraud. Fraud in relation to the company or any corporate body has been defined in section 447 of the companies act 2013. In order to commit fraud, an act must be so done by one party so as to deceive another party in order to induce him to enter into a contract. This definition highlights the precondition to prove the intention of the person who has committed fraud. The person who is found guilty should be given the imprisonment of not less than 6 months which may extend to 10 years and also shall be liable to the fine which should not be less than the amount involved in fraud. Where the fraud in question involves public interest the imprisonment should not be less than 3 years. As the punishment for fraud is both imprisonment and fine, it is considered to be non-compoundable offence, that means no compromise is allowed, as a result full trial is held which ends with acquittal or conviction of an offender.it shows the commission of fraud has is serious offence in the eyes of law.
MEANING OF CRIME AND WHITE-COLLAR CRIME:
The White-Collar Crimes can be termed as “the crimes committed by a person of respectability and high social status in the course of their occupation”[1] this was coined by the professor Edwin H. Sutherland. The headway of innovation White Collar wrongdoing has become a worldwide and overall wonder and it drastically affects India on account of the expanding development in the monetary and modern areas. There has been a colossal test for the law implementation organizations as there is a bizarre and gigantic development in innovative explicit desk wrongdoings and such sort of violations can be submitted in any piece of the world by any individual haphazardly. The fundamental driver of clerical violations are ravenousness, seriousness, absence of unbending laws or nonattendance of laws identified with the hoodlums minding out such wrongdoings. Voracity is one of the primary driver of such violations as high class individuals win a decent sum yet their avarice doesn’t let them get fulfilled and they have and inclination to acquire more, which drives them to pick illicit approaches to have a high monetary addition. There is continually overarching an opposition among individuals for the endurance, a few people to fulfill their own covetousness and so as to remain ahead from that point peers they carry out wrongdoings and pick illicit strategies and approaches to acquire increasingly monetary additions. The most wasteful and the significant reason for such wrongdoings winning in India as well as overall is absence of exacting laws and the discipline given to the guilty parties of the wrongdoing. After the beginning of wrongdoings a significant number of the guilty party escape without getting captured and bearing such a disciplines in light of the fact that there are insufficient laws which managed which such sorts of desk violations. Also a significant number of them escape on account of high political associations and approaches which prompts uncalled for training of letting the guilty parties escape without getting rebuffed. By and large there are no observers for the offenses as they occurred in private generally. Even one and half century ago, Indian Penal code 1860, came into force and provided punishment for cheating under Section 420, criminal breach of trust Section 409, making and selling of adulterated drugs Section 274and 275, counterfeiting of coins Section 232, making and selling of fake goods Section 481, but what has changes is enormity of economic crimes threating to development in technology and better ways of carrying out such fraudulent activities and crimes in transportation or communication sector. Economic offenders have exploited weaknesses in almost all areas of economic activity and siphoned off thousands of cores.[2]
Not every crime involves smoking the gun. Some crimes are committed under the nose of the victim without a single shot fired. White collar crime is nonviolent in nature done for the financial gain. White collar crime are criminal acts that are nonviolent and financially motivated. These are committed by the government professionals and business men, through deceptive practices, for the purpose of financial gain. They are able to do so as they are able to access to large amount of money. These crimes are characterized by violation of trust, concealment of facts and deceit. White collar crime is often associated with the educated and affluent people ever since the term was coined in 1939 as a crime committed by a person of high statues and social socialiblity. In the decades since, range of white-collar crime has expanded to a great extent. This is because of the advent of new technology and new financial products and arrangements that have inspired a host of white -collar crime offenses. Administrative department of examination characterizes these wrongdoings as including huge scope misrepresentation executed by corporate or government establishments. Truth be told, the organization names these violations in their most noteworthy requirement needs. This is on the grounds that it brings huge loses to people as well as to financial specialists.
TYPES OF WHITE-COLLAR CRIMES:
Types of white- collar crime include wage theft, fraud, Ponzi schemes, insider trading, cybercrime, identity theft, and forgery. The following are the overviews of the crimes that are generally included to be an example of white -collar crime:
1-Securities fraud – Securities fraud is basically related to insider trading in which shares of company are traded to one’s own advantage through having access to confidential information. insider trading can be legal or illegal depending on when the insiders are making the profit.
2-Ponzi scheme – Ponzi scheme is a fraudulent way of accuring funds by promising high rates of return with little risk to business. The Ponzi scheme generates returns for early investors by acquiring of the new investors.
3-Money laundering – Money laundering is the illegal filtering of black money through a series of transactions designed to make the black money as a legitimate money. It is illegal because it allows the criminals to profit from crime.
4-Identity theft – Identity theft is a crime in which a criminal obtains key pieces of information of an individual in order to impersonate the third party. The information can be used to obtain credit, merchandise, or services in the name of the victim.in certain cases an imposter can create criminal records or leaving outstanding arrest warrants for the person whose identity has been stolen.
5-Tax evasion – Criminal Tax Evasion is a white- collar crime through which the perpetrators tries the evade the tax which they otherwise owe towards the government.it can range from simply filling the wrong credentials in the tax form to illegally transferring of the property so as to avoid tax obligations.
6-Self dealing – Corporate fraud also ranges from one or more employees of a company acting to enrich themselves at the loss of investors or other parties.
VARIOUS SECTORS BEING AFFECTED BY THE CORPORATE CRIMES:
1-Medical field– In this field white collar crime is generally committed by person belonging to medical profession by the issuance of wrong medical certificate, selling drugs and medicine to patients and illegal abortions. the supreme court has defined medical negligence to include overdose of medicine, not informing the patients about the side effects of the medicine.
2-Engineering– White collar crime in this field include using substandard and low grade raw material in the construction of buildings, roads. canals, dams etc. Resulting the danger for the safety of public at a large scale.
3-Educational institutions– White collar crime in this field have increased by a large degree. The activities involved in white collar crimes in this area includes-wrong and misleading prospectus, false recruitment, termination of services, problem in pay, unfair transfer in government schools and university etc. In case of Nidhi Kainv v. Madhya Pradesh[3] the supreme court held that using the unfair means in the examination led to disqualification of the same and principal of natural justice Audi Alterum must be followed.
4-Legal professionals– The white collar in legal field is widespread. The common legal and professional violation committed by lawyers and legal advisors are advising organized criminals, fabricating false evidence and aiding false claims.
THE MAIN REASONS OF WHITE -COLLAR CRIMES ARE-
1- Less impact on individuals.
2- Less enforcement drive from law and administration.
3- Legislators and law implementers belong to the same field to which occupational criminal belongs.
4- Less punishment and fine on individuals.
OBJECTIVES OF THE RESEARCH:
- To find out which all sectors are being affected by such crimes.
- To trace the psychological and sociological impact suffered by the victim due to such crimes.
- To study the laws pertaining to curb the White-Collar crimes in India.
- To suggest or to deduct stringent ways in which such crimes can be controlled or restricted.
LITERATURE REVIEW:
In this bit of work the data has been taken from different writing and different sources have been alluded to. The sources alluded all gave knowledgeable data about the point. The writer has additionally alluded to different online sources, for example, legitimate database, online articles. Scientist has additionally alluded the International Handbook of White-Collar and Corporate Crime, this book clarifies the importance, types and case laws. It is a totally eminent aggregation of articles on desk wrongdoing and its control. Inside and out, this volume is very sure to impact the insightful comprehension of professional wrongdoing and its control for quite a long time to come, and will long be viewed as a milestone commitment to the field. Different online articles have likewise helped the specialist in understanding the theme and further creation it a value paper.
- “Corporate Accounting Fraud: A Case Study of Satyam Computers Limited, Madan Lal Bhasin, SSRN-Id-2676467”
This article by Madan Lal gave an enriched information about the one of the biggest scam that is Satyam scam. It also tells about the Chairman of the company Ramalinga Raju has manipulated the books of accounts and the financial statements of the company and tried to mislead the investors of the company from a decade. “Satyam Computers was founded in 1987 and it was converted into public ltd. In 1991”. It offers information technology services and consulting services spanning all over the various sectors. The success-run of the company was abrupted on 16th December 2008. Mr. Raju confessed that “the scam of IRN 71.36 Billions in the company’s balance sheet was a result of small manipulation done many years back” and he also mentioned that “every attempt to fill the gap failed”. Former CEO and founder confessed that he fudged the accounts of the company and inflated earning and profits for the company.
- “WHITE COLLAR CRIMES: A LEGAL CHALLENGE ON INDIAN CORPORATE SYSTEM, Dr. Gyanendra Kumar Sahu, Vol 7, Issue, 08, pp.19219-19222, August, 2015.”
This piece of art helps us understand the definition of white-collar crimes and also tells about the structure of corporate crimes and its types. The major case on white -collar crime has been described by the author that is Sahara India Real Estate Corporation Ltd. and Sahara Housing Investment Corporation Ltd. v. SEBI. The author has also suggested various legislative measures been taking to prevent the corporate crimes taking place in the global era.
- Chapter 2 “WHITE-COLLAR CRIMES AND THE INDIAN PENAL CODE, 1860” SHODHGANGA article.
This article tells various sections of IPC which provides punishment for the corporate criminals and also the states the penalty to be born by the offenders.
- Sood, Dr & Bala, Meenu. (2019). White Collar Crimes in India. International Journal of Trend in Scientific Research and Development. Volume-3. 288-290. 10.31142/ijtsrd23700.
The paper has helped in providing various effects of white-collar crimes in India prevailing in different sectors and also the major causes of such corporate offenses or white-collar crimes.
METHODOLOGY:
The author has encircled this work utilizing Doctrinal Method. Descriptive and investigative examination has been utilized recorded as a hard copy this exploration paper. Reference has been produced using auxiliary sources like books, journals and articles and online sites. All the sources have been appropriately recognized. Doctrinal strategy includes combination of thoughts and conceptual in a precise manner and reference is been taken by the auxiliary wellsprings of information. The utilization of essential information is additionally there in discovering the specific segments where this issue wins. The specialist has likewise utilized the exact technique for research by social event data of different association where this training is being done and discovering measurement in regards to the issue additionally an examination will be done on such negligence.
RECENT WHITE-COLLAR CRIMES IN INDIA:
Each year, global exchange releases a “top corporate criminal” list to highlight the corporate crimes done by the different companies of the world. The worst-of-the-worst issues like low pay, tax evasion, violation of human rights and voting rights, unlivable working conditions etc. Some of the companies are-
- JET AIRWAYS[4]– The government had ordered a probe into jet airways for alleged financial irregularities and spinoff of funds. The ministry of civil aviation has ordered the serious fraud investigation office to probe under section 212 of the companies act where the report indicated that the company was involved in malpractices, mismanagement through wrong accounting of funds, financial irregularities etc. Now the company is facing insolvency proceedings and all the employees of the jet airways had been fired from their respective jobs.
- GOOGLE– There has been serious analysis of the google on the issues, for example, forceful duty, copyright control. misappropriation of assets, search lack of bias, utilization of other’s licensed innovation. On walk 20,2019 the European commission forced a fine of €1.49 billion on google for keeping the opponents from contending and enhance decently, in the web based promoting market. Google senior VP said that they had just made a wide scope of changes to their items to address the commission concerns and that they will make further updates to give greater perceivability to rivals in Europe.
- SAHARA- SAHARA V. SEBI[5]– Sahara Indian real estate corporation ltd issued optionally fully convertible debentures from investors whosoever interested from subscription from 25th April 2008 to 13th April 2011. Sahara raised about Rs 20,000 crores from investors. From 2009 Sahara group’s activities came under radar of SEBI (Stock exchange board of India) which resulted in arrent of Sahara Pariwar founder Subrota Roy in 2014. Both the parties indulged into a heated up regulatory conflict. SEBI alleged that Sahara who issued the OFCD’s where illegally collecting the investor money and whereas Sahara stated that it had no jurisdiction under this circumsatances. The purpose of the issue was to carry out the infrastructural activities such as rail system, construction of bridges, modernizing or setting up of airports which may be allotted to Sahara. As per Sahara issue of OFCD’s was a private placement. Later a complaint was issued that the Sahara ltd is issuing housing bonds without complying with relevant regulations prompting SEBI to look into the matter. Sahara’s contention was that the issue of OFDC’s bonds is legal and was not a public issue. They also claimed that OFDC’s are neither shares nor debentures they are of hybrid class. And Hybrid instruments cannot be listed they alleged that serious error is committed by SEBI.SEBI contended that OFCD’s are public issue and there was violation of section 73 of companies act 1956. Sahara went to securities appellate tribunal where the order was passed in favor of SEBI. And then again Sahara moved to supreme court wherein again order was passed in favor of SEBI and SC ordered Sahara to repay the investors.This landmark judgment is a milestone in India’s corporate sector. SEBI has myriad powers to investigate listed and unlisted companies into matters relating to the interest of investors. It was removed the grey areas related to issue by so called unlisted companies. The supreme court ordered Sahara to repay Rs 5120 crores to its investors.
- SATYAM SCANDAL[6]– SATYAM SCAM ,2009: It is the biggest scam case in history corporate sector of India. The Chairman of the company Ramalinga Raju has manipulated the books of accounts and the financial statements of the company and tried to mislead the investors of the company from a decade. Satyam Computers was founded in 1987 and it was converted into public ltd. In 1991. It offers information technology services and consulting services spanning all over the various sectors. The success-run of the company was abrupted on 16th December 2008. Mr. Raju confessed that “the scam of IRN 71.36 Billions in the company’s balance sheet was a result of small manipulation done many years back” and he also mentioned that “every attempt to fill the gap failed”. Former CEO and founder confessed that he fudged the accounts of the company and inflated earning and profits for the company. He was charged a heavy penalty.
- WORLDCOM– In this case of the company named World Com, after investigation, internal audits found improper accounting for more than 3.8 billion dollars. According to GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP), this type of improper accounting did not conform. As a result, the senior Vice President and Controller (David Myers) along with over 20000 employees of World Com had to resign. Thus, this is remembered as one of the “BIGGEST ACCOUNTING SCANDALS IN U.S. HISTORY”. This was the biggest American bankruptcy under the boss of this company, Bernie Ebbers.
VARIOUS METHODS TO CURB THE WHITECOLLAR CRIMES:
- IMPLEMENTING VERIFICATION SYSTEMS:
Allowing only one employee to handle all the contracts, fiscal or financial transaction is not a good idea. There should be an implementation of a verification and balance systems which helps in preventing many White – Collar Crimes within a business. No person in any organization should have excess of power which would allow him to conduct crimes as it’s a saying that Power tends to corrupt and absolute power corrupts absolutely. Even if there is only one susceptive transaction which is performed by any employee of the business organization.
- TRACKING INTERNET ACTIVITIES:
Desk wrongdoing ordinarily includes the web. make a point to utilize programming in your business that intently screens the sites, internet based life associations and exercises led by the laborers. In the event that the business doesn’t have just got a web use strategy set up, make one and the business will likewise need to necessitate that laborers utilizing their own gadgets have recognition programming put in by your data innovation division.
- WORKING WITH AN ATTORNEY:
Consider working with an office wrongdoing proficient. These lawful professional will prompt you on what to do if your laborers are leading abused exercises. an expert will advise you regarding your privileges as an entrepreneur, just as the best approach to move toward squeezing charges for professional wrongdoing.
- MONITORING EMPLOYEES:
- INVENTORYING EQUIPMENT:
- STOP GLAMORIZING WHITE COLLAR CRIME:
- ASSIGNING AN ETHICS BUDDY AT WORK:
- REDUCE THE PRISON SENTENCES OF WHITECOLLAR CRIMINALS FACE:
LEGISLATIVE MEASURES UNDERTAKEN TO REDUCE THE WHITE-COLLAR CRIMES:
There are various regulations which are prevailing in our system in order to place a control on the corporate criminal offenses or white-collar crimes. The government in order to punish the offenders of the corporate crimes has made few legislations in force.
- “The Companies Act, 1960”
- “The Companies Act, 1960”
- “The Income Tax Act, 1961”
- “Indian Penal Code, 1860”
- “The Commodities Act, 1955”
- “The Prevention of Corruption Act, 1988”
- “The Negotiable Instrument Act, 1881”
- “The Prevention of Money laundering Act, 2002”
- “The Information Technology Act, 2005”
- “The Imports and Exports (control) Act, 1950”
- “The Special Court (Trial of offences relation to Transactions in Securities) Act, 1992”
- “The Central Vigilance Commission Act, 2003”
Penalty for white collar crimes in India:
The companies act, 2013 states the punishment for fraud under section 447, which states that if any person is guilty of committing fraud, he would be imprisoned for a period which is not less than 6 months or which may extend to 10 years. Section 448 of companies act, 2013 states the punishment for false statement. Under this section if a person is found deliberately speaking a false statement would be held liable for his wrongful act. Also sections 449, section 450, section 451 and section 454 states various penalties for the offenders of the corporate criminals. These are the measures which helps in curbing the increasingly white-collar crimes at a global level.
CONCLUSION:
The progression of science and innovation in the ongoing decade has made another type of wrongdoing that is “desk wrongdoing”. It is a financial offense as the consequence of which society endures the most. The people who submit these offenses are called as financial guilty parties. The term desk wrongdoing isn’t characterized in criminal law yet different offenses connected with cushy wrongdoing is characterized in the Indian correctional code. The administration has taken a few activities to improve India recognition among the worldwide financial specialists. Its center is to decrease the extortion and debasement in the Indian Corporate. Associations likewise progressively perceives that misrepresentation isn’t just an aftereffect of macroeconomic pattern of lessening moral and virtues bot additionally because of escape clauses in the in the inside structure of an association that must be stopped through better controls, successful enactment and restricted supersedes.
Lately, India has gone at any rate five enactment so as to forestall corporate misrepresentation, misbehavior, and unfortunate behavior. This implies the controllers know about the difficulties looked by the enterprises just as people in checking extortion and are resolved to guarantee that business is led morally. The counteraction of debasement (amendment)act,2018 is currently progressively far reaching and it guarantees that association follows the satisfactory systems intended to forestall pay off. The outlaw financial guilty parties bill 2018 guarantees discouragement of the monetary wrongdoers who get away from criminal prosecution14 and where the cost of the topic included is in excess of 100 crores rupees. The indebtedness and liquidation code, 2016 is improving bankruptcy goal by leading procedures in a period bound way nearby giving financially practical choices to continue focused on business.
Through better combination of information from fluctuated sources could assist with advancing breaking point the chance of cheats later on. Innovation is helping the association to deal with the danger of extortion. It had help them to screen exchanges and hailing of dubious sections. Corporates ought to be elevated to take a gander at the following level innovation to forestall different acts of neglect. With the appropriation of the more up to date innovation by huge corporates begins, it become progressively reasonable for average sized organization.in expansion to interest in the innovation preparing of assets to ideally use these devices ought to be made. there is likewise acknowledgment among the corporate of the way that a change toward zero resistance to extortion is fundamental so as to forestall the examples of professional wrongdoing. While the institutional mindfulness is basic to grant training and mindfulness among representatives, it is additionally significant for the line administrators to make a situation that is helpful for their groups to raise the worries without dreading counter or inclination. Likewise open conversation inside groups on wrongdoing and misbehavior, can additionally improve the making of a moral ventures.
REFERENCES:
- International Handbook of White-Collar and Corporate Crime by Pontell, Henry N., Geis, Gilbert L. (Eds.)
- WHITE COLLAR CRIMES-A STUDY OF EMERGING TRENDS IN INDIA -SHODGANGA ARTICLE.
- inflibnet.ac.in
- Sood, Dr & Bala, Meenu. (2019). White Collar Crimes in India. International Journal of Trend in Scientific Research and Development. Volume-3. 288-290. 10.31142/ijtsrd23700.
- Corporate Accounting Fraud: A Case Study of Satyam Computers Limited, Madan Lal Bhasin, SSRN-Id-2676467
- WHITE COLLAR CRIMES: A LEGAL CHALLENGE ON INDIAN CORPORATE SYSTEM, Dr. Gyanendra Kumar Sahu, Vol 7, Issue, 08, pp.19219-19222, August, 2015.
- Chapter 2 “WHITE-COLLAR CRIMES AND THE INDIAN PENAL CODE, 1860” SHODHGANGA article.
FOOTNOTES
[1] Sood, Dr & Bala, Meenu. (2019). White Collar Crimes in India. International Journal of Trend in Scientific Research and Development. Volume-3. 288-290. 10.31142/ijtsrd23700.
[2] WHITE COLLAR CRIMES: A LEGAL CHALLENGE ON INDIAN CORPORATE SYSTEM, Dr. Gyanendra Kumar Sahu, Vol 7, Issue, 08, pp.19219-19222, August, 2015.
[3] CIVIL APPEAL NO. 1727 OF 2016
[4] Fresh EoI invited for Jet Airways, by ADITYA ANAND, The Hindu.
[5] AIR (1976) SC 2428
[6] “Corporate Accounting Fraud: A Case Study of Satyam Computers Limited, Madan Lal Bhasin, SSRN-Id-2676467”