Evolution of Corporate Criminal Liability in the Indian context with the help of relevant case laws by VEDANT JAIN at LEXCLIQ

Imposition of criminal liability on the corporate can be understood by the rationale of determent theory of jurisprudence. By strengthening of law up to the criminal level, the legislation is making compliance to the norms of good corporate governance a must. Corporations have distinct legal personality from their directors and shareholders and therefore they can be held liable for wrongful acts of the company. Corporate criminal liability means the extent to which the corporates can hold liable as a natural person for the acts done during its conduct or the persons employed by it whose conduct is in bad faith.

The liability of a corporate can be held on these principles: –

  1. Vicarious Liability – the concept of vicarious liability is based on the principle that are he who acts through another deems to be acted on his own and the principle is liable for the acts of the agent.
  2. Identification Doctrine – It is an English law doctrine which states that the persons in certain key-managerial position and who run the affairs of the business for their acts the corporation can be made liable. As of the liability of these key persons who act on behalf of company, it was held in Moore v. Brisler that the persons who are identified with the corporations must be acting within the scope of their employment or authority.
  • Alter Ego Doctrine – the owners, directors and managers who manage the company are known as alter ego of the company as for the criminal liability mens rea is an essential attribute so the concept of alter ego was developed which make the person under who supervision the act was committed and held them liable since the company has no mind or body.
  1. Organizational model – since there is requirement of mens rea so this model states that the culture and environment of the company can be taken into consideration in deriving the criminal liability of corporates.
  2. Derivative model – this model consists of the above vicarious liability principle and identification doctrine.

Since mens rea is required to make corporate-liable so the SC in the case of The Assistant Commissioner, Assessment-II, Bangalore & Ors. vs. M/s. Velliappa Textiles Ltd. & Anr., held that “though initially, it was supposed that Corporation could not be held liable criminally for offences where mens rea was requisite, the current judicial thinking appears to be that the mens rea of the person-in-charge of the affairs of the Corporation, the alter ego, is liable to be extrapolated to the Corporation, enabling even an artificial person to be prosecuted for such an offence”.

In U. P. Pollution Control Board vs. Modi Distillery, where an industry discharged its wastes in the nearby drain, this act is in breach of its lawful conduct. The court held that the individuals responsible for the discharge and breach of duty can be held liable even if the company cannot be prosecuted.

Therefore, from the above principles, doctrine and cases the individuals of the body-corporate can be held criminally liable for its affairs during the conduct of the business and the same is followed in the Indian scenario concurrently. However, there is no rigid rule yet and it depends on a case-by-case basis.

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