INTRODUCTION

As long as the world shall last, there will be wrongs, and if no man objected and no man rebelled, those wrongs would last forever. - Clarence Darrow

With the advent of globalisation, the world has witnessed a rampant increase in technological advancement and the global reach of market. This exponential growth has led to the continuous evolution and adaptation of crime everywhere. Nowadays, most of the conventional criminal activities are proliferating as modern age crimes, which are peculiar in the sense that that the culprit has easy access to a large number of targets with benefits of using new levels of anonymity as well as enjoying low risk of detection. As the perpetrator discovers newer methods to commit these contemporary crimes, preventing and combating them becomes a challenge for each country. Moreover, when these crimes are committed by any person belonging to a high social status, then these are generally referred to as white-collar crimes, which pose an even greater threat to the society at large because these are cases of misuse of power and authority, and several entities may be involved; therefore, finding the culprit and credible evidence of the crime becomes difficult and consumes more resources of the country. In particular, the current scenario of white-collar crimes in India has indicated an upward trend of financial frauds and crimes, which has further degraded the faith of the citizens in both public and private organizations.

This article discusses in detail white-collar crimes with emphasis on their types, effects, past scams, the enactments to curb these crimes, the appropriate punishment(s), and the important judgements passed by the Indian judiciary.

HISTORICAL OVERVIEW

The detrimental effects of white collar crimes were first realised and documented in 1473, England, in the popularly recognised Carrier’s Case[1].This case led to the adoption of the doctrine of ‘breaking the bulk’, which means that if a bailee who in possession of goods, tries to misappropriate its contents, then it would constitute a crime of larceny, i.e. the taking of property from the possession of its owner with an intention to permanently deprive him[2].

BLUE COLLAR CRIMES VS. WHITE COLLAR CRIMES

The main difference between the two categories of crimes lies in the nature of their commission. It mainly involves the different type of criminal activity that the criminal engages in. Blue-collar crimes are considered as generally committed crimes since ages, involving the use of some physical activity such as murder and robbery, whereas white-collar crimes are referred to as the new species of crime, wherein the perpetrator uses his knowledge to execute them, such as complex fraud schemes that are prevalent in society to dupe people.

Since the culprits, at the time of their occupation, are mostly designated at higher positions in an organisation, an exponential amount of innocent people are more susceptible to their nefarious motives of committing white-collar crimes than blue-collar crimes.

Moreover, the essential constituent that differentiates white-collar crimes from blue-collar crimes is that the former are usually carried out in a well-planned and executed manner to satiate underlying greed, whereas the latter are considered as crimes committed in a fit of rage and to accomplish revenge.

CATEGORISATION OF WHITE COLLAR CRIMES IN INDIA

The emergence of white-collar crime has punched the world economy to a greater extent, to which India is no exception. While corruption is the most common form of white-collar crime, there are several other types of these crimes that are prevalent in India.

1. Bank Fraud : Bank fraud is the most predominant type of white collar crime that exists in India. They can be referred to as financial scams, which are carried out by fraudulent companies through frivolous representations in order to deceive and gain undue advantages.[4] They are associated with the acts of manipulation of negotiable instruments, such as cheque bounce and securities.[5] The citizens are most vulnerable to such a type of white-collar crime since they have limited knowledge about the risks and the technology to avail the services provided to them by their banks.

2. Cyber crimes: This computer-related crime is on its peak since it is acquiring the shape of white-collar crime in this tech savvy era. It poses a huge risk to the privacy of any person because their personal information, sensitive data, confidential financial information, etc., is obtained by the perpetrator. It is committed with the sole motive to cause physical and mental harm as well as to tarnish the reputation of its victims[6]. 

3. Bribery: Another kind of white collar crime that is practiced in India is bribery. When a person supplies money to the person in authority, in exchange for a favour, then such an act is known as bribery[7]. It is a very familiar form of white-collar crime, which has plagued even the topmost bureaucrats in almost every organisation.

4. Money Laundering: The criminal act of money laundering involves the process of disguising the true ownership and original source of money. In other words, money laundering can be considered as wrongful portrayal of illegal money as legal. It comes within the ambit of white-collar crimes as a large amount of black money is layered in various bank accounts by the person of authority across the globe. Gradually, this layered black money is integrated back into the financial system in small amounts.

5. Tax Evasion: Evasion of legitimate taxes can take place when an individual intentionally fails to render due taxes. Its scope also extends to the concealment of actual earnings, underpayment of due taxes, and falsification of return and/or supporting documents. Currently, it has also assumed the face of white-collar crimes as high-ranking officials purposely reduce their tax liabilities to evade their share of fair taxes.

6. Insider Trading: The malpractice of insider trading is one of the quintessential white-collar crimes. It is regarded as an unfair trade practice wherein company insiders have exposure to the non-public information about their organisation. Further, this non-public information is crucial for making investments. It is when such an officer uses this crucial information so as to make money or avoid losses.

EFFECTS OF WHITE-COLLAR CRIMES

Although the act of white-collar crimes is unnoticeable, its ramifications are very significant in the society. The effects of white-collar crimes are substantial not only on the society but even on the business and consumers.

1. Effect on Company : White-collar crimes have a greater impact, in terms of losses and damages, on the company. In order to overcome such losses, the companies raise the prices of their products and services, which in turn results in a decrease in the number of their consumers. This phenomenon is based on demand and price principle. When the demand for a particular commodity increases, there is a parallel decrease in the prices of such a commodity. In other words, the demand for a particular commodity is inversely proportional to its price. Moreover, the commission of white-collar crime by a bureaucrat may even tarnish the reputation and goodwill of the company.

2. Effect on Society : White-collar crimes are sometimes referred to as socio-economic crimes because of its direct impact on the society. Since these crimes cause huge financial losses to the business, its subsequent repercussion is also witnessed by the society. Due to the prevalence of these crimes in the society, the economy of a country is hugely affected. To overcome the issue of a shambled economy, government revenue, taxes, insurance costs, etc., are elevated.

3. Effect on Consumer : As the consumers are subjected to misleading and unscrupulous schemes and offers, these often result in frauds being committed at the cost of the consumers. White-collar crimes not only results in financial loss to the consumers, but also forces them to face mental agony and distress. Ultimately, such crimes makes the consumers lose confidence even in genuine schemes.

SOME PAST WHITE COLLAR CRIMES IN INDIA

1. Harshad Mehta Securities Scam: The surge in white-collar crimes in India was witnessed in the year 1992, when Harshad Mehta, an Indian stock broker, used the ‘pump and dump’ scheme to manipulate and misappropriate the stock prices for his financial gains. His conduct resulted in a drastic and sudden rise in the prices of the securities because of unnatural pumping of money in the stock markets. When his scam was uncovered, the stock market crashed significantly for the first time in its history. The Supreme Court of India held Harshad Mehta liable for executing a huge financial scandal for his own financial advantages.

2. Satyam Scam: This scam first came into light in 2009, when the founder of the Satyam Computers Services Limited confessed to his crime of manipulation and misrepresentation of his books of accounts to the board, shareholders, investors, stock exchanges, and regulators. Various shell companies were established to divert the funds from Satyam. It was majorly a scam that was committed in connivance with the auditors and chartered accountants to cheat the investors and shareholders. A special CBI Court charged the accused persons with imprisonment and fine for his criminal actions.

3. Punjab National Bank Scam: In 2018, NiravModi, a diamantaire and elite jewellery designer, allegedly organised for the issuance of fake letter of undertakings worth eleven thousand crore rupees by Punjab National Bank, in connivance with some employees of the bank, for his business of dealing in diamonds. The investigation revealed that these letters of undertaking were fraudulently issued to him without following the due procedure. Further, SWIFT messaging service was used to transmit the said letters of undertaking, based on which credit was granted to him. The forensic audit of five companies of Nirav Modi revealed the siphoning off of funds in various fraudulent activities. When this scandal broke out, NiravModi had already fled the country. Ultimately, he was arrested in London in March 2019 and presently, the Indian authorities are awaiting his extradition.

4. Vijay Mallya Scam: The Chairman of the famous Kingfisher Airlines of the United Breweries Group, even after attaining the permission to operate his airlines on international routes, was unable to make profits and the company went into losses. Being a member of the RajyaSabha, Vijay Mallya took various loans from various banks worth 9,000 crore rupees to successfully run his business of aviation. However, even after taking huge amounts of loans, his company was unable to prosper. Eventually, the company crashed and was declared as an NPA in 2012 and Vijay Mallya refused to repay his loans. Reports suggest that the loans borrowed by Vijay Mallya were laundered overseas to various tax havens, which was executed with the help of various sham companies incorporated by him. By the time his true intentions were exposed, Vijay Mallya had exited India and was declared as a Fugitive Economic Offender. Presently, like Nirav Modi, India is taking crucial legal steps to get Vijay Mallya extradited to India.

5. Agusta Westland Scam: The AgustaWestland VVIP chopper deal has been doing the rounds in the media as the Indian helicopter bribery scandal, which was committed during the UPA led government in 2011. It is a multi-million dollar corruption case in India, wherein various middlemen and Indian officials were accused of receiving kickbacks in the deal of purchasing choppers for high ranking political leaders. Large amounts of money, received as bribes, were laundered to various sham companies in order to conceal the money.

16. ICICI Bank Scam: The ICICI Bank scam primarily relates to the large amounts of loan money that were laundered in a deal between the bank and the Videocon Group. The husband of the then-CEO of the ICICI Bank, Ms.Chanda Kochchar, was accused of siphoning off money and proceeds of crime to various shell companies. It was alleged by the investigating authorities that various loans worth crores of rupees were being sanctioned by the ICICI Bank to the perpetrator since Ms.ChandaKochchar was a chairperson of the committee, which had sanctioned the loan. Subsequently, the investigation revealed that a total amount of Rs. 1,575 crore that was sanctioned by the bank to Videocon Group had become anon-performing asset.

ENACTMENTS TO CURB WHITE-COLLAR CRIMES IN INDIA

White-collar crimes retain criminal characteristics because of the nature of crime committed as well as the intention of the perpetrator to commit them. White-collar crimes per se are not punishable under the criminal law in India; however, several offences linked to them are considered as crime in various legislations.

1. The Indian Penal Code, 1860: The Indian Penal Code, 1860, incorporates various offences that can be closely linked to white-collar crimes, such as Bribery (Section 171B),Criminal Misappropriation (Section 403), Criminal Breach of Trust (Section 405), Cheating (Section 420), Forgery (Section 463), and Making a false document (Section 464).

2. Prevention of Money Laundering Act, 2002: The Act was framed with the view to combat money laundering in India. It entails three main objectives, i.e., to prevent and control money laundering, to confiscate and seize the property obtained from the money laundered, and to deal with any other issue connected to money laundering in India[8].

3. The Companies Act, 2013: This enactment specifically provides for certain acts which when committed by the high ranking officials can be termed as white-collar crimes. Fraud (Section 447), Furnishing False Statement (Section 448), and Furnishing False Evidence (Section 449) are some of the provisions under The Companies Act, 2013, which are considered as white-collar crimes.

4. Prevention of Corruption Act, 1988: The act of corruption refers to the prevalence of dishonest conduct of high ranking officials, who are in power and mainly involves the wrongful act of bribery. Thus, the prime aim of enforcing this statute was to prevent and curb corruption, and punish erring officials.

5. Information Technology Act, 2000: Since a significant increase in cybercrimes was observed, the need for a special legislation was realised. A cybercrime refers to an unlawful activity that is committed via a computer device and internet. This statute specifically deals with cybercrimes and its consequences.

6. Fugitive Economic Offenders Act, 2018: In 2018, the Government of India passed this legislation in order to punish such persons who commit white-collar crimes and try to escape their criminal liability. The provisions of this statute enable the government to attach the property of economic offenders to realise criminal liability.

APPROPRIATE PUNISHMENT FOR WHITE-COLLAR CRIMES IN INDIA

The punishment for white collar crimes varies from country to country. In the United States of America, punishment for white collar crimes ranges from imprisonment, fines, home detention, forfeitures, restitution, etc. Sometimes, the federal law imposes longer prison sentence, where the victim suffers from a substantial harm. In China, however, the punishment for white collar crimes is not as lenient as that in other countries. China penalises the perpetrator of white-collar crime with capital punishment, i.e., death penalty, as it is considered necessary to safeguard the state security, public interests, and smooth operation of economic construction[9]. It is pertinent to mention that not all white collar crimes result in death penalty; some times,harsh imprisonments are meted out instead.

Even though white collar crimes have been prevalent in India since a very long time, they have only gained prominence in the last few years. There has been an assumption or rather a misconception that white collar crimes will be perceived with leniency since they are considered as non-violent crimes. In India, even though there are various legislations that penalise certain offences, which when committed by top-positioned officials amount to white collar crimes, there is no specific enactment that deals with white collar crimes altogether. Therefore, to tackle the perennial problem of white collar crimeseffectively, robust penal provisions are necessary for dealing with them, depending upon the severity of such crimes, losses incurred, and persons affected by such crimes. However, capital punishment may be ruled out in even the most serious case as all white-collar crimes are considered to be inherently non-violent.

IMPORTANT CASES RELATED TO WHITE COLLAR CRIMES

1. In P. Chidambaram v. Directorate Of Enforcement on 15 November, 2019[10], the Hon’ble High Court of Delhi has held that:

“the entire Community is aggrieved if the economic offenders who ruin the economy of the State are not brought to book as such offences affects the very fabric of democratic governance and probity in public life. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence 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 crimes with a permissive eye unmindful of the damage done to the national economy and national interest.”

2. Similarly, in Mrs. Shivani Rajiv Saxena v. Directorate Of Enforcement & Anr. on 15 September, 2017[11], the Hon’ble High Court of Delhi has held that:

“crimes, which constitute economic offences, stand on a graver footing which are professionally committed by white-collared people which need to be dealt with a heavy hand and releasing such person on bail may affect the community at large and will also jeopardize the economy of the country.”

3. The Hon’ble Supreme Court of India in Nimmagadda Prasad vs. Central Bureau of Investigation[12], has held that:

“economic offences having deep rooted conspiracy and involving huge loss of public funds, need to be viewed seriously and considered as a grave offence affecting the economy of the country as a whole and thereby opposing serious threat to the financial health of the country.”

4. In the case of Satya Narayan Sharma v. State of Rajasthan[13], the Hon’ble Supreme Court of India held that:

“in cases where public servants are being accused of any act of corruption under the provisions of the Prevention of Corruption Act 1988, the same should not be stayed by any order passed under the code of CrPC. Proper adjudication and investigation of the act should be carried out in conformity to the provision of the Prevention of corruption Act.”

CONCLUSION

As India is progressing and experiencing technological advancements, the crime rate is also increasing exponentially. In spite of various legislations that have been passed by the Government of India, there has been a rampant increase in white-collar crimes in India.

The word white-collar crime has not been described in any statute, and hence, the need for a specific, separate, and stringent law, which deals with white collar crimes, persists. In addition to this, India must essentially enter into international treaties and agreements to facilitate the extradition of fugitive offenders so that they go through fair means of trial for their criminal liability.

Furthermore, amendments have to be made at the grass root level since it is essential to provide sufficient and effective training to various investigative agencies so that they acquire the requisite skills to investigate such crimes. Lastly, media should play an important role in creating awareness in the public about these white collar crimes and ways to avoid or overcome such incidents.