White Collar Crime

BABASAHEB BHIMRAO AMBEDK AR UNIVERSITY

TOPIC:

WHITE COLLAR CRIMES

SUBJECT:

CRIMINOLOGY {LLB 144(e)}

SUBMITTED TO:

SUBMITTED BY:

Dr. PRADEEP KUMAR, (Asst. Prof.),

RISHABH TOMAR

DEPARTMENT OF LAW,

(IX)th Sem.,

SLS, BBAU.

DEPARTMENT OF LAW SLS, BBAU. 1

CONTENTS 1. Preface

3

2. Table of Cases

4

3. Abbreviations

5

4. Introduction

6

5. Historical Background

6-7

6. Definition of White Collar Crime

7-8

7. Classification of White Collar Crimes

8

8. Criticism of Sutherland’s Views on White Collar Crime

9

9. White Collar Crime in India

9-10

10. Common Types of White Collar Crime in India

10-11

11. Judicial Response

11-12

12. Remedial Measures

13

13. Conclusion

14

14. Bibliography

15

2

PREFACE This assignment is an outcome of the Semester Assignment for Criminology {Paper Code: LLB 144(e)} done as per the curriculum requirements of IXth Semester, BBA LLB. (Hons.), Department of Law, School for Legal Studies, Babasaheb Bhimrao Ambedkar University, Lucknow. The Assignment covers definition and interpretation clause Internal Aids to Interpretation under Internal Aids of Construction of Interpretation of Statutes. The assignment specifically on the White Collar Crime. I have tried my best to do justice with topic and put it in black and white with the same effort as I did it during the research of this Assignment. I would like to thank Dr. Pradeep Kumar, who has been a guide as well as mentor, helping me in making this assignment.

Rishabh Tomar IXth Semester, DOL, BBAU.

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TABLE OF CASES 

Government of Andhra Pradesh v. P.V. Reddy, AIR 2002 SC 3346.



Jaylalitha v. Union of India (1999) 5 SCC I38.



M. H. Hoskot v. State of Maharashtra (1978) 3 SCC 544.



Nimmagadda Prasad v. C.B.I AIR 2013 SC 2821.



Ram Narayan Poply v. C.B.I. AIR 2003 SC 2748.



R.K. Garg v. Union of India (1981) 133 ITR 239



Sarjoo Prasad v. The State of U.P (1961) 3 S.C.R. 324)



Subramanium Swamy v. Dr. Man Mohan Singh AIR 2012 SC 1185



Vineet Narayan v. Union of India, (1998) 1 SCC 226.

4

ABBREVIATIONS 

AC

Appeal Cases



AIR

All India Reporter



CJ

Chief Justice



Del.

Delhi



Gau.

Gauhati



Guj.

Gujarat



ILR

Indian Law Report



Kar.

Karnataka



LJ

Law Journal



LT

Law Times



Mad.

Madras



Mah.

Maharastra



Sec.

Section



SC

Supreme Court



SCC

Supreme Court Cases



SCW

Supreme Court Weekly



V.

Versus



WLR

Weekly Law Report

5

WHITE COLLAR CRIMES Introduction: It is common knowledge that certain professions offer lucrative opportunities for criminal acts and unethical practices which hardly attract public attention. There have been croocks and unethical persons in business,1 various professions and even in public life. They tend to become unscrupulous because of their neglect at school. home and other social institutions where people get training for citizenship and character building. These deviants have scant regard for honesty and other ethical values. Therefore, they carry on their illegal activities with impunity without the fear of loss of prestige or status. The crimes of this nature are called ‘white-collar crimes’ and they are essentially an outcome of the competitive economy of mid-twentieth century.2 White collar crimes are the crime that people commit in disguise by taking the benefit of their position. It is a very serious issue that needs to be addressed with utmost potential as many people have to suffer in this quagmire even when they are innocent.3 White collar crime basically means the crime committed by the educated people belonging to a higher class of society during the course of their occupation. In this paper, the author has discussed about what differentiates white collar crime from the blue or ordinary crimes. It can also be called as the crime of educated and professional elites.4

Historical Background: The concept of white collar crime is usually associated with E.H. Sutherland whose penetrating work in this area focused the attention of criminologists on its demoralising effect on the total crime picture. Sutherland pointed out that besides the traditional crimes such as assault, robbery, dacoity, murder, rape. kidnapping and other acts involving violence, there are certain anti-social activities which the persons of upper strata carry on in course of their occupation or business. These activities for a long time were accepted as a part of usual business tactics necessary for a shrewd professional man for his success in profession or business. Thus, any complaint against such tactics often went unheeded and unpunished.

1

Hoarding, black-marketing, adulteration, tax evasion are some of the common white collar crimes committed by business world and professionals. 2 Dr. N.V. Paranjape, Criminology & Penology with Victimology, 145 (Central Law Publications, Allahabad, 17th edn., 2018) 3 Informative Essay Sample On " White Collar Crime", available at: https://www.studentsassignmenthelp.com/essay/samples-examples/white-collar-crime-informative/, (Visited on Oct 18, 2019) 4 White Collar Crime: Detail Study, available at: http://www.legalserviceindia.com/legal/article-530-whitecollar-crime-detail-study.html, (Visited on Oct 18, 2019)

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It must, however, be stated that Sutherland was preceded by other writers who focused attention on the dangers to society from the upper socio-economic group who exploited the accepted economic system to the detriment of common masses. Albert Morris refers to a paper entitled ‘Criminal Capitalists’ which was read by Edwin C. Hill before the International Congress on the Prevention and Repression of Crime at London in 1872. In this paper the learned writer underlined the growing incidence of crime as an organised business and its evil effects on society. In 1934. Morris drew attention to the necessity of a change in emphasis regarding crime. He asserted that anti-social activities of persons of high status committed in course of their profession must be brought within the category of crime and should be made punishable. Finally, E.H. Sutherland through his pioneering work emphasised that these ‘upper world’ crimes which are committed by the persons of Upper socio-economic groups in course of their occupation violating the trust, should be termed "White Collar Crime" so as to be distinguished from traditional crime which he called, "Blue Collar Crime". Sutherland carefully examined the depredations of nearly seventy large corporations involved in white collar crimes and found that the charges against them included contracts. combinations or conspiracies in restraint of trade misrepresentation in advertising. infringements against copyrights, financial frauds and violations of trust, breach of warregulations and other miscellaneous offences.5

Definition of White Collar Crime: The term “white-collar crime” developed because of Edwin Sutherland. He used this to illustrate criminal activities conducted by the rich and powerful. “White-collar crime involves conspiracies by members of the wealthy classes to use their position in commerce and industry for personal gain without regard to the law.6 The concept of "white collar crime" found its place in criminology for the First time in 1941 when Sutherland published his research paper on white collar criminality in the American Sociological Review.7 He defined white collar crime as a "crime committed by persons of respectability and high social status in course of their occupation".8 A white-collar criminal belongs to upper socio-economic class who violates the criminal law while conducting his professional qualities. Southerland further pointed out that a white-collar crime is more harmful to society than ordinary crimes because the financial loss to society from white collar crimes is far greater than the Financial loss from burglaries, robberies, larcenies etc. The most dismal aspect of white collar crimes is that there is no effective programme for the enforcement of criminal law

5

Dr. N.V. Paranjape, Criminology & Penology with Victimology, 145-146 (Central Law Publications, Allahabad, 17th edn., 2018) 6 Criminology assignment, available at: https://www.studocu.com/en/document/university-of-northgeorgia/criminology/mandatory-assignments/assignment-13/1946072/view, (Visited on Oct 18, 2019) 7 American Sociological Review Vol. V No. l (1941). 8 Prof. (Dr.) Syed Mohammad Afzal Qadri, Ahmad Siddique’s Criminology & Penology with Victimology, 73 (Eastern Book Company, Lucknow, 7th edn.)

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against them and the influential persons involved in these offences are able to resist enforcement of law against themselves. Sir Walter Reckless, an eminent American criminologist suggests that white collar crime represents the offences of businessmen who are in a position to determine the policies and activities of business.9 Referring to this variety of the upper world of crime, Barnes and Teaters quoted Lord Acton who said, "power tends to corrupt and absolute power tends to corrupt absolutely". Wherever citizens of a particular nation become apathetic to the working of their Government, corruption and alliance between public servants. politicians and the criminal world become rampant resulting is crimes such as breach of trust. fraud and other mal practices.10

Classification of White Collar Crimes: Theoretically, various white collar crimes may broadly be classified into four main categories as follows : 1. Ad hoc crimes.-They are also known as personal crimes because in this category of white collar crimes, the offender pursues his own individual objective having no faceto-face contact with the victim. Hacking on computers, credit-card frauds, tax evasion etc. are common forms of ad hoc white collar crimes. 2. White collar crimes involving breach of trust or breach of faith bestowed by an individual or institution on the perpetrator. Insider trading, financial embezzlements, misuse of funds, fictitious pay rolls etc. are common illustrations of this type of white collar crimes. 3. Individuals occupying high positions or status who commit crime incidental to. and in furtherance of their organisational operations constitute this category of white collar crime. People occupying high positions commit such crime, not because it is their central purpose. but because they incidentally find an opportunity during the course of their employment to earn quick-money or gain undue advantages by using their power or influence. 4. White collar crime may also committed as a part of business itself. Violation of trade marks or copyright, Patent Law or Competition Law etc. come under this category of white collar crime. The violation of Domain Name and other corporate crimes are also white collar crimes of this type.11

9

Walter Reckless: The Crime Problem. p. 345. The widespread corruption, frauds, scams and scandals involving thousands of crores of rupees loss to the nation during the UPA Government rule in India (2006-2011) hears testimony to this phenomenon. 11 Dr. N.V. Paranjape, Criminology & Penology with Victimology, 146-148 (Central Law Publications, Allahabad, 17th edn., 2018) 10

8

Criticism of Sutherland’s Views on White Collar Crime: Sutherland’s definition of white collar crime has evoked criticism from certain quarters. Coleman and Moynihan12 pointed out that the lack of definite criteria for determining who are ‘persons of respectability and status’ has made Sutherland’s definition of white collar crime most controversial. It seems likely that what Sutherland meant by this is absence from convictions for crimes other than white collar crimes. The element of ‘high social status’ as used in the definition also leads to confusion: Clearly it has far narrower meaning than is given to that term in everyday usage. Another criticism quite often advanced against Sutherland’s definition of white collar crime is that it includes even those violations of law which are not committed in course of occupation or profession and these violations do not necessarily belong to upper strata of society or the so-called ‘prestigeous groups’. Yet another objection against the definition of white collar crime is that it does not necessarily require mens rea which is an essential ingredient of a crime. The doctrine of mens rea based on common law has no application to statutory offences in India and the requirement of guilty mind may be excluded either expressly or by implication in such cases.13

White Collar Crime in India: White collar criminality has become a global phenomenon with the advance of commerce and technology. Like any other country, India is equally in the grip of white collar criminality. The reason for enormous increase in white collar crime in recent decades is to be found in the fast developing economy and industrial growth of this developing country. The Santhanam Committee Report in its findings gave a vivid picture of white collar crimes committed by persons of respectability such as businessmen, industrialists, contractors and suppliers as also the corrupt public officials.14 Highlighting the magnitude of white collar crime in India, the Commission on ‘Prevention of Corruption’ in its report observed: "the advance of technological and scientific development is contributing to the emergence of ‘mass society’ with a large rank of file and a small controlling elite, encouraging the growth of monopolies, the rise of a managerial class and intricate institutional mechanisms. Tax evasion and avoidance, share-pushing, malpractices in the share market and administration of companies, monopolistic control, usury, under-invoicing or over-invoicing, hoarding, profiteering, sub-standard performance of contracts of constructions and supply, evasion of economic laws, bribery and corruption, election offences and malpractices are some examples of white collar crime. "15

12

Coleman & Moynihan: Understanding Criminal Data (1996) pp. 8-10. Dr. N.V. Paranjape, Criminology & Penology with Victimology, 148-149 (Central Law Publications, Allahabad, 17th edn., 2018) 14 Santhanam Committee Report. pp. 25l-53. 15 Government of India Report of the Commission on Prevention of Corruption (1964) para 2.13. p. 11. 13

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The Commission broadly classified white collar and socio-economic crimes into eight categories and suggested insertion of a new chapter on white collar crimes in the Indian Penal Code. The matter was referred by the Government to the Law Commission of India for consideration. The Law Commission, however, disagreed with the proposal and observed that "such offences are better left to be dealt with by special and self-contained enactments which supplement the basic criminal law." Interestingly, the Report of the Vivin Bose Commission of Inquiry into the affairs of Dalmia-Jain group of companies in 1963 highlights how these big industries indulge in white collar crimes such as fraud, falsification of accounts, tampering with records for personal gains and tax-evasion etc. Similar observations were made by Mr. Justice M.C. Chagla about the big business magnate Mundhra who wanted to "build up an industrial empire of dubious means."16

Common Types of White Collar Crime In India: 1. Bank Fraud: Fraud is a crime committed with an intention to deceive and gain undue advantage. Bank Fraud is a fraud committed on the banks. It is committed by the fraudulent companies by making fake representations. It is also related to the manipulation of the negotiable instruments like cheque bouncing, securities, bank deposits etc. Bank fraud is concerned to the public at large because there is a relation of trust between the banks and the public. 2. Bribery: Bribery is also a very common type of white collar crime. It means giving money or some goods to the person at a high position in return of a favor. In simple words bribery is when one man gives money to the other which is in authority. It is done for the purpose of insisting him to do something or to prevent him from doing something. It is the most common income of most of the public officials of our country. 3. Cybercrime: Cybercrime is the biggest cause leading to these type of crime in India. It is the latest problem prevailing in the cyber world. Cybercrime is the crime which is related to ‘computer networks’. With the rapid increase of advancement of technology there is also a rapid increase in the crime related to the technology. Cybercrime involves the persons who are expert in computer related technology. And it is committed against the victim directly or indirectly to cause a harm to his reputation or to harm in physical or mental way using internet, networks and other technological sources. Hacking, Child pornography, Copyright infringement, Cyber terrorism and Cyber stalking are some of common examples of cybercrime. 4. Money Laundering: Money laundering is a crime in which the criminals disguise the identity of the money. In this crime, criminals try to hide the original ownership of the money and the place where they obtained that money by illegal means. Laundering is done with the intention of making that money came from legal sources. In simple words money laundering means to show the illegitimate money as legal money.

16

Dr. N.V. Paranjape, Criminology & Penology with Victimology, 150-151 (Central Law Publications, Allahabad, 17th edn., 2018)

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5. Tax Evasion: Tax evasion is committed with an intention to conceal one’s actual taxable income and one’s original position to the authorities. This concealment of income is done to reduce the tax liability in the eyes of government. In simple words it means to hide the money obtained from the illegal means in order to reduce one’s liability to pay tax and to show low income to the tax authorities. Tax evasion has a negative impact on the social values as it demoralized honest tax payers and they might also want to do tax evasion also it gives economy power in the hand of few undeserving people. The Supreme Court in its majority decision in R.K. Garg v. Union of India17 upholding the validity of the Special Bearer Bonds (Immunities and Exemption) Act, 1981, observed that the Act was not intended to encourage tax evasion in future and condone such evasion committed in past but the real object of the Act was to launch a nation-wide search to unearth undisclosed wealth by encouraging small incentive to those who declare their undisclosed cash.18 6. Identity Theft: Identity theft is one of the easiest type of crime these days. Due to advancement of technology it is very easy to access personal information of anyone. Identity theft is the crime in which the criminal access unauthorized information such as name, address, phone number etc. and use this information to gain money. In simple words identity theft is committed by using some other person identity to commit fraud or to gain money by illegal means.19

Judicial Response: The requirement of prior sanction of the Government under Section I97 of the Code of Criminal Procedure, 1973 provided an umbrella shield for corrupt public servants who were accused of any offence alleged to have been committed by them while acting or purporting to act in discharge of their official duty. The Supreme Court in Vineet Narayan v. Union of India,20 observed that the corruption cases against the public servant were often delayed due to refusal or delayed sanction by the competent authority despite the investigation agency having disclosed a prima facie case against the public servant. The Court held that sanction to prosecute not being a quasi-judicial function, the competent authority must give sanction if it is satisfied that material placed before it is sufficient for prosecution of the public servant. The Supreme Court, in Subramanium Swamy v. Dr. Man Mohan Singh,21 reiterated that the time-limit of three months for grant of government sanction under Section 19 of the Prevention of Corruption Act, 1988 for prosecution of public servant alleged of corruption charges, must be strictly followed without delay.

17

(1981) 133 ITR 239 Dr. N.V. Paranjape, Criminology & Penology with Victimology, 152 (Central Law Publications, Allahabad, 17th edn., 2018) 19 White Collar Crime: Detail Study, available at: http://www.legalserviceindia.com/legal/article-530-whitecollar-crime-detail-study.html, (Visited on Oct 18, 2019) 20 (1998) 1 SCC 226. 21 AIR 2012 SC 1185 18

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Expressing concern for the widespread corruption in public life, the Supreme Court in the case of Jaylalitha v. Union of India,22 observed that corruption errodes the moral fabric of the society and is detrimental to national economy. Misuse and abuse of power by persons occupying high positions in the Government has reached alarming dimensions and it has tarnished the image of the country. Giving the term ‘public servant’ a wide interpretation, the Supreme Court in Government of Andhra Pradesh v. P.V. Reddy,23 held that with a view to curb corruption at all levels, it would be appropriate not to limit the definition of public servant only to Government officials but it should also include employees of a co-operative society which is aided and controlled by the Government. In Ram Narayan Poply v. C.B.I.,24 the Apex Court expressed concern for adverse effects of white collar crimes and held that economic offenders should not be allowed to ruin the economy of the country and they should be sternly dealt with. In Sarjoo Prasad v. The State of U.P.25 it was held that a servant who sold adulterated food stuff on behalf of his employer cannot be held liable unless it is shown that he had the knowledge that the food was adultered. Section 7 of the Prevention of Food Adulteration Act. 1954 prohibits sale of adu1terated food items and one who contravenes this provision shall be punishable under Section 16 of the Act. In the 940 crores Bihar Fodder Scam case (1996) in which the then Chief Minister Shri Lalu Prasad Yadav along with 45 other public officers and servants was charge sheeted by CBI in June 1997 and convicted for 5 years RI by the Special Court on 30th Oct. 2013 is an eyeopener for those who indulge in white collar criminality abusing their power and status. However, he has been granted bail by the Supreme Court on 18th Dec., 2013, but has lost his Parliamentary Membership consequent to his conviction. In the case of Nimmagadda Prasad v. CBI,26 the appellant along with Y.S. Jagan Mohan Reddy, enriched himself for more than 40,000 crores of rupees by the inf1uence of Jagan Mohan‘s father Dr. Y.S. Rajasekharan Reddy who was the then Chief Minister of Andhra Pradesh. The Chief Minister, Late Dr. Reddy extended many undue favours to the appellant by abusing his official position and thereby allotting 18878 acres of land to the appellant and in return, he paid illegal gratifications amounting to 854.5 crores rupees to Y.S. Jagan Mohan Reddy and his group of companies. Illegal gratifications were paid in the guise of investments/share application money to give them corporate colour in order to escape criminal charges.

22

(1999) 5 SCC I38. AIR 2002 SC 3346. 24 AIR 2003 SC 2748. 25 (1961) 3 S.C.R. 324) 26 AIR 2013 SC 2821. 23

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Remedial Measures: In a country like India where large scale starvation, mass illiteracy and ignorance affect the life of the people, white collar crimes are bound to multiply in large proportion ‘Control of these crimes is a crucial problem for the criminal justice administration in this country. However, some of the remedial measures for combating white collar criminality may be stated as follows: 1. Creating public awareness against these crimes through the media of press, platform and other audio-visual aids. Intensive legal literacy programmes may perhaps help in reducing the incidence of white collar criminality to a considerable extent. 2. Special Tribunals should be constituted with power to award sentence of imprisonment up to ten years for white collar criminals. 3. Stringent regulatory laws and drastic punishment for white collar criminals may help in reducing these crimes. Even legislations with retrospective operation may be justified for this purpose. 4. A separate chapter on white collar crimes and socio-economic crimes should be incorporated in the Indian Penal Code by amending the Code so that white collar criminals who are convicted by the court do not escape punishment because of their high social status. 5. White collar offenders should be dealt with sternly by prescribing stiffer punishments keeping in view the gravity of injury caused to society because of these crimes The Supreme Court in M. H. Hoskot v. State of Maharashtra,27 in this context observed, "soft sentencing justice is gross injustice where many innocents are the potential victims". 6. There is an urgent need for a National Crime Commission which may squarely tackle the problem of crime and criminality in all its facets. 7. Above all, public vigilance seems to be the cornerstone of anti-white collar crime strategy. Unless white collar crimes become abhorrent to public mind. it will not be possible to contain this growing menace. In order to attain this objective. there is need for strengthening of morals particularly. in the higher strata and among the public services.28

27

(1978) 3 SCC 544. Dr. N.V. Paranjape, Criminology & Penology with Victimology, 160-162 (Central Law Publications, Allahabad, 17th edn., 2018) 28

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Conclusion: White collar crimes are the most common in every society this is because loose rules of the nation allow the people sitting on higher position to escape from their crimes easily through the loopholes that exist in the ruling system. The types of white collar crimes are like fraud in construction work by passing the site for construction even if it is a soft soil in return of money or raising the rate of interest in banks in return of the bribery. Although some are certainly more privileged than others, white collar criminals are allowed to mitigate their deliberate criminal decisions using excuses unavailable to their street-crime counterparts. Their stories resonate with those familiar with finance, office, politics, business competition, and regulation, whereas street criminal’ explanations often fall on deaf ears. The practices of these white collars crimes is very high and the Supreme Court expressing concern for the rising incidents of corruption and hike in graph of the economic offences, the Supreme Court in Nimmagadda Prasad v. C.B.I,29 inter-alia, observed: "Unfortunately, in the last few years, the country has been seeing an alarming rise in white-collar crimes, which has affected the fiber of the country’s economic structure. Incontrovertibly, economic offences have serious repercussions on the development of the country as a whole." Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. These offences have deep rooted conspiracies and involve huge loss of public funds and therefore, need to be viewed seriously and considered as grave offences affecting the national economy thereby pose a serious threat to the financial health of the country.30 Here we can draw a conclusion that people of high designation are much involved in the crimes known as white collar crimes and it could be stopped by a strong judicial system. The laws must be made in such a way that criminals fail to escape from the punishment even after trying his or her best. The every effort and step must be taken to save the innocent people which are trapped in the net of crime without committing any crime. So make sure that every nation is bothered about its innocent citizens who become the victims of certain criminals

29

AIR 2013 SC 2821. Dr. N.V. Paranjape, Criminology & Penology with Victimology, 166 (Central Law Publications, Allahabad, 17th edn., 2018) 30

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BIBLIOGRAPHY: Books:  

Dr. N.V. Paranjape, Criminology & Penology with Victimology, (Central Law Publications, Allahabad, 17th edn., 2018) Prof. (Dr.) Syed Mohammad Afzal Qadri, Ahmad Siddique’s Criminology & Penology with Victimology, (Eastern Book Company, Lucknow, 7th edn.)

Internet Resources: 

Informative

Essay

Sample

On

"

White

Collar

Crime",

available

at:

https://www.studentsassignmenthelp.com/essay/samples-examples/white-collar-crimeinformative/, (Visited on Oct 18, 2019)



White

Collar

Crime:

Detail

Study,

available

at:

http://www.legalserviceindia.com/legal/article-530-white-collar-crime-detail-study.html,



(Visited on Oct 18, 2019) Criminology assignment, available at: https://www.studocu.com/en/document/universityof-north-georgia/criminology/mandatory-assignments/assignment-13/1946072/view, (Visited on Oct 18, 2019)

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