White Collar Crime In India

This research article analyses a critical study on white-collar crime in India. And to understand the concept of white-collar crime in India. White-collar crime basically means the crime committed by the educated people belonging to a higher class of society during their occupation. Some of the most common white-collar crimes in India as well as all over the world are fraud, corruption, and bribery. Cases Like the Harshad Mehta case, Saradha & Narda Chit fund case, Satyam Computers case & Nirav Modi case, etc. Falls into the category of white-collar crimes and also are a few examples of white-collar crime.

This type of crime can also be called the crime of educated and professional elites. The term- white-collar crime- comes from an outdated assumption that business executives wear white shirts and ties. when a person or group of persons violate the law in the course of a legitimate business enterprise or occupation is termed as a White-collar crime. Secondly, the execution of a White-collar crime involves the cooperation and participation of many people because White-collar crime is a type of non-violent crime that is financially motivated.

Historical Background of White Collar crimes

In the year 1930 for the first time, an American socialist & criminologist Edwin Sutherland coined the term “White-collar crime”. A certain phrase was used by him to indicate or to describe the crime commonly committed by “Person of respectability” in other terms people who possess a high social status.

In 1934, Again Morris drew attention to the necessity of a change in emphasis regarding crime. He arrested those anti-Social activities of persons of high status committed in course of their profession must be brought with the category of crime and should be made punishable. Sutherland again came into the picture and clarified that the crimes which would be committed by people belonging to high socio-economic groups, during their occupation, would be termed as ‘white-collar crimes’. And further said that the traditional crimes would be denoted as ‘blue-collar crime’.

So he drew a distinction between white-collar crimes, i.e. corruption, bribery, fraud, and blue-collar crimes, i.e., traditional crimes like robbery, theft, etc.

And that is how in 1941 the concept of white-collar crime found its place in criminology for the first time.

Difference between white-collar crime and blue-collar crime

  1. White collar crimes  basically done by the educated and privileged portion of the society. Whereas Blue collar crimes are ordinary  crimes which is committed by every portion of the society education does not plays any important role in blue collar crime.
  2. White collar  crimes  are committed by individual or an organization to  satisfy the greed of Money and its totally  aims on financial gain. On the other hand, Blue collar crimes are committed  for many reasons which include personal vendetta like rage, revenge and other emotions. In other words we can say that white collar crime focus on financial or economical loss of others but Blue collar crime focus on ones physical loss or harm.
  3.  Another difference between blue and the white collar crime is that the economic loss of white collar crime is thousands time higher than that of the ordinary crimes. The financial loss which the society has to bear is higher in white collar crimes than the crimes committed by the people of low-social standard.
  4. In the case of State of Gujarat v. Mohanlal Jitamalji Porwal and Anr, the apex court of india termed Blue collar crime as crime of general nature whereas in context of white collar crime justice Thakkar opined that that one person can murder another person in the heat of the moment, but causing financial loss or say committing economic offences requires planning. It involves calculations and strategy making in order to derive personal profits. Thus the characteristic of the both the crimes are distinguished from each other.
  5. To constitute any crime mens rea and actus reus must be there. Where mens rea is an essential element of blue collar crimes, its involvement in white collar crimes is not as much necessary.
  6. No social issue like poverty involve in white collar crimes but in Blue collar crimes social issues like poverty are involved in many cases.
  7. White collar crimes are threat to economy of a country. on the other hand, Blue collar crimes are injury to individuals life, reputation and body.

Types of white-collar crimes in India :

  • Bank Fraud :

Crimes such as bank fraud are being committed by commercial banks by falsely representing the customers. Cases involving negotiable instruments such as bouncing of cheques, securities, their related activities, thereby jeopardizing the relationship of trust and fiduciary against such corporate institutions come within the purview of bank frauds. One of the most important cases that can be read under this head is Sahara Vs. SEBI (2012) 10 SCC 603. This particular case involved the fact of providing misleading information within the prospectus of the company based on which large numbers of complaints were being raised before the Supreme Court by the investors. Based on the factual circumstances and the claims made by the investors the court ordered the company to refund almost Rs.5120 Crores.

  • Bribery :

Bribery is a white-collar crime where a person asks for money, a favor, or something of value in order to get the other person’s work done. For example, if a police officer asks a person to offer him some amount of money and only then he will register the complaint, it would amount to bribery.

The punishment for bribery has been provided under Section 171E of the Indian Penal Code, 1860 which says that any person who commits such an offense would be imprisoned for a term that may extend to 1 year or with a fine or both. Also, Section 13 of the Prevention of Corruption Act, 1988 has penalized acts constituting an offense under this head, being engaged in by public officials.

In order to curb down the aspects relating to Bribery in the case of Satya Narayan Sharma vs. State of Rajasthan 1AIR 2001 SC 2856, the Supreme Court gave a value judgment. The apex court was of the view 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.

  • 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 showing illegitimate money as legal money. For instance, if a person obtains money from black marketing, trafficking of illegal goods the money will be considered ‘dirty’ and he cannot deposit into the banks as it may seem suspicious if he directly deposits money into the financial institutions because he had to create statements and records stating that where the money came from. Money laundering involves three steps:

  • Firstly, the owner of the money obtain the money from some illegal means and deposit into the bank by some way.
  • Then through multiple transactions the transfer of money is being done.
  • Lastly, they return the money into banks to make it legitimate.

The Prevention of Money Laundering Act, 2002 (“PMLA”)along with the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (“Rules”) are the principal laws enacted to prevent money laundering activities in India. There are specialized authorities dealing with money laundering issues such as the Reserve Bank of India / Securities and Exchange Board of India(“SEBI”)/Insurance Regulatory and Development Authority of India which also prescribe guidelines on anti-money laundering standards based on PMLA and Rules.

  • 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 the 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 social values as it demoralized honest taxpayers and they might also want to do tax evasion also it gives economic power in the hand of a few undeserving people.

Tax evasion and avoidance both is an offense which is used to reduce one’s tax burden. The offense of tax evasion is punishable under Chapter XXII of the Income-tax Act, 1961, which can impose a heavy amount of fines or even send you to jail.

Tax evasion= (amount of income that has to be reported) – (the actual amount reported)

In the case of tax evasion related offences, the Foreign Exchange Management Act, 1999 (“FEMA”) (specifically Section 37), empowers the Director and Assistant Director of the ED to exercise the power of investigation for any contravention that may occur under FEMA. These officers under FEMA have the power to exercise all the rights for investigation, which have been conferred on income-tax authorities under the IT Act.

Such failures on the part of companies leading to potential actions related to tax evasion may also have an adverse impact on key managerial persons of such companies. The Supreme Court, in Sunil Bharti Mittal v. CBI inter alia, held that an individual can be held liable for an offense by the company, (i) if there is sufficient evidence of the individual’s active role, coupled with criminal intent; or (ii) where the statute itself stipulates the liability of directors and other officials, such as under the Prevention of Money-Laundering Act, 2002. Although, the Companies Act, 2013, carves out exceptions for independent and non-executive directors, ensuring that they are liable only in cases where their knowledge and involvement can be established or where they, despite having knowledge, failed to act diligently. Regardless, ensuring that appropriate measures are in place to shield against any criminal investigation, prosecution and its effects are critical.

  • Food and Drug adulteration

One of the major prevailing nature of the white-collar crime of which the current Indian society is a victim is the act of making adulterated foods and drugs to be sold to the general public thereby causing a large amount of damages to health. Based on the recent report that has been submitted by the Ministry of Health of the Government of India it has been demonstrated that approximately 70% of the food and other edible stuff are being adulterated in nature and has the potential of causing health risks and damages to the general public. Z

  • Counterfeiting of government promissory notes and stamps :

The act relating to counterfeiting of government stamps is being considered as a criminal offense within IPC for which specific provision had been provided from Section 255 to 263A. Section 255 of the concerned Act states that under circumstances if any person is engaged in the act of selling any counterfeited government stamp or is related to the process of creating the same shall be held punishable under the said provision. Apart from this, Section 259 of IPC makes the possession of counterfeit coins also illegal with the objective of restraining an individual from preparing to commit any such crime.

In India, the number of counterfeit coins has increased significantly. On July 4, 2019, the Special Task Force of Kolkata apprehended three persons after discovering fictitious Indian rupees with a face value of Rs. 6,50,000 with them. As per Times of India, two persons reportedly seized in Rajkot carrying 1,080 counterfeit cash currencies with a face value of Rs 21.60 lakh.

  • Hoarding and black marketing:

For the purpose of achieving huge amounts of profits within the business structure activities like hoarding and black marketing is being carried out of the essential commodities that have in recent years increased in India. In order to control such illegal practices, the government has initiated specific legislation and regulations such as the Trade Restrictive Practices (Amendment) Act 1992, The consumer protection Act 1986 with string5ent punishment measures for violators of its provisions and the other offenders.

  • Identity Theft:

Identity theft is one of the easiest types of crime these days. Due to the advancement of technology, it is very easy to access the personal information of anyone. Identity theft is the crime in which the criminal access unauthorized information such as name, address, phone number, etc., and uses this information to gain money. In simple words, identity theft is committed by using some other person’s identity to commit fraud or to gain money by illegal means.

  • Cybercrime:

As the use of computers and the internet is increasing, so is the crime related to it. The crimes which involve the use of the computer, coupled with the use of the internet are called cybercrime. It is where the computer is used as the object of the crime or as a tool to commit an offense.

The only legislation which deals with the offenses related to cybercrime is Information Technology Act, 2000. The exact definition of cybercrime hasn’t been provided in any of the acts or laws as it is not possible to define such a nature of crime where computer and the internet is involved.

Measures to curb white-collar crimes

The measures that can be adopted to prevent the commission of white collar crimes are:

  1. The top investigating agencies of the country like the Central Bureau of Investigation, the Enforcement Directorate, the Income-tax Department, The Directorate of Revenue Intelligence and the Customs Department, needs strengthening, by way of implementing strong regulating policies. The Central Vigilance Commission should monitor the working of the officials sitting at top positions and also cross-check their works, so as to ensure transparency in the system.
  2. As the method of commission of such white collar crimes is advancing, so should the training of the investigating officials. It often happens that ageing officers are well experienced to understand the nature and techniques, but are not able to utilise the technology for tracking the suspect. This happens due to lack of training. So, every investigating officer must be trained in such a manner that, no matter how complicated the case is, they would be able to easily resolve it.
  3. To uproot the existence of such crimes, it is very important to include strict laws into the system. Less amount of fine and shorter period of imprisonment makes it very casual for the offenders to commit such crimes.
  4. Fast track courts and tribunals should be set in all the parts of the country for the early disposal of these cases. The tribunal should be provided with the power to fine or imprison someone who has been held guilty. Such measures would lower the rates of occurrence of white collar crimes.
  5. The electronic and print media should be utilized in the right way to spread awareness about white collar crimes. The general people need to be aware of such crimes and that they are taking place everywhere, from a small cafe to big multinational companies. Also, they need to be aware of the remedies they could seek in case they become victim to such crimes.
  6. Stringent laws and hefty fine and long term imprisonment should be given to the offenders for committing such crimes. And for this to happen, the Indian Penal Code, 1860 should be amended and include provisions for the white collar crimes. For example, the IPC could have a separate chapter dealing with white collar crimes.
  7. The government may establish a separate body which would look into the matter of crimes and criminality prevailing in the country. The independent body could be named as the National Crime Commission. Since their entire work would be related only to the crimes and would be an independent body, it could work more efficiently towards reducing criminality in the country.

Conclusion

White-collar crime is a nonviolent crime committed for financial gain. These crimes are characterized by deceit, concealment, or violation of trust.” The motivation for these crimes is “to obtain or avoid losing money, property, or services or to secure a personal or business advantage.”

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