WHITE COLLAR CRIMES: PROJECT REPORT

ARMY INSTITUE OF LAW

WHITE COLLAR CRIMES IN BUSINESS DEALS

Submitted in partial fulfilment of requirements for BA. LLB Degree

Submitted To: Submitted By:

Dr. Tejinder Kaur Gaurav Hooda
Offg. Principal & Associate Prof. of Law Section-A
Army Institute of Law 1433
 ACKNOWLEDGEMENT

I would like to extend my sincere thanks to my White Collar Crimes Professor,

Dr. Tejinder Kaur, for allotting me this topic and guiding me through it. Your wisdom and
knowledge helped me immensely in the compilation of my project.

I would also like to thank my fellow batch mates and friends. If it hadn’t been for their criticism,
I would not have been able to improve the various flaws in my project.

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 TABLE OF CONTENTS

S. No Title Page No.

1. Introduction 4

2. Definition of White Collar Crime 4

3. Causes of White Collar Crime 5

4. White Collar Crime & Business Deals 5

5. Various Facets of White Collar Crime in Business Deals 8

6. Statistical Analysis of White Collar Crimes 9

7. White Collar Crimes & Other Crimes 10

8. Recommendations & Suggestions 11

9. Bibliography 13

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 WHITE COLLAR CRIMES IN BUSINESS DEALS

“The practitioners of evil the hoarders the profiteers the black-marketeers and speculators
are the worst enemies of our society. They have to be dealt with sternly. However well placed
important and influential they may be. If we acquiesce in wrongdoing, people will lose faith
in us’’

~ Dr. Radhakrishnan

INTRODUCTION

The famous Criminology Professor Edwin H. Sutherland coined the term ‘White Collar Crime’
as “the crime committed by a person of respectability and high social status in course of their
occupation”. Sutherland through this definition included in it the big corporations and legal
entities, which was earlier considered to be only committed by the lower class. With the
development of technology, White Collar Crime has become a global phenomenon and in India
it is increasing at a tremendous pace because of the increase in the economical and industrial
growth.

There has been an unusual and unexpected increase in the growth of computer specific white
collar crime which brings a great challenge for the law enforcement agencies as these crimes
can be committed from anywhere in the world by any anonymous person. There are many
professions where criminal and unethical practices are often going unnoticed. In order to gain
more for themselves, some unethical professionals indulge into illegal activities without fear
of loss of respect and prestige.

DEFINITION OF WHITE COLLAR CRIME IN INDIA

According to Sutherland, it is a “Crime committed by persons of respectability and high social

status in course of their occupation”.

According to Sir Walter Reckless “White collar crime represent the offence of businessmen
who are in position to determine the policies and activities of business”.

Sutherland farther pointed out that a white collar crime is more dangerous to society than
ordinary crimes because the financial loss from burglaries, robberies larcenies etc. the most
dismissal aspect of white collar crimes is that there is no effective programme for the

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enforcement of criminal law against them and the influential persons involved in these crimes
are able to resist enforcement of law against themselves.

These white collar crimes by their very nature are such that the injury or damage caused as a
result of them is so widely diffused in the large body of society that their gravity in regard to
individual victim is almost negligible.

CAUSES OF WHITE COLLAR CRIME IN INDIA

1. Greed:

High class people are financially stable, however, they still commit crime because of their
greed to earn more. And for this purpose, they even choose illegal ways to have an economic
gain.

2. Competition:

Darwin in his theory of evolution has stated that “survival of the fittest” is necessary and thus
there will always be competition for survival. However, some people for their own greed and
in order to get ahead of their peers commit crimes.

3. No fixed laws or punishments:

After committing the crimes most of the offenders get away without getting any punishment
because there are not enough laws to deal with such kind of crimes. In many cases, because of
the supreme political connections most of the offenders get away without any punishment.
Moreover, in many cases there are no witnesses for the said offences as such offences are
committed in private.

WHITE COLLAR CRIMES & BUSINES DEALS

White collar crimes are also rampant in business world. There have always been instances of
violation of trust. Sutherland made a careful study of a number of large corporations and
business houses in United States and found that they were involved in illegal contracts,
combinations or conspiracies in restraint of trade, misrepresentation in advertising,
infringements against copyrights and trademarks, unfair labour practices, bribing public
officials and so on. The public hardly knows the trickery of business criminals as they treat, it
is not too important for their purpose.

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Bribery is an offence under the Prevention of Corruption Act, 1988 and both, bribe taker as
well as the bribe giver are equally punishable, but commercial agents and public officials
indulge in illegal gratification for their personal gain and the legal restraints provided for the
purpose are hardly adequate to cure this menace. 1 It may, however, be pointed out that all
bribery cases are not necessarily white collar crimes because white collar criminality is
confined to only those illegal activities which the persons of prestigious group, high social
status commit in course of their legitimate business or occupation for financial gain.

White collar crimes also operate in insurance business where both the insured as well as insurer
earn considerable profit by making false and fabricated claims. Instances are not wanting when
intentional house-burning, automobile destruction and even murders are planned by the persons
of respectable community in order to make good fortunes from the manipulated insurance
claims.

These are only a handful of instance of white collar crimes practiced in day to day life by
certain professional in the course of their profession. The major role in committing white collar
crime are played by the business men and politician whose greed and want multiply with the
more they acquire. In India whenever major scandal come to the media focus a thorough
investigation always find an unlawful involvement of politician parities in it so far as
businessmen are conserved, their act of white collar crime are go beyond the court. These are
only a handful of instances of white collar crimes practiced in day to day life by certain
professionals in the course of their profession.

So far as the businessmen are concerned, their acts of white collar crimes go beyond count.
They are termed as the corporate criminals who more often than not, are involved in illegal
contracts, combination and conspiracies of trade restraints, unfair labour practices, selling of
adulterated foods and drugs, bribing of public officials so on and so forth. They take advantage
of the corporate veil and indulged in a number of crimes. The recent Satyam scam case is one
of the worth-mentioning illustrations, where it was seen how an individual, hiding himself in
the veil of incorporation, indulge in defrauding crores of money.

Sutherland attributed the highest degree of criminality to business world which includes
traders, businessmen and industrialists. It has been held that “business communities in India of

1
See R.S. Nayak v. A.R. Antuley, AIR 1984 SC 684; P.V. Narasimha Rao v. State, AIR 1998 SC 001.

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large and small merchants are basically dishonest bunch of crooks ..... Nowhere in the world
do businessmen get rich as quickly as they do in India.2

The Report of the Monopolies Inquiry Commission expressed great concern about the chronic
problem of hoarding, profiteering and black-marketing of essential commodities by traders in
India. In times of shortage and scarcity of consumer commodities, the traders withdraw the
stock and subsequently dispose it of at exorbitant prices.3

The Santhanam Committee Report on Prevention of Corruption, observed that Indian

businessmen build up secret hoards of foreign exchange abroad through under-invoicing of
exports and over-invoicing of imports violating the Imports & Exports Laws and Foreign
Exchange Regulations.4

Adulteration of edible foodstuffs is also frequently committed by businessmen which is

injurious to public health. The sale and production of spurious drugs and sub-standard
medicines by manufacturers is yet another white collar crime which enables businessmen to
earn huge illegal profits.5 The evil has become so widespread and persistent that it is difficult
to get even air water and light unpolluted. The constant rise in price and cost of living has made
the consumers cost-conscious. The unscrupulous traders take undue advantage of the situation
and provide adulterated articles of food, drinks or drugs etc. at a cheaper rate and earn huge
profits.6 They even do not hesitate to add poisonous constituents to articles of food and drinks
which are injurious to health. A number of deaths are reported every year due to consumption
of spurious liquor or food poisoning7.

Some of the common adulterants used in various edibles and articles of foodstuffs are:

(i) Injurious colours such as sacrol, succarin etc. in preparation of ice-cream and kulfi;
(ii) Addition of blotting paper or soapstone in panir;
(iii) Geru, ratanjot and powdered husk of rice or bran in powdered chillies and spices;
(iv) Coal-tar in batasha and other sweets;
(v) Horse-dung, powdered bran etc. in dhania.

2
N.R.M. Menon’s unpublished dissertation entitled, ‘A Socio-legal Study of White Collar Crime in India,’ 1968.
3
Report of the Monopolies Inquiry Commission 1965, p. 162.
4
Santhanam Committee Report, p. 253.
5
Pharmaceutical Inquiry Committee Report, 1954, p. 146.
6
K.D. Gaur (ED.): Criminal Law and Criminology (2003) p.285.
7
Ibid.

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These are only a few examples of adulteration in food and drinks. Despite stringent provisions
in IPC, Adulteration Act, Drugs Act and Opium Act, the menace of adulteration still subsists
and laws have failed to eradicate this evil.

VARIOUS FACETS OF WHITE COLLAR CRIMES IN BUSINESS DEALS

 Corruption and Bribery in India

The report has a special coverage on corruption in India. It shows that the 2010-2011 corruption
and fraud cases in India – 2G telecom scam, Adarsh Society scam, Commonwealth Game
fraud, various land scams etc.. have negatively impacted India‘s reputation internationally. Last
decade depicted India‘s growth story.

The government and private sector post-independence never had it so good. Huge investments
were planned to improve infrastructure. With liberalization foreign investment flows increased.
The sudden spurt in economy also resulted in higher greed and corruption soared. The cases
show how senior level politicians and business heads who were much revered and respected
compromised their ethics. As per the report, 78% of the Indian organizations have stated that
they are highly/moderately vulnerable to corruption. In my view, this is an understatement;
around 90- 95% of the companies are exposed to corruption. The multinational subsidiaries in
India are also significantly affected by corruption.

Though the FCPA and/or UKBA are applicable to them, the acts do not have much teeth in
Indian scenario. In my view, the US/ UK authorities will be able to follow through only on the
bigger cases, and the smaller ones will be ignored. Hence, the effectiveness of these acts is
limited. Secondly, the developed countries have a one sided view of corruption. They prohibit
their own country‘s companies from paying bribes. However, accept the bribe money deposits
from Indian (and other countries) politicians and businesspersons in their country‘s banks. 8

This encourages money laundering rather than curtailing corruption. Although, India has a
Prevention against Corruption Act, it hasn‘t reduced corruption. As per the act, government
officials cannot receive any form of bribes or grease payments. However, receiving 2-10%
bribe of total contract value assigned is quite prevalent.

8
http://shodhganga.inflibnet.ac.in/bitstream/10603/43935/8/08_chapter%202.pdf.

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 Public Servant Unlawfully Engaging In Trade

Faith is reposed in a public servant and if public servants are allowed to engage in trade they
would not be able to devote their undivided attention to their official work. Moreover they may
take unfair advantage over other traders of their official position for the advancement of their
trade. So keeping this aspect in mind S.168 of the Code provides “whoever, being a public
servant, and being legally bound as such public servant not to engage in trade, engages in trade,
shall be punished with simple imprisonment for a term which may extend to one year, or with
fine, or with both.9

In State of Gujarat v. Mahesh Kumar Dheerajlal Thakka,10 the Supreme Court has held that
‘private practice’ cannot be termed as ‘trade’ as accepting of ‘fee’ does not involve profit
making, which is an essential ingredient of the term ‘trade’.

 Public Servant Unlawfully Buying Or Bidding For Property

Under Section 169 of Indian Penal Code, 1860, public servant is prohibited from unlawfully
buying or bidding for property. This section is an extension of Section 168 of the Code. The
scope of the section is limited to property sold by a public servant in his official capacity.

This is based on the principle that, as he is placed in an advantageous position over the other,
he might influence the sale in his favour. But if the sale is unconnected with the official position
of the public servant, he is not prohibited from purchasing or bidding for the property, and the
section is not attracted. For instance, purchase of an impounded pony by a police officer,11 and
of a buffalo belonging to a District Board at an auction by a member of board were neither
covered by this section.12

STATISTICAL ANALYSIS: WHITE COLLAR CRIMES

2010-2011 Annual Global Fraud Survey report of Kroll conducted by Economist Intelligence
Unit gives expected results. Fraud continues to be a big problem worldwide and more so in
India. Of the companies surveyed, globally 75% reported experiencing fraud during the year.
Though the figure has reduced in comparison to previous year‘s 88%, the situation is still

9
Section 168 of the Indian Penal Code, 1860.
10
AIR 1980 SC 1167.
11
Rajkristo Biswa (1871) 16 WR (Cri) 62. See also V. Punne Thomas v. State of Kerala, AIR 1969 Ker 81, State
of Orissa and Ors. v. Titaghur Paper Mills Company Ltd. and Anr., AIR 1985 SC 1293, Chet Ram v. State 1976
Cri LJ 585 (All.).
12
Suraj Narian Chaube v. State, AIR 1938 Bom. 565.

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dismal. In India, the situation is disastrous, with 84% organizations reporting that they suffered
from fraud during the year.

It is wake-up call for India, as it is ranked second worldwide after Africa and shares the position
with China The chart below compares the top six fraud categories at global level with India. In
most of the cases, India is doing much worse than its global counterparts are. Worldwide
management conflict of interest, internal financial fraud, corruption and bribery and vendor
procurement related frauds have increased. Physical theft of assets and information theft
decreased. Indian business crucial pain points are corruption and bribery, information theft,
internal financial fraud, financial mismanagement and vendor procurement.

WHITE COLLAR CRIMES VIS A VIS OTHER CRIMES

The Supreme Court of India in State of Gujarat v. Mohanlal Jitamalji Porwal and Anr13 has
differentiated between the general crimes and white collar crimes. In the above-mentioned
judgement, Justice Thakker had stated that murder can be committed in the heat of moment but
these economic offences are committed with a cool calculation and planned strategy to gain
personal profits.

The characteristics of white collar crime enunciated herein below distinguishes it from other
street crimes.

1. Direct access to the victim because of offender’s high position:

Because of his/her position the offender has direct access to the victim. E.g. when a thief
commits a theft in a house, he first breaks the door or window and then commits the crime.
Therefore, before committing theft a thief must first gain access to the house by entering it.
Whereas this is not in the case of white collar crimes because the white collar offenders have
easy and valid access to their targets.

2. No information about the offender:

Most of these crimes are committed by offenders without coming face to face with the victim.

13
AIR 1987 SC 1321.

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3. Political Connections:

Most of the offenders have big political connections and somewhere the politicians are also
involved in the said crimes. Therefore, it is difficult to take any action against such offenders.

4. Harm to Society:

These types of offenders can cause great harm to the public as well as to the institutions and
organizations.

RECOMMENDATIONS & SUGGESTIONS

The purpose of punishment besides reformative is different as well, So that it may deter the
accused from repeating the crime in future and may be a warning to those who are like- minded.

Accordingly, the law should not take a lenient attitude in fixing punishment to a White Collar
or Socio- Economic Criminal. For example hundreds of persons died after drinking country
made liquor which contaminated with some poisonous material. The punishment for such an
offence under the Indian Excise Act is nominal.

 Thus, the harsh punishments should also be extended to White Collar Crimes, as well; and
 The penalty might be extended up to sentence of death or life imprisonment the
circumstances so demand.
 The criminal liability for Socio -economic offences should be made absolute.
 The Indian Evidence Act should also be modified so as to shift the burden of proof of
innocence’s in case of White Collar, Socio-economic Crimes from the prosecution to that
or the accused. The accused should be held liable for the violation of such laws, unless he
proves innocence.
 A provision should be made of public censure by publishing the names of white collar &
social & economic offenders in the public domain with the help of digital medium including
local as well as national newspapers etc. This will have an added advantage ours. The
sentence of imprisonment & time.
 At every step the need is to the efforts should be made to create public awareness against
these crimes through media of press, platform & other audio-visual aids.
 Special Tribunals similar to Fast Track Courts should be constituted with power to award
sentence of imprisonment up to 10 years or even life imprisonment for White Collar Crimes
criminals.

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 More stringent regularity laws & punishment for White Collar Crimes criminals for
effective implementation with a clear message of deterrence.
 Now there should be a separate chapter on White Collar Crimes should be incorporated in
Indian Penal Code by awarding the code. So that White Collar Crimes criminals connected
by the court & do not escape punishment because of high social status.
 Above all, public vigilance will always be required to have a positive change in the longer
run.

“White-collar crime is not new to India. The scale is.”

***

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 BIBLIOGRAPHY

Table of Cases:

1. Chet Ram v. State

2. P.V. Narasimha Rao v. State
3. R.S. Nayak v. A.R. Antuley
4. State of Gujarat v. Mahesh Kumar Dheerajlal Thakka
5. State of Gujarat v. Mohanlal Jitamalji Porwal and Anr
6. State of Orissa and Ors. v. Titaghur Paper Mills Company Ltd. and Anr.
7. Suraj Narian Chaube v. State
8. V. Punne Thomas v. State of Kerala

Books/Articles/Reports:

1. ‘Conference report on white collar crimes’, by Godwin Kunda

2. ‘Criminal liability of corporate bodies’ by Vikas Garg
3. ‘Report on White-collar Crimes’ by International Monetary Fund
4. ‘White-collar crimes- (Talk delivered in the DST Programme on Forensic Laboratories
on 02.05.99)’ by N. Vittal, Central Vigilance Commissioner
5. K.D. Gaur (ED.) : Criminal Law and Criminology(2003) p.285.
6. Mishra R., ‘Criminal Psychology’, Sunit Enterprises, 2006
7. N.R.M. Menon’s unpublished dissertation entitled, ‘A Socio-legal Study of White
Collar Crime in India,’ 1968.
8. Pharmaceutical Inquiry Committee Report, 1954, p. 146.
9. Ratanlal & Dhirajlal, ‘The Indian Penal Code’, 30th edition 2006, Wadhwa
10. Report of the Monopolies Inquiry Commission 1965, p. 162.
11. Santhanam Committee Report, p. 253
12. Williams Frank. P., ‘Criminology Theory’, Andersen Publication

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Websites Referred:

1. http://www.businessinsider.com/four-shocking-misconceptions-about-whitecollared-
crime-2012-3
2. http://shodhganga.inflibnet.ac.in/bitstream/10603/43935/8/08_chapter%202.pdf

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