WHITE COLLAR CRIMES IN INDIA

Abstract

This paper analyzes a critical study on white-collar crime in India and to understand the concept of white-collar crime in India. White-collar crime means the crime committed by educated people belonging to a higher class of society during the course of their occupation. In this paper, the author has discussed what differentiates white-collar crime from blue or ordinary crimes. It can also be called as the crime of educated and professional elites. In this article, the author has further discussed the common types of white-collar crimes evolved in India in the last few years. And how this has become a socio-economic crime. Besides this, there are crimes that are involved in different professions i.e. in medical, education and legal professions. This also includes the theories of White Collar Crimes and the major Indian Laws laying down offences relating to White collar Crimes. ??

Introduction

White collar crimes are those crimes which are committed by high professionals, in their occupation, exploit social, economic and technical power for personal and corporate gain. White-collar crime is a very broad concept and includes many types of non-violent offences like fraud and illegal financial transactions. White-collar crimes are crimes that are done by the most elite people in their usual work. A few examples of white-collar crimes of a better understanding are fraud, counterfeiting, embezzlement, tax evasion etc. ?

?It is seen that White Collar Crimes are a major problem and it is difficult to find out the actual number of these crimes as they remain unrecorded by the Federal Bureau of Investigation's (FBI) crime statistics.

History

The most influential criminologist of the 20th?century and also a sociologist, Edwin Hardin Sutherland, for the first time in 1939, defined white-collar crimes as “crimes committed by people who enjoy the high social standard, great repute, and respectability in their occupation”. The five attributes of the given definition are:

· It is a crime.

· That is committed by an important person in the company

· Who enjoys high social status in the company

· And has committed it in the course of his profession or occupation

· There may be a violation of trust.

White Collar Crimes in India

Corruption, fraud and bribery are some of the most common white-collar crimes in India as well as all over the world. The Business Standards?22.11.2016 published a report titled “The changing dynamics of white collar crime in India” stating that in the past 10 years, the Central Bureau of Investigation (CBI) has found a total of 6533 cases of corruption out of which only 517 cases have been registered in past 2 years.

In 2014, India was ranked 85th which subsequently improved to 76th position in 2015 because of several measures to tackle white-collar crimes. In 2018, as per the report of The Economic Times, India was placed at 78th position, showing an improvement of three points from 2017, out of the list of 180 countries.

Reasons for the growth of white-collar crimes in India

Greed, competition and lack of proper laws to prevent such crimes are the major reasons for the growth of white-collar crimes in India.

· Greed: The father of modern philosophy, Machiavelli, strongly believed that man by nature is greedy. It is said that a person will sooner or later forget about the death of his father than the loss of his inheritance. The same is true concerning the commission of white-collar crimes.

· Competition: Herbert Spencer after reading “On the Origin of Species” by Darwin, coined the phrase that evolution means “Survival of the fittest”. It implies that there will be competition between species and the only person who adapts himself wins and survives.

· Lack of awareness: The nature of white-collar crimes is different from the conventional nature of crimes. Most people are not aware of it and fail to understand that they are the worst victims of crime.

· Necessity: People also commit white-collar crimes to meet their own needs and the needs of their families. But the most important thing is that people of high social status want to feed their egos. ?

Difference between white-collar crime and blue-collar crime

The term ‘blue-collar crime’ came into the picture in 1920. The term was used to refer to Americans who prefer manual labour. These people work on low incomes or on an hourly basis.

The difference between ‘blue collar crimes’, which are crimes of a general nature, and ‘white collar crimes’ was laid down by the Supreme Court of India in the case of State of Gujarat v. Mohanlal Jitamalji Porwal and Anr. Justice Thakker elucidated 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 to derive personal profits.

Meaning:

Blue-collar crimes refer to people who work physically, using their hands.

White-collar crimes refer to knowledgeable works, who use their knowledge to commit crimes.

New v/s Traditional

Traditional concept committed since ages.

It is recently developed. It is a new species of crime.

Mens rea

Mens Rea is essential in blue-collar crimes

Meas Rea is not an essential item in white-collar crimes.

Direct access to the target

The people don’t have easy, direct and valid access to its targets.

The people have complete access to the targets.

Veiled offenders

The offender has to come face-to-face with the victim.

The offender doesn’t have to come face-to-face with the victim.

Examples

Murder, theft, extortion

Cybercrime, counterfeiting, fraud etc.

Types of white-collar crime in India

The ambit of white-collar crime is very varied. Some of the main white-collar crimes in India are:

Blackmail

Section 503?of the Indian Penal Code, 1860, defines blackmail as making a demand for money and any other consideration by imposing a threat to cause physical injury or damage to one’s property. For example, revealing a secret of the person that the offender knows if revealed will cause great embarrassment to the victim. For example, if A, the Managing Director of the company XYZ knows that B, a female employee of the same company, was bearing the child of somebody other than her husband. A asked B to commit forgery on the account papers so that he could embezzle 20 lakhs rupees from the company without anybody knowing about it, or else he would reveal her secret which would cause great embarrassment not only to her but her family as well. ?

When does blackmailing become a white-collar crime?

For blackmailing to be considered under the ambit of white-collar crime, it should be committed by or show involvement by someone enjoying higher social status in an occupation.

Credit Card Frauds

These frauds are committed when one person uses the credit card of another person unauthorized to obtain goods of value, he is said to have committed credit card fraud against the other person. For example, in 2003 in Mumbai, Amit Tiwari, a 21 years old engineering student was arrested for using too many names, for having too many bank accounts and too many clients, all falsely managed to defraud a Mumbai-based credit card company, CC Avenue, of around 9 lakhs rupees.

This case brought to the notice of the authorities that credit card fraud has not been recognized by the Information Technology Act, of 2000. The loophole in the law has caused a great loss to the company.?

The Act of Embezzlement:

When a person who has been entrusted with money or property to use it for his purpose, but makes use in any manner, other than what is being told in an illegal manner, is said to have committed the offence of embezzlement. The act of embezzlement may be characterized as a criminal breach of trust which has been defined in section 405?of the Indian Penal Code, 1860.

It defines criminal breach of trust as “an act where a person who has been entrusted with a property misappropriated it or falsely converted it to his use or dispose of it without any law allowing him to do so”. Embezzlement is a misappropriation of someone’s property where a person has an intent to cause loss to the other person and criminal misappropriation is an offence under Section 403 of the Indian Penal Code, 1860.

The essential elements that constitute the crime of embezzlement are as follows:

1. The two parties must share a fiduciary relationship, that is, a relationship based on trust.

2. It is important that the defendant receives a certain amount of money or assets by making wrongful use of this relationship.

3. The defendant while embezzling the asset or money should act like he is the owner of that goods or he owns the money which he is giving to another person

4. There should be an intention to deceive on the part of the offender.

Some examples of embezzlement, in which people have committed white-collar crimes are:

It is often found that the company provides a car to its senior employees for official work. But these cars are seen to be used for purposes other than official duties which amounts to embezzlement. ?

In the banking sector, the bank tellers, who are people directly dealing with the customers give them access to the funds of the bank for work.

Racketeering

It refers to a wrongful act or says criminal act of a person where he indulges in illegal business with a profit motive.

The number of cases of racketeering has experienced a rise in the recent times. According to a report published in India Today?in February, 2019, Raju alias Hakla was arrested for his involvement in 113 cases of murder, dacoity and robbery. ?A kidney racket case?was revealed in 2019 where a businessman from Gujarat, Brijkishore Jaiswal, was about to undergo an illegal kidney transplant. This happened in Powai’s Hiranandani hospital. When the wrongful practice was unveiled, the CEO of the hospital, Sujit Chatterjee and 5 other people were taken under arrest.

Fraud Over Calls

Commonly called, telemarketing fraud, these frauds are made over a phone call. Here, a person is approached to make an investment for building a charitable institution and thus ask them about the details of their bank accounts to obtain a certain sum of money.

Fraud in buying and purchasing securities

When the broker of a company wrongfully shows the inflated of stocks in order to make people invest in his stock, is called securities fraud.

In 2019, pursuant to the report published by News18, Anilesh Ahija, known to the public as Neil, CEO and Chief Investment Officer of Premium Point Investments LP (PPI), an investment firm that managed hedge funds along with Jeremy Shor, former PPI trader, was arrested on the charge of securities fraud.

Using wrong weights

The consumer forums are flooded with cases where shopkeepers use false weight to sell their goods. The people who become prey to this kind of fraud are the ones who are illiterate.

In Emperor v. Kanayalal Mohanlal Gujar,?Sawkar, the accused bought a certain quantity of hirda from the vendor, Savleram. ‘Adholis’ which are primitive methods of measuring weights was used to measure the hirda. Despite warning from the patil of the village to not use these weights as they didn’t give accurate measures, Sawkar agreed to use them and later on seized the adholis and filed the suit. Sawkar said that false weight had been used to measure hirda but the court said that since he had agreed to the same and also Savleram didn’t have bad intent, Savleram would not be held liable for fraud. ?

Bribery

Bribery is a white-collar crime where a person asks for money, a favour, or something of value to get the other person’s work done. For example, if an electoral officer asks a person to offer him wine and only then will he be allowed to give a vote, 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 offence would be imprisoned for a term which 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 offence under this head, being engaged in by public officials.

Cybercrime

As the use of computers and the internet is increasing, so is the crime relating to it. The crimes that involve the use of computers, 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 offence.

The only legislation that deals with offences related to cybercrime is the Information Technology Act, of 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 are involved. ??

Tax evasion

Tax evasion is when a person deliberately forges his state of affairs in order for the authorities to levy less amount of tax. This can either be done by an individual, a corporation or a trust. It is a false means of escaping government taxes. In simple terms, Tax evasion and avoidance both is an offence which is used to reduce one’s tax burden. The offence 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)

Counterfeiting

Counterfeiting is a criminal act defined under section 28 of the Indian Penal Code, 1860, where the imitation of something authentic takes place to steal, destroy or replace somebody’s original work. This facilitates gaining profits from illegal transactions and deceiving a person who believes that the representation made to him is true and that the imitated work is of more value.

The crime of using counterfeiting is generally related to coins and currencies and is punishable under section 489B of the Indian Penal Code, 1860. In some cases, it also relates to imitating products like clothes, bags, shoes, watches, art, toys, etc. Counterfeit products carry fake logos and brand names and in some products, harmful chemicals have also been found leading to the death of the person using it.

The cases of counterfeiting coins have experienced a serious rise in India. On 4th July 2019, three people were caught by the Special Task Force of Kolkata upon finding fake Indian rupees with them whose total face value was rupees 6,50,000. In Rajkot, two people were caught recently with 1,080 counterfeit currency notes having a face value of 21.60 lakh, as per the Times of India report.

White-collar crime in other professions

In Medical Profession: The problem of the relationship between the doctor and the patient has been recognized long back by penologists. Manu said that the ones indulging in false practices, for example, where a doctor makes a false diagnosis report, a heavy fine would be levied on him. Removing of immature fetus was considered to be a heinous crime and such a person was called to be subject to severe punishment.

There have been many cases where medical practitioners have had no license to practice medical profession. The doctor treating the patient had turned out to be a fake doctor who had only deceived the patients by not treating them properly and running away with their money.

Examples of white-collar crime in medical profession could be issuing fake medical certificates, facilitating illegal abortions, and selling sample drugs and medicines directly to patients or chemists in India. Sometimes, professionals in the medical field are seen giving advice to criminals on how to escape the allegations using medical grounds.

In Karnataka, two doctors, K.H. Jnanendrappa and K.M. Channakeshava, were charged with making fake medical certifications for Abdul Karim Telgi, who was involved in a multicrore stamp paper racket in order to help him get bail on the grounds of health issues. Therefore, under the Prevention of Corruption Act, 1988 they both were held liable with 7 years imprisonment and with a fine of 14 lakh rupees each.

In Legal Profession:?Use of fake evidence, and fake witnesses in the court and thus extracting a huge sum of money from their clients, the lawyers too commit white collar crime. Legal practitioners with the help of ministerial support involved in wrongful practices and violate all the ethical standards for some amount of money.

So in the case of D.K. Gandhi v. M. Mathias?when referring to what the Supreme Court had said in Jacob Mathew v. State of Punjab, held the appeal and left the matter to be decided by the State Commission based upon the law.

In the case of Jacob Mathews, the Supreme Court had said that: in law of negligence, the professionals from different professions like, legal, medical, or architecture, or any other would be held liable for negligence in practicing their profession if that either of the two given conditions are satisfied: a. He did not have the required skill that was needed to be professed and, b. Even if he has the required skills to be professed, he did not exercise the same.

In Engineering Profession:?Engineers are often found to be involved in providing substandard works and materials.

In April 2019, India Today?reported that an assistant engineer by the name of S.F. Kakulte was arrested for negligence because of which a bridge had collapsed. Along with Kakulte four other engineers and the chief engineers of Bombay Municipal Corporation were involved in the project. The Structural Auditor, Neeraj Desai, was also arrested for negligence in the report. He claimed that beams, pillars, and metal fixtures were audited but the concrete slabs were not mentioned in the inventory given to him for the audit as a result 6 people died and 35 were seriously injured.

In education: Many private educational institutions involve themselves in fake practices like using fictitious documents and fake details to obtain grants from the government to run their institution.

It was in 2019 when the New India Express?reported that a senior railway ticket-checking staff was arrested by the Central Crime Branch for leaking out the question papers of the exams for the post of constables in return for money.

Courts and white-collar crime in India

The white-collar crimes have not been defined anywhere in the law, but there exist various legislations which imply the existence of such crimes in India.

We are well aware of the fact that more than 3 crore cases are pending before the Indian Judiciary. In this case, it would be very difficult to dispose of the cases of white-collar crimes as early as possible.

Legislation against white collar crime in India

Several provisions exist for identifying white-collar crimes in India. Government to ensure that the criminal committing white collar crime must be punished, brought out the various legislations-

1. The Companies Act, 1960

2. The Income Tax Act, 1961

3. Indian Penal Code, 1860

4. The Commodities Act, 1955

5. The Prevention of Corruption Act, 1988

6. The Negotiable Instrument Act, 1881

7. The Prevention of Money Laundering Act, 2002

8. The Information Technology Act, 2005

9. The Imports and Exports (Control) Act, 1950

10. The Special Court (Trial of Offences Relation to Transactions in Securities) Act, 1992

11. The Central Vigilance Commission Act, 2003

Penalties?for White-Collar Crimes in India:

Punishment for fraud:

Section 447 of the Companies Act, 2013 provides the punishment for the commission of fraud. It states that if a person is found guilty of an offence of fraud, he would be imprisoned for a period of less than 6 months and which may extend to 10 years.

Punishment for false statement: Section 448 of the Companies Act, 2013 states that: if a person deliberately makes a false statement, knowing it to be false then he would be held liable for his wrongful act.

Punishment for furnishing false evidence: Section 449 of the Companies Act, 2013 provides for punishment for furnishing false evidence. It states that if any person gives a false evidence in a court of law:

· Either upon an examination on oath or solemn affirmation; or

· When any company is about to dissolve or otherwise also in case of any matter arising under this Act, in any affidavit, deposition or solemn affirmation,

· He shall be punished with imprisonment and fine both. The imprisonment will not be less than 3 years and may extend to 7 years and the fine may extend to 10 lakh rupees.

Recent white-collar crime cases in India

SEBI v. Burman Plantation and Others

Before the High Court of Allahabad, the learned counsel on behalf of SEBI claimed that the company was being wrongly accused as the company was not in a position to pay its debts, including payments to its investors. When the advertisement by the company was put into question, the council said that the advertisement was given in 2003 while the order was passed in 2004, when the company was not in a position to pay back its debts.

Moreover, the sum of money that the investors were claiming was nowhere cited. The main claim of the counsel made the legislatures raise the punishment from 1 year to 10 years and also increased the fine which may now extend to 25 crores by amending the laws under section 24(1) of the SEBI Act. At last, Ravi Arora, the accused, was held liable.

Abhay Singh Chautala v. C.B.I.

There were two appellants in the present case against whom a charge sheet was filed for committing an offence under Section 13(1) (e) and 13(2) of the Prevention of Corruption Act, 1988 read with Section 109 of the Indian Penal Code, 1860 in separate trials. It was alleged that both the accused had accumulated disproportionate wealth as per their income when they were members of the Legislative Assembly.

When the Central Bureau of Investigation (CBI) initiated its investigation it was found that the father of the appellant had acquired huge properties and same is the case with the appellants. The High Court held that the appellant had provided a different office(s) of the accused than they were holding at that time. Thus the sanction under Section 19 of the Prevention of Corruption Act, 1988 was held to be without any merit.

Binod Kumar v. State of Jharkhand & Others

This case was filed against several ministers of the State of Jharkhand along with the Chief Minister for having the possession of unaccountable money. The High Court had requested the Central Government to transfer the case from the Enforcement Directorate to the CBI by way of power given to it under Section 45 (1A).

It was alleged that the ministers were in possession of hefty amounts of money and though no evidence was found to charge them with a money laundering case, a strict investigation was proposed.

The ministers were said to be the owners of property not only in India but abroad as well. Therefore, the court asked for an investigation to determine whether this wealth was acquired by making use of the official position. It was to be clarified if a white crime had been committed under the Prevention of Corruption Act, 1988 and under the Indian Penal Code, 1860.

The CBI started its investigation under the Prevention of Corruption Act, 1988 and the Indian Penal Code, 1860 as the power to carry on investigation under the Prevention of Money Laundering Act was only with the Enforcement Directorate, which is of course subject to the power given to the Central Government under Section 45 (1-A) of the Prevention of Money-laundering act.

Suggestions to curb white-collar crimes in India:

? The purpose of Punishment is to reform the criminal and not to let the criminal commit the crime again. Thus, the law must not be lenient and must provide harsh punishment.

? The penalty along with the sentencing must be increased so that people (criminals) can be reformed.

? The need is to create public awareness against these crimes with the help of media, press and other platforms.

? Special tribunals similar to Fast Tract courts should be constituted with the power to award punishment with a sentence of up to 10 years. ?

Conclusion:

The threats of white-collar crime to the well-being of India and the economic development of the country cannot be underestimated. The white collar crime is a bane to most of the developing countries of the world. White collar crimes have two surprising features, first, that they are non-violent crimes, though the criminals tend to gain control or have a sense of entitlement, and, second, that they are committed by people in the higher profession.

The media has a key role to play in reducing the rate of increasing white-collar crimes. It has been noted that most of the white-collar crimes go unreported. So, if the media becomes more active towards publishing frauds and scams at higher levels and revealing how the people at higher positions in a company use their powers arbitrarily and also make efforts to make people aware of the white-collar crimes and avoid corrupt practices, then this would help in reducing the rate at which the white collar crimes are being committed.

References:

1. https://www.business-standard.com/article/markets/the-changing-dynamics-of-white-collar-crimes-in-india-116102200032_1.html?
2. https://economictimes.indiatimes.com/news/politics-and-nation/india-improves-its-ranking-on-global-corruption-index-in-2018-study/articleshow/67744492.cms?
3. Para 4; A.I.R. 1987 SC 1321
4. Indian Penal Code, 1860.
5. https://blog.ipleaders.in/white-collar-crimes/?
6. https://www.google.com/amp/s/www.indiatoday.in/amp/crime/story/man-involved-in-113-criminal-cases-arrested-in-delhi-1462084-2019-02-22?
7. https://m.timesofindia.com/topic/Kidney-transplant-racket?
8. https://www.google.com/amp/s/www.news18.com/amp/news/india/indian-origin-founder-of-us-based-hedge-fund-firm-convicted-of-securities-fraud-2228389.html?
9. Emperor v. Kanayalal Mohanlal Gujar, (1939) 41 BOMLR 977
10. Prevention of Corruption Act, 1988
11. Income-tax Act, 1961
12. D.K. Gandhi v. M. Mathias, 6th August, 2007
13. Jacob Mathew v. State of Punjab, (2005) 6 SCC 1 (para 18)
14. https://www.indiatoday.in/india/story/chhatrapati-shivaji-maharaj-terminus-collapse-bmc-engineer-arrested-1491863-2019-04-02
15. https://www.newindianexpress.com/cities/bengaluru/2019/mar/24/railways-suspends-officer-arrested-for-exam-malpractice-1954976.html?
16. SEBI v. Burman Plantation and Others, (2013)
17. Abhay Singh Chautala v. C.B.I., (2011)
18. Binod Kumar v. State of Jharkhand and Others, (2011)