CAUSES OF WHITE-COLLAR CRIME

The general perception is that the white collar crimes are committed because of greed or
economic instability. But these crimes are also committed because of situational pressure
or the inherent characteristic of getting more than others. However, there are various
reasons for white collar crimes.4
4 Aashish Ahuja, “Analysis Of White Collar Crimes In India”, available at
https://blog.ipleaders.in/analysis-white-collar-crimes-india/ (Visited on 18 April, 2018).
Not really a crime: Some offenders convince themselves that the actions performed by
them are not crimes as the acts involved does not resemble street crimes.
Not realizable: Some people justify themselves in committing crimes as they feel that the
government regulations do not understand the practical problems of competing in the free
enterprise system.
Lack of awareness: One of the main reason of white collar crime is the lack of awareness
of people. The nature of the crime is different from the traditional crimes and people
rarely understand it though they are the worst victims of crime.
Necessity: Necessity is another factor of committing crimes. People commit white collar
crimes in order to satisfy their ego or support their family.
Greed: People of high strata are financially stable. But, still they commit crimes out of
greed. For this purpose, they adopt all sorts of illegal methods to have an economic gain.
Technology: Another reason behind the commission of white collar crimes can be
technology. The emergence of new technologies, political pressure or growing business,
has led to many more ideas which has resulted in the commission of crimes.
Competition: White collar crimes usually occur because of the desire to beat the
competitor and to reach ahead of them. To win, crimes like forgery, bribery and frauds
are committed.
Legislation: One of the major reasons behind the rise in the commission of white collar
crimes are that there are not enough laws to deal with such kinds of crimes. In most of the
cases, white collar criminals are not even prosecuted. The implementation of Information
Technology Act 2008 is fragile due to lack of trained workers. It is tough to find white
collar criminals because the crimes which are committed are mostly done in private
places and hence there is no eye witness. 5
5 Raj Krishna, Rishabh Goswami, “White Collar Crimes: A Conceptual Discussion” available at
http://ijldai.thelawbrigade.com/wp-content/uploads/2016/11/Raj-Krishna.pdf (Visited on 18th April,
2018).
TYPES OF WHITE COLLAR CRIMES
Few infamous categories of white collar crime include hoarding, black marketing,
adulteration, tax evasion, etc. These days, white collar crimes are more linked with the
profession in which it is committed, and accordingly various names are given.
Professional or occupational crimes by doctors, engineers, legal professionals are
individually, and sometimes institutionally (through Hospitals, Associations, Institutions
including educational institutions etc) involve in committing these crimes.
From the theoretical perspective, four types of white collar crime are explained here. The
first category is that of personal, or ad hoc crimes in which offender pursue his individual
objective, and usually has no face-to-face relationship with the victim. Tax evasion by
individual, frauds, credit frauds, etc. come in this category. In this category the offender is
often persuaded by greed, or sometimes by a very serious real or perceived need.
The second category is where the offender abuses the trust or faith bestowed over him by
individual or institution. Financial embezzlements by employees or fiduciaries, accepting
bribes or other favours to grant contracts on behalf of one’s government or business
employer, misuse of an employer’s property or information for private profit, misuse of
labor union pension funds, creating “ghosts” on payrolls or fictitious accounts payable-
all of these are typical examples in this category. Here the offender has power to cause
harm by virtue of his
or her position and, through control and manipulation of paper or computer records, to
temporarily or permanently bury evidence of crime.
The third category, and the most difficult category of white collar crimes belongs to that
type of offender, usually with a real high status in society or their respective community,
and they commit crime incidental to, and in furtherance of their organizational operations.
Since, under this class, committing crime is not the central purpose of the organization,
and people too belong to a real high status, having influence over system and society
both, ravish not only regulatory norms but also faith of people at large. Offenders, under
this category often indulge in antitrust violations, collusive bidding, and corrupt practices
at political as well as economic fronts to support their individual or organizational
interests etc. Fraudulent medical claims, submission of a misleading statement, academic,
institutional or financial, to obtain more credit/fund/grant etc. also comes under this
category of white collar crime. Crime committed under this class is well hidden and
extensively rationalized. The recent examples of such crimes are 2G Spectrum Scam,
Coalgate Scam, Commonwealth Games Scandal, Mumbai Adarsh Defence Society Scam,
Bihar Fodder Scam, etc.
The fourth category of white-collar crime is a class where crime is committed as a part of
business itself. Violation of trademarks or copyright, Patent Law or Competition Law etc.
come under this category. The violation of Domain name and other corporate crimes are
also white collar crimes of this type. 6
6 Dr. Girjesh Shukla, Criminology- Crime Causation, Sentencing and Rehabilitation of Victims 101,
(Lexis Nexis, 2013)
7 G. Nagarajan & Dr. J. Khaja Sheriff, White Collar Crimes in India, International Journal of Social
Science & Interdisciplinary Research available at
http://indianresearchjournals.com/pdf/IJSSIR/2012/September/16.pdf (Visited on April 17, 2018).
8 Act No. 45 of 1860

INDIAN SCENARIO
In the India, there has been prevalence of white-collar crimes over a period of time. They
are spreading like a rapid fire in every sphere of society. Though corruption, one of the
species of white collar crimes, has been the most talked about issue in all spheres- social,
economic and political, not much stringent steps/actions have been taken to curb this
menace.7 The Indian Penal Code 18608 is the earliest comprehensive and codified
criminal law of India.
specifically does not mention the word ‘white-collar crimes’ but deals with many
offences which are closely linked to white collar crimes such as bribery and corruption, 9
counterfeiting of coins and government stamps, 10 of offences relating to weights and
measures,11 offences relating to adulteration of food stuffs and drugs, 12 misappropriation
of public property and criminal breach of trust, 13 cheating,14 forgery and offences relating
to documents15 and counterfeiting of currency.16
9 Indian Penal Code, 1860- Section 168, 169, 171B, 171C, 171E, 171H.
10 Ibid section 230 – 263.
11 Ibid section 264 – 267.
12 Ibid section 272 – 276.
13 Ibid section 403 – 409.
14 Ibid section 415 – 420 .
15 Ibid section 463 – 489.
16 Ibid section 489A – 489D.
17Prof. N.V. Paranjape, Criminology & Penology with Victimology 147 (Central Law Publications,
16th edition, 2015)
18 Fourth Annual Report on the Working of Indian Companies Act, 1956, Government of India (1960).
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 lucid picture of white collar crimes committed by
persons belonging to higher social strata. It includes businessmen, industrialists,
contractors, suppliers as well as corrupt public officials. The Reports of the Vivin Bose
Commission of Inquiry which looked into the affairs of Dalmia Jain group of companies
(1963) highlighted that how industrialists indulge themselves in white collar crimes such
as forgery, fraud, falsification of accounts, tampering with records for personal gains and
tax evasion etc.17 Similar observations were made by Mr Justice M.C Chagla while
dealing with the case of business tycoon Mundhra who wanted to build up an industrial
empire by dubious means. There were as many as 124 prosecutions against the business
magnate and companies owned or controlled by him between 1958 to 1960 and as many
as 113 of them resulted into conviction. 18
The 2010-2011 corruption and fraud cases in India – 2G Spectrum scam, Adarsh Society
scam, CWG fraud, various land scams etc. – have negatively impacted India’s reputation
internationally. The infringements are of various kinds, with bribery and corruption
making up 83% of cases. A large part of the frauds also relate to cyber crime (71%) and
diversion of assets
(65%). The sectors most affected are financial services (33%) and information and
entertainment (17%), according to the survey.
The Satyam Scam: In perhaps one of Corporate India's worst unfolding chapters, Mr B.
Ramalinga Raju, Founder-Chairman of the $2-billion Satyam Computer Services,
dramatically stepped down after admitting of faking financial figures of the company to
the tune of Rs 7,136 crore, including Rs 5,040 crore of non-existent cash and bank
balances. The startling disclosure by Mr Raju, considered one of the poster boys of Indian
IT, jolted the corporate world, investor community, Government and large pool of young
professionals, pushing the fourth largest Indian IT company into a crisis, exposing it to
acquisitions and leaving the future of 53,000 employees in balance. Mr Raju in his
revelation to the BSE admitted that the balance sheet for September 30, 2008, comprised
faked and exaggerated figures of revenue, profit, interest and debt. The list includes Rs
5,040 crore of fictional cash and bank balances, non-existent accrued interest, discreet
liability of Rs 1,230 crore on account of funds raised by Mr Raju and overstated debtors
position of Rs 490 crore (as against Rs 2,651 crore).“What started as a marginal gap
between actual operating profit and the one reflected in the books continued to grow over
the years. It has attained unmanageable proportions as the size of the company's
operations grew over the years,” Mr Raju explained. 19
19 “White Collar Crimes With Special Emphasis On Corporate And Cyber Crimes” available at
https://www.lawteacher.net/free-law-essays/criminal-law/white-collar-crimes.php (Visited on 19th
April, 2018).
The PNB bank case: Nirav Modi and Mehul Choksi, in connivance of several senior as
well as junior officials, defrauded PNB of several thousand crore of rupees. These PNB
officials fraudulently issued LoUs and LoCs on behalf of several companies belonging to
the duo for availing buyers' credit from overseas branches of Indian banks. None of the
transactions were routed through the CBS (Core Banking Solution) system, thus avoiding
early detection of fraudulent activity, which was going on since 2011.
In the scam now pegged to be around Rs 13,700 crore, over Rs 450 crore was diverted to
around six beneficiaries companies based in Hong Kong and Sharjah (UAE) in just one
month - July 2014. The amount of money, issued as loans through the LoUs (Letters of
Undertaking) or LoCs (Letters of Credit) by Punjab National Bank, was later routed to the
shell companies
linked to Nirav Modi and Mehul Choksi in Hong Kong and Sharjah. These companies
include Sunshine Gems (Hong Kong), Sino Traders (Hong Kong), Tri Colour Gems
(Sharjah), Diagem (Sharjah), and Auragem (Hong Kong).
The ED has already issued Letter Rogatory (LR) - a request sent to a foreign court for
judicial assistance - to 13 countries (mostly regulated by the United Nations), including
Hong Kong and UAE, to seek their cooperation in the investigation. Both Nirav Modi and
Mehul Choksi are on the run since January 5. Through these LRs, the ED has sought the
details of companies associated with the duo, their local addresses, and the beneficiaries
involved.20
20 Available at https://www.businesstoday.in/sectors/banks/pnb-fraud-companies-owned-by-nirav-
modi-mehul-choksi-received-rs-427-crore-in-july-2014/story/272700.html (Visited on 20th April,
2018).
21 (1998)1 SCC 226.
22 AIR 2012 SC 1185.
JUDICIAL RESPONSE
The Prohibition of Corruption Act, 1986 and the Code of Criminal Procedure, 1973, both
provide special impunity by Section 19 and Section 197, respectively. The sanction
contemplated in Section 197 of the Code concerns a public servant who “is accused of
any offence alleged to have been committed by him while acting or purporting to act in
the discharge of his official duty”. To restrict the unnecessary harassment of public
servant, these sections provide that no court shall take cognizance without prior sanction
for prosecution from the appropriate authority.
Dealing with corruption related matters, where often sanction for prosecution of a public
servant is either refused or delayed by the government, Supreme Court observed in the
Vineet Narain v. Union of India,21 that the corruption cases against public servant were
often delayed due to refusal or delayed sanction by the competent authority despite the
investigation agency having disclosed a prima facie 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 reiterated this approach in
Subramanium Swamy v. Dr. Manmohan Singh,22and reaffirmed that the 3 months
time limit imposed on the grant of governmental
sanction under section 19 of Prevention of Corruption Act, 1988 for the prosecution of
public servant for corruption must be strictly adhered to.
In the case of Jaylalitha v. Union of India, 23 the Supreme Court admitted that
corruption is rampant among the public servants. Court further stated that corruption
corrodes the moral fabric of the society and is harmful to the national economy.
Corruption by persons occupying high posts in government, by misusing their powers can
cause considerable damage to the national economy, national interest and image of the
country.
23 (1999) 5 SCC 138.
24 AIR 2003 SC 2748.
25 AIR 1987 SC 1321
26 AIR 2013 SC 2821.
In Ram Narayan Poply v. C.B.I.,24 the Apex Court expressed concern for adverse effect
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.
The Supreme Court in State of Gujarat vs. Mohanlal Jitamalji Porwal and Anr.25 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.
In case of Nimmagadda Prasad v. C.B.I.,26 the appellant along with Jagan Mohan
Reddy, enriched himself for more than 40,000 crores of rupees by the influence 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 18879 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.
The appellant’s prayer for bail was dismissed by the Supreme Court in the view of the
fact that he was involved in a grave economic offence of alienating prime lands to
selected private companies/individuals under the garb of development using deceptive
means resulting in
wrong ownership and control of material resources detrimental to common good. The
Court notes that the appellant was a person of means and as such, he could influence
witnesses, therefore, it would not be proper to release him on bail.
RECENT STEP
The Union Cabinet decided to bring into effect the Fugitive Economic Offenders Bill as
an ordinance, after the Bill could not be tabled in the Budget Session of Parliament owing
to a logjam. The ordinance will lay down measures to empower Indian authorities to
attach and confiscate the proceeds of crimes associated with economic offenders and their
properties. The ordinance has been approved in order to address the deficiency in present
laws. It is expected that the special forum, to be created for expeditious confiscation of
the proceeds of a crime, in India or abroad, will coerce the fugitive to return to submit to
the jurisdiction of courts. The ordinance will cover those whose alleged proceeds from a
crime are over Rs 1 billion. Any person who does not appear before a special court or
does not respond to summonses will be declared an economic offender. All the offender’s
assets will be confiscated, not only those from the proceeds of the alleged crime.
According to the ordinance, a special court will have powers to declare a person an
economic offender. An administrator will be appointed to manage and dispose of the
confiscated assets, including helping banks recover any defrauded amount. The offender
will not be able to file any civil claim in any Indian court to recover his or her assets. 27
Currently, confiscation can be done through multiple laws, but is a complicated
process. The laws under which such offenders are tried are the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, the
Recovery of Debts Due to Banks and Financial Institutions Act, and the Insolvency
and Bankruptcy Code.