Remedies to combat white collar crimes

PUBLIC SERVANT

• Section 2(b) of Prevention of Corruption Act, 1988: Public Duty It means a duty in the
discharge of which the State, the public or the community at large has an interest. In State of
Gujarat v. Mansukhbhai Kanjibhai Shah, 2020 (2) RCR (Criminal) 544, the Supreme Court
observed that evidently, the language of Section 2(b) of the PC Act indicates that any duty
discharged wherein State, the public or community at large has any interest is called a public duty.

• In C.B.I. v. Ramesh Gelli, (2016) 3 SCC 788, the managing director and chair of a private
banking company were held to be ―public servants‖ for the purposes of prosecution under the
Prevention of Corruption Act 1988.

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• In P.V. Narsimha Rao v. State, 1998 CriLJ 2930, the Supreme Court held that MLA is
public servants U/s 2(c)(viii) of Prevention of Corruption Act, 1988, as it states ‗any
person who holds an office by virtue of which he is authorized or required to perform any
public duty‘.

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CORRUPTION LAWS IN INDIA
• Public servants in India can be penalized for corruption under the Indian Penal Code,
1860 and the Prevention of Corruption Act, 1988. The Benami Transactions (Prohibition)
Act, 1988 prohibits benami transactions. The Prevention of Money Laundering Act, 2002
penalises public servants for the offence of money laundering. India is also a signatory
(not ratified) to the UN Convention against Corruption since 2005. The Convention
covers a wide range of acts of corruption and also proposes certain preventive policies

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PROCESS TO INVESTIGATE AND PROSECUTE
CORRUPT PUBLIC SERVANTS

• The three main authorities involved in inquiring, investigating and prosecuting corruption cases are the
Central Vigilance Commission (CVC), the Central Bureau of Investigation (CBI) and the state Anti-
Corruption Bureau (ACB). Cases related to money laundering by public servants are investigated and
prosecuted by the Directorate of Enforcement and the Financial Intelligence Unit, which are under the
Ministry of Finance
• The CBI and state ACBs investigate cases related to corruption under the Prevention of Corruption Act,
1988 and the Indian Penal Code, 1860. The CBI’s jurisdiction is the central government and Union
Territories while the state ACBs investigates cases within the states. States can refer cases to the CBI.

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• The CVC is a statutory body that supervises corruption cases in government
departments. The CBI is under its supervision. The CVC can refer cases either to the
Central Vigilance Officer (CVO) in each department or to the CBI. The CVC or the CVO
recommends the action to be taken against a public servant but the decision to take any
disciplinary action against a civil servant rests on the department authority.
• Prosecution can be initiated by an investigating agency only after it has the prior
sanction of the central or state government. Government appointed prosecutors undertake
the prosecution proceeding in the courts.
• All cases under the Prevention of Corruption Act, 1988 are tried by Special Judges who
are appointed by the central or state government.

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INSTITUTIONS INVOLVED IN
INVESTIGATION
• At the federal level various bodies are constituted. Out of which key institutions are the Supreme Court
(S.C), the Central Vigilance Commission (CVC) the Central Bureau of Investigation (CBI) the office of
the Comptroller and Auditor General (CAG) and the Chief Information Commission (CIC),
Enforcement Directorate (ED) and at the State level there are the Anti-corruption Bureau (ACB) for
each State.
• A) Supreme Court and High Courts: Any citizen can file a petition, known as Public Interest
Litigation, before the Hon‘ble High Courts and Hon‘ble the Supreme Court, alleging corruption in the
public sector. If the Hon‘ble High Courts and the Supreme Court find the allegations credible, they can
refer such cases to the Central Bureau of Investigation for further enquiry or investigation. Many big
cases of corruption have been successfully investigated by the agency in the past on such references
from these courts.

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• B) Central Vigilance Commission (CVC): Central Vigilance Commission is an apex
Indian governmental watchdog body created in 1964 to address governmental corruption
constituted under the provision of Central Vigilance Commission Act, 2002. It has the
status of an autonomous body i.e. free from executive control. The Central Vigilance
Commission set up by 4 the Government of India to advise and guide central government
agencies, as well as it also have special power to analysis of complaints of corruption,
professional misconduct, misuse of power by administrative bodies.
• C) Central Bureau of Investigation (CBI): The Central Bureau of Investigation is an
investigating agency set up by the Government of India to investigate crime, especially
corruption cases in Union Territories, which are directly administered by the Government
of India. It enjoys high credibility amongst the people of India. As a result even the
States also refer sensitive and large-scale corruption cases to the Central Bureau of
Investigation for investigation. The High Courts of various States and the Supreme Court
of the country have powers under the Indian Constitution to entrust investigation of any
crime to the Central Bureau of Investigation for investigation.
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• D) Comptroller and Auditor General of India (CAG): Comptroller and Auditor
General is supreme constitutional audit authority of India. Comptroller and Auditor
General is the ‘watchdog‘ on each and every financial transaction of Central or State
department such as railway, telecom, public sector etc. Comptroller and Auditor General
is one of the institutions to prevent the corruption in government department Role of
Comptroller and Auditor General in democracy is as prejudiciary. Main function of the
Comptroller and Auditor General is to see that, money sanction by parliament must be
spent only for that purpose for which it is sanction.
• E) Anti-Corruption Bureau (ACB): These police agencies of the States are meant
mainly for investigating corruption cases within the States under the Corruption Act.
They are responsible for the prevention, detection and investigation of corruption crime
only and are not engaged in conducting other police duties such as handling conventional
crimes and law and order. After investigating a crime, they file the investigation reports
in a court of law to launch prosecution.
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JUDICIAL RESPONSE TO WHITE COLLAR
CRIMES

• In the case of Anosh Ekka v. Central Bureau of Investigation, Anosh Ekka was
alleged to have been involved in money laundering as, after becoming the minister
acquired a huge amount of movable and immovable assets in his name and in the name
of his family within a short span of 3 years. The Supreme Court held the accused liable
for looting and laundering huge amount of public wealth. He delayed the judgement and
also manipulated the evidence against him. He was also accused of abusing the
lawmaking process and contempted on the justice delivery system.

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• Arun Kumar Mishra v. Directorate of Enforcement
Five persons opened a fictitious account with the Punjab National Bank (PNB) and made
personal gains while causing PNB to lose a significant amount of money. Because the
offence did not come under any section of the Prevention of Corruption Act, the money
laundering case was dismissed. Ex-post facto laws, according to Article 20(1) of the
Indian Constitution, have no legal force. It is a basic right under the stated Article not to
be tried under a legislation that did not exist at the time the offence was committed. The
court did say, however, that if money laundering has been proven against the petitioner,
the Enforcement Directorate can bring a new case against him under the statute in effect
at the time.

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• The Supreme Court of India in J. Jayalalitha v. Union of India, has held that
“Corruption corrodes the moral fabric of the society and corruption by public servant not
only leads to the corruption of the moral fabric of the society but is also harmful to the
national economy and national interest, as the person occupying high posts in
government by misusing their powers due to corruption can cause considerable damage
to the national economy, national interest and image of the country”.

• In a landmark judgment of Parkash Singh Badal v. State of Punjab, Supreme Court of

India has expressed that if an accused is a public servant who has retired or ceased to be a
public servant then to prosecute him no sanction in terms of Section 19(1) of the Act is
necessary.

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MAJOR SCAMS RELATED TO WCC

1. Harshad Mehta Securities Fraud

• Harshad Mehta was a stockbroker who founded Grow More Research & Asset
Management Limited, a security company, in 1990. Investors blindly followed
him as he was well-known back then with the title “Sultan of Dalal Street” of the
Stock market. Harshad Mehta was involved in a massive stock manipulation
scheme financed by worthless bank receipts. He used techniques such as signing
fake cheques, and misusing market loopholes & fabrication to raise the stock
prices up to 40 times their original price. Thus, the Stock traders making good
returns from this scam fraudulently gained unsecured loans from banks.

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2. Satyam Scandal

• This was the biggest-ever corporate accounting fraud by B. Ramalingam Raju, who was
the founder and chairman of Satyam Computers Services Limited. He wrote a confession
published in the Times of India in 2009, revealing this scam. In the letter, he accepted the
fact that he tampered with his books of accounts by inflating assets and understating
liabilities. We know that a company’s financial condition is judged from its books of
accounts, and before making any investment, investors rely on this book so, falsifying it
to defraud shareholders and investors is obviously a crime which Raju committed. In
order to ensure that a similar scam never happens again, SEBI responded to this matter
strongly.

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 3. Ketan Parekh Security Scam
• Parekh engaged in circular trading and stock manipulation from 1999 to
2001. He borrowed money from financial institutions such as Global Trust
Bank and Madhavpura Mercantile Co-operative Bank to utilize the amount
for the manipulation of many stocks. They were found guilty of
manipulating the share prices of ten companies called K-10. The scandal
cost roughly ₹ 1,250 crore so. Consequently, SEBI banned Parekh and
associated firms from trading in the market for 14 years. He although served
only a year in prison yet he was not allowed to trade on the Indian stock
market until 2017.
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4. Saradha chit fund case

• A renowned financial fraud by an elite group which was also an alleged political scandal
was the Saradha Chit fund case. Saradha Group, a group of 200 private companies, ran
Ponzi scheme, which collapsed, it was running collective investment schemes (money
pooling schemes) incorrectly referred to as Chit Fund that resulted in major financial
fraud. With the fake promise of a multiplied substantial sum in return in the form of cash
or real estate and other assets, this group manipulated around ₹30,000 crores from more
than 17 lakh depositors. SEBI banned Saradha Realty India and its managing director
Sudipta Sen from the securities market until the group winded up all the Collective
Investment Schemes (CIS) and made the refund.

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5. Punjab National Bank Fraud

• Nirav Modi was the 85th richest person in India whose name popped up in the Punjab
National Bank Fraud case. Bank claimed that Modi and the businesses connected to him
conspired with a few of the bank’s representatives to obtain guarantees or letters of
undertaking from other foreign banks to help finance buyers’ credit for the purpose of
buying & selling diamonds. Two bank employees fraudulently issued Letters of
understanding to these firms without following the proper procedure. Then, based on these
Letters, credit was extended to these firms

• PNB claimed that the money purportedly raised for the purpose of buying and selling
diamonds was not put to use. PNB released information to the stock exchange & ₹11,400
crores of fraud was discovered at PNB, making it one of the biggest scams in the Indian
banking industry.
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6. 2G Scam

• 2G Scam involved the fixed-price sale of licenses for the 2G spectrum. It was a political
controversy in which politicians and private officials of the United Progressive Alliance
coalition government in India (UPA) were allegedly involved in selling or allotting 122 2G
spectrum licenses. Licenses were given to applicants who weren’t even qualified. It was a
combination of three cases, one filed by the Enforcement Directorate and two cases
registered by the CBI. CAG’s report revealed that 2G, or second generation licenses for
mobile networks, were given at throwaway prices instead of carrying free and fair auctions.
The then Telecom minister, A Raja, denied all charges stating that PM Manmohan Singh
had consented to this decision and so he was arrested in 2011 on charges of cheating,
forgery and conspiracy. In 2010, the CAG of India released a report on their crime. Also,
the charge sheet was 80,000 pages long as the crime was very serious.

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7. Common Wealth Games Scam

• Commonwealth Games is an international competition wherein the athletes from the

Commonwealth Nations compete in several sports. It occurs once a year & it is run by
the Commonwealth Games Federation. Suresh Kalmadi, the Games’ planning committee
chairman, conducted this Commonwealth Games scam. He allegedly awarded the
lucrative contract to the Swiss firm to install a TSR system for the Commonwealth
Games at a very high cost, causing a loss of over ₹900 million to the exchequer as the
Swiss Timings’ time equipment actually costs ₹95 crores. The Central Vigilance
Commission got to know about the CMW scam, and the culprits were detained on
charges of cheating, conspiracy, corruption, forging documents etc. Hence, this is also a
serious white-collar crime.

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REMEDIES TO CURB WHITE COLLAR CRIMES
• Remedies for white-collar crimes involve legal actions and measures aimed at addressing the
consequences of these offenses, holding perpetrators accountable, and preventing future
occurrences. Here are some common remedies employed in response to white-collar crimes:

Criminal Prosecution:

• Individuals engaged in white-collar crimes may be subject to criminal charges. Prosecution can
lead to convictions, resulting in penalties such as fines, restitution, and imprisonment. The
severity of punishment depends on the nature and extent of the crime.

Civil Lawsuits: Victims of white-collar crimes, including individuals and businesses, may
pursue civil lawsuits against perpetrators to recover financial losses. Successful lawsuits can
result in monetary judgments that compensate victims for damages.

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 Restitution: Courts may order perpetrators to pay restitution to the victims, requiring
them to reimburse the financial losses suffered by individuals or entities affected by the
white-collar crime.

Asset Forfeiture: Authorities may seize and forfeit assets acquired through illegal
activities. This can include funds, real estate, vehicles, or other valuables obtained
through fraudulent schemes.

Regulatory Actions:

• Regulatory bodies, such as the Securities and Exchange Commission (SEC) or the
Federal Trade Commission (FTC), may take administrative actions against individuals
or organizations involved in white-collar crimes. This can include fines, penalties, and
sanctions.
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 Compliance Programs:

• In response to white-collar crimes, businesses and organizations may implement or enhance

compliance programs. These programs are designed to ensure adherence to legal and ethical
standards, detect potential misconduct, and prevent future violations.

Whistleblower Protections:

• Legal protections for whistleblowers who report white-collar crimes can encourage individuals
within organizations to come forward with information about fraudulent activities. Whistleblower
programs may also offer financial incentives.

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 Reform and Legislation: Governments may respond to white-collar crimes by enacting new legislation
or enhancing existing laws to address emerging challenges. Regulatory frameworks may be updated to
close loopholes and strengthen enforcement.

Public Awareness and Education: Public awareness campaigns and educational programs can help
individuals and businesses recognize and prevent white-collar crimes. This may involve disseminating
information about common schemes and promoting best practices for fraud prevention.

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