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Published by Enhelion, 2021-11-09 02:09:04

Module 3

Module 3




Before we begin with this module, let us relook at the definitional aspects of white collar crime.
This essentially includes the following-

• It is a criminal act
• Which is committed by a high-status individual or by an individual in the course of his

business, occupation or profession
• The opportunity to commit such a crime arises from the advantageous position of the

person owing to his social status, professional edge or other such related privileges

With the advent of technology, white-collar crime is assuming a global importance. It has been
witnessed that with increased economic and industrial growth, white-collar crimes have
become a more frequent happening. There has also been a stark increase in such crimes by
employing technology or through the medium of internet and cyber space. It is increasingly
becoming a major challenge to the law enforcement agencies in India due to the evasive nature
of the crime and legal loopholes.
A report by the Business Standard, published in 2016, shows that over the past 10 years, CBI
has prepared 6533 corruption cases, of which 517 have come up in the past 2 years alone.1 In
2020, India ranked 86th on Transparency International’s Corruption Perceptions index (CPI),
falling from 76th in 2015.2 This deprecation in rank mirrors the rise in corruption complaints
received. Advancement in commerce and technology has invited unprecedented growth in one
of the types of white collar crimes, known as cybercrime. Cybercrimes are increasing because
there is only a little risk of being caught or apprehended.


The trend of white collar crimes in India poses a threat to the economic development of the
country. These crimes require immediate intervention by the government by not only making
strict laws but also ensuring its proper implementation.

In the last few modules, we have learnt the basics of white-collar crime. We have understood
it as a concept, its meaning and different debates surrounding the topic in general. We have
also seen some common types of white-collar crime in India an relevant legal provisions
dealing with them. Having said that, there is a definitive need to understand the criminology
behind white-collar crime for targeted legal and regulatory remedies. Currently, the issue of
white-collar crime is dealt by different legislations and regulations, which in turn leads to
judicial complexity. Moreover, there are many legal and technical loopholes which such
offenders routinely exploit to evade detection and/or judicial process.

In this module, we will be focussing upon the Indian law and important provisions therein
regarding prevention of white-collar crime and punishment of white-collar criminals. We will
then be discussing on the issue of legal loopholes and how they are commonly exploited.
Lastly, we will briefly focus upon the lacunae in investigation and proper prosecution of white-
collar crime.


In this section, we would be taking a look at important legal developments which have helped
shape the law as it exists today vis-à-vis regulating white-collar crime in India.

• The Report on LIC Mundra Affairs

The Mundhra Scandal was one of the first big financial scandal of the independent
India. The retired Bombay High Court Judge, Justice M C Chagla was appointed as a
one-man committee to look into the LIC Mundhra scam. It was also a highly politically
driven matter. It was one of the very first instance of a large-scale white-collar crime in
independent India.

• Inquiry on the Administration of Dalmia-Jain Companies, 1963

This inquiry was facilitated by the Ministry of Commerce and Industry into the
corruption and other allegations against the Dalmia-Jain Companies in 1963.

• The Report on the Commission on the Prevention of Corruption, 1964

On the recommendations by the Committee on the Prevention of Corruption, headed
by Shri K. Santhanam, the Central Vigilance Commission was created in 1964. The
Central Vigilance Commission is now the highest institution for vigilance, independent
of any executive authority. Its primary function is to address corruption in government
offices and to monitor all vigilance under the Central Government. This organization
seeks its advice in planning, executing and reviewing their vigilance work.

• Second Administrative Reforms Commission on Reports- 4th Report titled ‘Ethics
in Governance’ 2007

This report suggested amendments to reduce the number of white-collar crimes in India,
particularly by government officials and politicians. It highlighted the importance of
ethics in governance to root out corruption.

• Law Commission 47th Report

The Commission recommended the inclusion of the following provisions in the Indian
Penal Code, 1860:

1. In every one of those cases where the offence has been committed by the corporation
and the punishment includes imprisonment or fine and imprisonment both, the court
will have the power to impose on these offender fine only.

2. In every one of those cases where the offender is the corporation and the punishment
for his offence can be either imprisonment and any other punishment other than fine,
than in that case the court shall have the power to impose on such offenders fine

3. In this section, ‘corporation’ should mean an incorporated company or other body
corporate. It would also include firms and other association of individuals.

• The Report by Sanathanam Committee

The Santhanam Committee was the first body to recognize the intensity of the crimes
committed by the people of high social standards, which was acknowledged by the 29th
report of the Law Commission released in 1972. Santhanam Committee in its report on
the Prevention of Corruption has talked about the reasons behind the prevalence of
white collar crimes in India.

The committee showed its concern regarding the great damage that these crime can
cause to the public morals. The Report states-

“The advance of technological and scientific development is contributing to the
emergence of “mass society”. With a large rank and file and a small controlling elite,
encouraging the growth of monopolies, the rise of a managerial class and intricate
institutional mechanisms. Strict adherence to a high standard of ethical behaviour is
necessary for the even and honest functioning of the new social, political and economic
processes. The inability of all sections of the society to appreciate in full this need
results in the emergence and growth of white-collar and economic crimes, renders
enforcement of the laws, themselves not sufficiently deterrent, more difficult. This type
of crime is more dangerous, not only because the financial stakes are higher but also
because they cause irreparable damage to public morals. Tax evasion and avoidance,
share-pushing, malpractices in the share market and administration of companies,
monopolistic control, usury, under-voicing or over-voicing, hoarding, profiteering,
sub-standard performance of contracts of construction and supply, evasion of economic
laws, bribery and corruption, elections offence, and malpractices are some examples
of white-collar crime.”

• 29th Report on Proposal to Include Certain Social and Economic Offences in the
Indian Penal Code, 1966

The 1966 report recognised the problem of white-collar crime and cited the Sanathanam
Committee Report in this regard. It noted that the commission of a white-collar crime
is facilitated by the office, calling, profession or vocation of the individual concerned.
It says that the object of those who have tried to draw attention to white-collar crime

was to educate the public of the harm caused to the society by such crime, and to point
out that these crimes should bear the same moral stigma as acts regarded as crime
traditionally. It was pointed out that one of the reasons for the differential
implementation of law in the area of white-collar crimes was the ‘relatively
unorganized resentment of the public’ towards such crime.


As discussed earlier, there is no one comprehensive legislation dealing with all aspects of
criminality of white-collar offences. In fact, having an all-inclusive legislation may be
counterproductive due to the ever-changing modus operandi of white-collar criminals. This
does not, however, solve the problem of inefficacy of the current legal system to curb the
instances and irreparable loss caused by white-collar crime on the social, economic and
political status of the country.

Let us take a look at some of the important legal provisions which are commonly used to
prosecute white-collar criminals under the Indian law.

• The Indian Penal Code, 1860

The Indian Penal Code is an important code which deals with substantive criminal law
of the country. Although, the Indian Penal Code penalises general criminal acts, some
of the provisions can be fairly applied to white-collar criminality as well. Some major
provisions like criminal acts of public servants, cheating, misappropriation, fraud,
counterfeit, forgery, etc. are important provisions applicable to white-collar crime.

Some of the important provisions are-
o Forgery- Section 463
o Cheating- Section 4203

3 “Cheating and dishonestly inducing delivery of property.—Whoever cheats and thereby dishonestly
induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole
or any part of a valuable security, or anything which is signed or sealed, and which is capable of being
converted into a valuable security, shall be punished with imprisonment of either description for a term
which may extend to seven years, and shall also be liable to fine.”

o Bribery- Section 171B4

o Criminal intimidation- Section 5035

o Dishonest misappropriation- Section 4036

o Criminal Breach of Trust- Section 4057

o Counterfeiting- Section 288

o False Personation- Section 2059

4 “ (1) Whoever-
(i) gives a gratification to any person with the object of inducing him or any other person to
exercise any electoral right or of rewarding any person for having exercised any such right;
(ii) accepts either for himself or for any other person any gratification as a reward for exercising
any such right or for inducing or attempting to induce any other person to exercise any such
right, commits the offence of bribery: Provided that a declaration of public policy or a
promise of public action shall not be an offence under this section.
(2) A person who offers, or agrees to give, or offers or attempts to procure, a gratification shall be
deemed to give a gratification.
(3) A person who obtains or agrees to accept or attempts to obtain a gratification shall be deemed to
accept a gratification, and a person who accepts a gratification as a motive for doing what he does
not intend to do, or as a reward for doing what he has not done, shall be deemed to have accepted
the gratification as a reward.”

5 “Whoever threatens another with any injury to his person, reputation or property, or to the person or
reputation of any one in whom that person is interested, with intent to cause alarm to that person, or to
cause that person to do any act which he is not legally bound to do, or to omit to do any act which that
person is legally entitled to do, as the means of avoiding the execution of such threat, commits criminal
intimidation. Explanation.—A threat to injure the reputation of any deceased person in whom the person
threatened is interested, is within this section.”

6 “Whoever dishonestly mis-appropriates or converts to his own use any movable property, shall be
punished with imprisonment of either description for a term which may extend to two years, or with fine,
or with both.”

7 “Whoever, being in any manner entrusted with property, or with any dominion over property,
dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of
that property in violation of any direction of law prescribing the mode in which such trust is to be
discharged, or of any legal contract, express or implied, which he has made touching the discharge of
such trust, or wilfully suffers any other person so to do, commits "criminal breach of trust".”

8 “A person is said to "counterfeit" who causes one thing to resemble another thing, intending by means
of that resemblance to practise deception, or knowing it to be likely that deception will thereby be
Explanation 1.--It is not essential to counterfeiting that the imitation should be exact. Explanation 2.--
When a person causes one thing to resemble another thing, and the resemblance is such that a person
might be deceived thereby, it shall be presumed, until the contrary is proved, that the person so causing
the one thing to resemble the other thing intended by means of that resemblance to practise deception or
knew it to be likely that deception would thereby be practised.”

9 “False personation for purpose of act or proceeding in suit or prosecution.--Whoever falsely personates
another, and in such assumed character makes any admission or statement, or confesses judgment, or
causes any process to be issued or becomes bail or security, or does any other act in any suit or criminal
prosecution, shall be punished with imprisonment of either description for a term which may extend to
three years, or with fine, or with both.”

o Making a False Document- Section 46410

• Prevention of Money Laundering Act, 2002

PMLA, 2002 is an Act to prevent money-laundering and to provide for confiscation of
property derived from, or involved in, money-laundering and for matters connected
therewith or incidental thereto. It has been enacted in furtherance of the Political
Declaration and Global Programme of Action, which was adopted by the General
Assembly of the United Nations in 1990.

Offence of money laundering has been provided for in Section 3 of the Act and Section
4 provides the punishment for same. Section 3 has been amended in 2019 to include an
explanation in the definition.

Section 3 reads as-

“Whosoever directly or indirectly attempts to indulge or knowingly assists or
knowingly is a party or is actually involved in any process or activity connected with
the proceeds of crime including its concealment, possession, acquisition or use and
projecting or claiming it as untainted property shall be guilty of offence of money-
Explanation.—For the removal of doubts, it is hereby clarified that,—

10 “Making a false document.--A person is said to make a false document
First.-Who dishonestly or fraudulently makes, signs, seals or executes a document or part of a document,
or makes any mark denoting the execution of a document, with the intention of causing it to be believed
that such document or part of a document was made, signed, sealed or executed by or by the authority of
a person by whom or by whose authority he knows that it was not made, signed, sealed or executed, or
at a time at which he knows that it was not made, signed, sealed or executed; or
Secondly.-Who, without lawful authority, dishonestly or fraudulently, by cancellation or otherwise,
alters a document in any material part thereof, after it has been made or executed either by himself or by
any other person, whether such person be living or dead at the time of such alteration; or
Thirdly.-Who dishonestly or fraudulently causes any person to sign, seal, execute or alter a document,
knowing that such person by reason of unsoundness of mind or intoxication cannot, or that by reason of
deception practised upon him, he does not know the contents of the document or the nature of the

(i) a person shall be guilty of offence of money-laundering if such person is found to
have directly or indirectly attempted to indulge or knowingly assisted or knowingly is
a party or is actually involved in one or more of the following processes or activities
connected with proceeds of crime, namely:—
(a) concealment; or
(b) possession; or
(c) acquisition; or
(d) use; or
(e) projecting as untainted property; or
(f) claiming as untainted property, in any manner whatsoever;
(ii) the process or activity connected with proceeds of crime is a continuing activity and
continues till such time a person is directly or indirectly enjoying the proceeds of crime
by its concealment or possession or acquisition or use or projecting it as untainted
property or claiming it as untainted property in any manner whatsoever.”

Section 4 provides for the punishment of money laundering as rigorous imprisonment
for a term which shall not be less than three years but which may extend to seven years
and shall also be liable to fine.

• Prevention of Corruption Act, 1988

The 1988 Act was enacted to consolidate and amend the law relating to the prevention
of corruption and for matters connected therewith. It defines undue advantage under
Section 2 (d) as any gratification whatever, other than legal remuneration.

Section 711 penalises the offence relating to public servant being bribed.

11 Any public servant who,— (a) obtains or accepts or attempts to obtain from any person, an undue advantage,
with the intention to perform or cause performance of public duty improperly or dishonestly or to forbear or cause
forbearance to perform such duty either by himself or by another public servant; or (b) obtains or accepts or
attempts to obtain, an undue advantage from any person as a reward for the improper or dishonest performance
of a public duty or for forbearing to perform such duty either by himself or another public servant; or (c) performs
or induces another public servant to perform improperly or dishonestly a public duty or to forbear performance of
such duty in anticipation of or in consequence of accepting an undue advantage from any person, shall be
punishable with imprisonment for a term which shall not be less than three years but which may extend to seven
years and shall also be liable to fine. Explanation 1.—For the purpose of this section, the obtaining, accepting, or
the attempting to obtain an undue advantage shall itself constitute an offence even if the performance of a public
duty by public servant, is not or has not been improper. Illustration.—A public servant, ‘S’ asks a person, ‘P’ to
give him an amount of five thousand rupees to process his routine ration card application on time. 'S' is guilty of

• The Companies Act, 2013

The Companies Act, 2013 governs various aspects of corporate entities. The Act has
been constantly updated to reflect the best practices regarding corporate governance.
The general scheme of the Act revolves around safeguarding the interests of the
stakeholders and ensuring transparency and accountability.

Some of the important provisions governing white-collar crime are-

o 195. Prohibition on insider trading of securities

(1) No person including any director or key managerial personnel of a
company shall enter into insider trading:
Provided that nothing contained in this sub-section shall apply to any
communication required in the ordinary course of business or profession or
employment or under any law.
Explanation.—For the purposes of this section,—
(a) “insider trading” means—
(i) an act of subscribing, buying, selling, dealing or agreeing to subscribe, buy,
sell or deal in any securities by any director or key managerial personnel or
any other officer of a company either as principal or agent if such director or
key managerial personnel or any other officer of the company is reasonably
expected to have access to any non-public price sensitive information in
respect of securities of company; or
(ii) an act of counselling about procuring or communicating directly or
indirectly any non-public price-sensitive information to any person;

an offence under this section. Explanation 2.—For the purpose of this section,— (i) the expressions “obtains” or
“accepts” or “attempts to obtain” shall cover cases where a person being a public servant, obtains or “accepts” or
attempts to obtain, any undue advantage for himself or for another person, by abusing his position as a public
servant or by using his personal influence over another public servant; or by any other corrupt or illegal means;
(ii) it shall be immaterial whether such person being a public servant obtains or accepts, or attempts to obtain the
undue advantage directly or through a third party.

(b) “price-sensitive information” means any information which relates,
directly or indirectly, to a company and which if published is likely to
materially affect the price of securities of the company.
(2) If any person contravenes the provisions of this section, he shall be
punishable with imprisonment for a term which may extend to five years or
with fine which shall not be less than five lakh rupees but which may extend
to twenty-five crore rupees or three times the amount of profits made out of
insider trading, whichever is higher, or with both.

o Section 212: Investigation into affairs of company by Serious Fraud
Investigation Office

(1) Without prejudice to the provisions of section 210, where the Central
Government is of the opinion, that it is necessary to investigate into the affairs
of a company by the Serious Fraud Investigation Office—
(a) on receipt of a report of the Registrar or inspector under section 208;
(b) on intimation of a special resolution passed by a company that its affairs
are required to be investigated;
(c) in the public interest; or
(d) on request from any Department of the Central Government or a State
the Central Government may, by order, assign the investigation into the affairs
of the said company to the Serious Fraud Investigation Office and its Director,
may designate such number of inspectors, as he may consider necessary for
the purpose of such investigation.

o Section 447: Punishment for Fraud

It states that in case a person is found guilty of an offence of fraud he would
be imprisoned for a period not less than 6 months and which extend to 10 years.
And he will also be subject to fine which should not in any case be less than
the amount involved in fraud and which may extend to 3 times the amount
involved in the fraud. In case the fraud has been committed against the interest

of the general public than the term of imprisonment would not be less than 3

o Section 448: Punishment for false statement

It provides that if in any return, report, certificate, financial statement,
prospectus, statement or other document required by, or for, the purposes of
any of the provisions of this Act or the rules made thereunder, any person
makes a statement,--
(a) which is false in any material particulars, knowing it to be false; or
(b) which omits any material fact, knowing it to be material,
he shall be liable under section 447.

o Section 449: Punishment for false evidence

It provides that if any person intentionally gives false evidence—
(a) upon any examination on oath or solemn affirmation, authorised under this
Act; or
(b) in any affidavit, deposition or solemn affirmation, in or about the winding
up of any company under this Act, or otherwise in or about any matter arising
under this Act,
he shall be punishable with imprisonment for a term which shall not be less than
three years but which may extend to seven years and with fine which may
extend to ten lakh rupees.

o Section 450: Punishment where no specific penalty or punishment is

If a company or any officer of a company or any other person contravenes any
of the provisions of this Act or the rules made thereunder, or any condition,
limitation or restriction subject to which any approval, sanction, consent,
confirmation, recognition, direction or exemption in relation to any matter has
been accorded, given or granted, and for which no penalty or punishment is
provided elsewhere in this Act, the company and every officer of the company

who is in default or such other person shall be liable to a penalty of ten thousand
rupees, and in case of continuing contravention, with a further penalty of on
thousand rupees for each day after the first during which the contravention
continue, subject to a maximum of two lakh rupees in case of a company and
fifty thousand rupees in case of an officer who is in default or any other person.

• The Fugitive Economic Offenders Act, 2018

The provisions of the Fugitive Economic Offenders Act extends to not only loan
defaulters and fraudsters but also to those individuals who violate laws governing taxes,
black money, benami properties, financial sector and corruption.

It is an Act to provide for measures to deter fugitive economic offenders from evading
the process of law in India by staying outside the jurisdiction of Indian courts, to
preserve the sanctity of the rule of law in India and for matters connected therewith or
incidental thereto.

Section 2 (1) (f) defines “fugitive economic offender” as any individual against whom
a warrant for arrest in relation to a Scheduled Offence has been issued by any Court in
India, who—

(i) has left India so as to avoid criminal prosecution; or
(ii) being abroad, refuses to return to India to face criminal prosecution;

Section 4: Application for declaration of fugitive economic offender and procedure
(1) Where the Director or any other officer not below the rank of Deputy Director
authorised by the Director for the purposes of this section, has reason to believe (the
reasons for such belief to be recorded in writing), on the basis of material in his
possession, that any individual is a fugitive economic offender, he may file an
application in such form and manner as may be prescribed in the Special Court that
such individual may be declared as a fugitive economic offender.
(2) The application referred to in sub-section (1) shall contain—
(a) reasons for the belief that an individual is a fugitive economic offender;

(b) any information available as to the whereabouts of the fugitive economic offender;
(c) a list of properties or the value of such properties believed to be the proceeds of
crime, including any such property outside India for which confiscation is sought;
(d) a list of properties or benami properties owned by the individual in India or abroad
for which confiscation is sought; and
(e) a list of persons who may have an interest in any of the properties listed under
clauses (c) and (d).
(3) The Authorities appointed for the purposes of the Prevention of Money-laundering
Act, 2002 (15 of 2003) shall be the Authorities for the purposes of this Act.

• Other Legislations

o Information Technology Act, 2002
o The Income Tax Act, 1961
o The Central Vigilance Commission Act, 2003
o The Special Court (Trial of offences relation to Transactions in Securities) Act,

o SEBI Regulations
o RBI Regulations
o Banking laws


White-collar crime are dealt with the same understanding which is applied to traditional crime
and this may be one of the most important reasons why there has been little success in this
regard. Despite multiplicity of law that deals with white-collar crime, there are no definitive
success stories of white-collar crime prosecution to establish faith of people in the system.

Some of the important points that need to be considered to make the system more robust are
discussed in brief as follows-


• No clarity with respect to responsibility when a corporation is involved in a white-collar

• Prosecutors must play a more pro-active role in the investigation. Investigation of
white-collar crimes must be done keeping in mind the challenges.

• Lack of legal assistance at the investigation stage often leads to acquittal of the accused.
This has also been suggested in the 14th Law Commission Report.

• There should be a proper legal regime for the protection of whistle-blowers to
encourage individuals to come forward with relevant information without fear of
prosecution or harassment.

• Proper plea-bargaining structure is important to successfully prosecute white-collar


With increasing white-collar criminality in India, the definition of “crime” itself has undergone
a change. The legal tools to tackle white collar crime, however, have stayed pretty much the
same. Making a targeted attempt at policy and structural changes will remove some major
impediments which plague the investigative process. There is a real need to identify real
corporate crimes and to prosecute and punish them effectively. Similarly, there is also a
growing need to adopt methodologies which are suitable for the prosecution of white-collar
crime. A change in attitude and approach is the first and foremost requirement in successful
prosecution of white-collar crime.

There is, therefore, a need to take white collar crime seriously and totally reimagine the way
we investigate and prosecute it.

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