Module 2

MODULE 2
LEGISLATIONS REGULATING MAJOR WHITE COLLAR CRIMES

IN INDIA

2.1. INTRODUCTION

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

in us.”

-Dr. S Radhakrishnan

The terms “White Collar Crime” and its offshoot, “organized crime”, reflect a half-century old
movement to remake the every definitions of crime.

There could be said to be three important characteristics for a crime to be categorised as a white
collar crime-

1. Such crimes are committed during the course of one’s job
2. The offender’s occupational is a central feature in the commission of crime
3. The offender’s occupation is perceived as a legitimate occupation by the society

The harm caused by white collar crime is, in most cases, palpable. White-collar crime is often
mired in moral complexity and uncertainty which is generally absent in other offences. Victims
of white-collar crime are largely unidentifiable, which leads to underestimation of
victimization of such crimes. Take for example, tax evasion, bribery or insider trading. Evasion
of tax results in reduced revenue. Bribery leads to biased governmental decision making.
Insider trading leads to loss of investments. So, the society and economy at large are the most
affected by a white-collar crime than any isolated incidents of violence or wrongdoing.

In the first module, we have discussed the general meaning of white-collar crime. We have
seen the origins of the concept and the early usages of the term. We have then entered into a

discussion regarding the meaning of the term and its implications. There exists an academic
divide on the classification of white-collar crime and blue-collar crime. This has been
highlighted in the previous module while discussing different definitional debates. The last
module also analyzed the different criminology theories applicable. Lastly, we discussed the
impact and victimization by white-collar crime and concluded the discussion by looking at the
possible reasons of rise of white-collar crime.

In this module, we will be streamlining the discussion to discuss the peculiar aspects of the
Indian law and regulatory regime. In this module, we will begin by discussing the common
types of white-collar crime in India. We will take a look at white-collar crime from a different
angle by analyzing different possibilities in different professions. Lastly, we will take a brief
look at the broad legislations and regulations against white-collar crime in India.

2.2. COMMON TYPES OF WHITE-COLLAR CRIME IN INDIA

Before we get into the discussion of various kinds of white-collar crime, let us take a look at
the possible reasons behind criminality of white-collar offenders. Some of the most important
reasons are-

• Greed
• Competition
• No fixed laws or punishment
• Loose regulatory control
• Lack of awareness
• Less possibility of conviction and punishment
• Lag in innovation and regulatory regime

Some of the most common type of white-collar crime will be discussed in this segment. The
following shall be discussed-

1. Money Laundering
2. Bank Fraud
3. Credit Card Fraud
4. Bribery

5. Blackmail
6. Embezzlement
7. Counterfeiting
8. Forgery
9. Insurance Fraud
10. Tax Evasion
11. Professional Crime
12. Fraud in Welfare Scheme
13. Currency Schemes
14. Cyber Crime

Now, let’s enter into a detailed discussion of various aspects of different kinds of white-collar
crime.

1. Money Laundering
When an individual converts his/her illegally earned money into money earned from
legitimate sources, he/she is said to have committed money laundering. It is also known
as “hawala transaction”. Prevention of Money Laundering Act, 2002 is the Indian
legislation on the point.

Section 3 of the Prevention of Money Laundering Act, 2002 defines the offence of
money laundering 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-
laundering.
Explanation.—For the removal of doubts, it is hereby clarified that,—
(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.”

2. Bank Fraud
Engaging in activity/activities where the purpose is to defraud the bank of funds or
achieve any other ulterior purpose by defrauding a banking institution. Bank fraud
may be committed in two ways-

1. By using illegal means to withdraw money or assets from the bank or any financial
institution.

2. By falsely representing oneself to be a bank or any financial institution, the person
extracts money or assets from people.

There could be different types of bank frauds-

o Imitating a financial institution
o Defrauding by means of cheques
o Falsely getting loans or credit line approved
o Bank fraud using internet or e-banking

Bank fraud may be made punishable under the Indian Penal Code, 1860. Section 4031,
4052, 415, 463 and 489A3 of IPC can be used to punish bank fraud.

Section 463 of the Indian Penal Code provides for-

“Forgery.--Whoever makes any false document or part of a document with intent to
cause damage or injury, to the public or to any person, or to support any claim or title,
or to cause any person to part with property, or to enter into any express or implied
contract, or with intent to commit fraud or that fraud may be committed, commits
forgery.”

3. Credit Card Fraud
These kinds of fraud are committed when a person uses the credit card of another person
without authorization to obtain a personal benefit or to defraud the authorized user of
the credit card. The lack of clear law at the advent of technological innovations made
it hard to implement harsh punishments on such offenders. Such a crime may be
penalized under the offence of cheating under the Indian Penal Code, 1860.

Section 420 of the Indian Penal Code, 1860 states-

“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

1 “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.”
2 “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".”
3 “Counterfeiting currency-notes or bank-notes.--Whoever counterfeits, or knowingly performs any part of the
process of counterfeiting, any currency-note or bank-note, shall be punished with [imprisonment for life], or with
imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.”

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.”

4. Bribery
When some kind of enticement, in the form of monetary compensation, good, services,
information or any other kind of benefit is offered with the intention to influence the
actions or decisions of the taker.

Section 171B of the Indian Penal Code defines bribery as-

“ (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; or
(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. Blackmail/Criminal Intimidation
A demand for money under the threat to do some kind of harm, be it bodily injury or
injury to property or any other kind of harm. For blackmailing to be considered under
the ambit of white-collar crime, it must be employed by a high-status individual/ or a
person in the position to exploit his occupational/professional position. It has been
made punishable under the Indian Penal Code, 1860.

Section 503 of the Indian Penal Code, 1860 defines the offence of criminal intimidation
as-

“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.
Illustration: A, for the purpose of inducing B to desist from prosecuting a civil suit,
threatens to burn B’s house. A is guilty of criminal intimidation.”

6. Embezzlement
A person in trust, who is entrusted with property or money, appropriates the property
or money for his or her personal use or gain is said to commit embezzlement.
The act of embezzlement may include a breach of trust or dishonest misappropriation.

Section 403 of the Indian Penal Code, 1860 provides for dishonest misappropriation as-

“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.”

Section 405 of the Indian Penal Code, 1860 provides for criminal breach of trust, it is
provided as-

“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".”

7. Counterfeiting
When a person copies or imitates an object, a valuable security or any item without
having been authorized to do so.

Section 28 of the Indian Penal Code defines counterfeiting as-

“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 practised.
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.”

8. Forgery
When a person passes a forged or false instrument (such as, a cheque or a secured
instrument) with an intention to defraud.

9. Insurance Fraud
When a person defrauds an insurance company by presenting false or forged documents
or an act of deliberate staging of theft, robbery, injury or any other damage to false
claim insurance amount under insurance policy.

Section 205, 420 and 464 of the Indian Penal Code, 1860 cover various aspects of
insurance fraud.
Section 205 of the Indian Penal Code provides for-

“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.”

Section 464 of the Indian Penal Code, 1860 states-

“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 alteration.”

10. Tax Evasion
Evading payment of necessary tax accrued to an individual, group of individuals, a
corporate or any other body or organization which can be made a subject to tax. This
method is commonly also employed by the middle-class to have extra unaccounted
money or assets.

The offence of tax evasion is punishable under Chapter XXII of the Income-tax Act,
1961

11. Professional Crime
Crimes committed by professionals during the course of their occupation, for example,
lawyers, accountants, medical practitioners, etc.

12. Fraud in Welfare Schemes
When a person tries to profit from a government welfare scheme by misusing his
position to divert the benefits or advantages for his personal benefit or to achieve any
other illegal goal.

13. Currency Schemes4
Currency schemes refers to the practice of advance value determination of currency in
the near future by adopting illegal means or exploiting a legal or technical loophole.
Common types of currency schemes are discussed as below-

o Schemes involving advance payment of fees
o Scams in the boiler room

(these involve makeshift offices, usually the scammer creates a fake website
with false, inaccurate or incomplete information)
o Exempt Securities Scam
(this refers to the selling of securities by a company without filing a prospectus)
o Scams in the Foreign Exchange Market
o Offshore Investing Scams
o Double Dip Scam
(this includes Re-victimization of the same victim)
o Affinity Scams
(scams by building a relationship of trust)
o Ponzi Schemes
(a kind of pyramid scam)
o Pump and Dump Scam
o Scamming by sending spam emails

14. Cyber Crime
Cyber crime is emerging as one of the most concerning kind of criminality in the recent
times. It may range from offences like cyber harassment, sexual exploitation to offences
like cyber terrorism which require proper legislative focus in terms of curbing the crime
to proper implementation of laws.

4 https://blog.ipleaders.in/white-collar-crimes/.

2.3. WHITE COLLAR CRIME IN DIFFERENT PROFESSIONS

• White Collar Crime in Medical Profession
Doctors and the medical profession as a whole are revered as being one of the most
respectable and sacrosanct profession. However, this does not take away the point that
there exist certain loopholes in the system which may be exploited by certain medical
professionals to their advantage. Medical practitioners may be placed at an opportunist
position in terms of commission of certain kinds of white-collar crime. It may range
from individual offences like practicing without obtaining proper license or not being
otherwise qualified to render medical advice. Such instances may impact a small
section of the society, however, there are certain other offences related to the medical
field that may translate to a larger harm. Though criminal activity and negligence is the
central theme of such crimes, the role of the opportunities presented due to the nature
of the medical field cannot be ignored.

Some of the common white-collar crime in the medical profession could be- fake
medical license, selling illegal drugs, organ trade, etc. One of the biggest scams under
this head is the Vyapam Scam uncovered in the State of Madhya Pradesh in 2013 for
the selection of medical students.

• White Collar Crime in Legal Profession

Legal practitioners, often in return of money or other services by their clients, present
false evidence, fake witnesses in the court. Legal practitioners with the political backing
indulge in wrongful practices and violate ethical standards and professional standards.
Manipulating evidences and faking witnesses by bringing in professional witnesses,
gives the case another turn, because of which many times the real accused is left free
and the innocent is sent behind the bars. Such a crime, though independently covered
by civil and criminal legislations, also requires to be seen in the light of professional
incompetence and exploitation of a trusted profession or occupation.

• White Collar Crime in Engineering/Architectural Profession

Another important field where white-collar crime may be perpetrated is the field of
engineering or architectural professions. In these cases, it is generally a professional
who indulges in projects of public importance, siphons the money for personal gains.
For example, in some road development projects, the engineer may, in connivance with
others, award the tender illegally or use low quality materials to pocket the profits
arising from such a situation. Such kinds of crime are very common in the Indian
context wherein it is not only the public trust is being violated, but also there is
substantial loss of harm and property. Such kinds of white-collar crime are also
perpetrated due to the status of the offender.

• White Collar Crime in Education
These kinds of crime generally happen in the public institutions, but may also be
perpetrated in private educational institutions. These kinds of crime substantially lower
the trust of people in public institutions and impact the overall education system of the
country. Various kinds of illegal practices may be carried out due to the advantageous
position of certain well-placed individuals in the education sector.

One of the most prominent scam in this regard is the Vyapam Scam of Madhya Pradesh
regarding corruption in admission of medical students in the State of Madhya Pradesh
which was uncovered in 2013.

• White Collar Crime by Banking Professionals
The banking professionals and management may also be key players in perpetrating
white-collar crime. Due to the well-placed advantage, it becomes a prominent concern
to check white-collar crime by banking professionals as they may go undetected for
long times due to the familiarity with the system and loopholes.

For example, in the case of Punjab National Bank Scam of 2018, Nirav Modi and his
associates were able to obtain a credit line from the bank based on forged documents
by the alleged involvement of some bank employees who were well versed with the
loopholes of the system. Such professional advantage allowed them to go undetected
for over 7 years and resulted in a grave loss to the economy and financial well-being of
the country

2.4. BROAD LEGISLATIONS AGAINST WHITE-COLLAR CRIME

In the next module, we will be entering into detailed discussion on various legal options
available against white-collar crime in India. Some of the most important legislations in this
regard are as follows-

1. The Companies Act, 1956
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

2.5. CONCLUSION

In this module, we have discussed the nature and kinds of white-collar crime in the particular
context of Indian situations. We have discussed different kinds of white-collar crime and their
penalties under different legislations. We have also categorised such crime based on particular
professions and the various opportunities afforded to the offender due to their professional or
occupational setup. The aim of this discussion is to highlight the reasons that contribute in
presenting opportunities to various well-placed individuals. This, in turn, highlights the need
for proper policy reforms based on a proper and detailed understanding of white-collar crime
in the Indian context.