Of late many of the reputed and celebrated personalities from the business world had been in news for notorious reasons for either fleeing the country and its jurisdiction to evade criminal proceedings initiated for frauds committed in India or found themselves mired in the corporate scandals. These sophisticated businessmen, professionals found wanting for the various type of so-called “upper world crimes” usually fall in the category of white collar crimes and these crimes are having characterised by deceit, concealment, violation of trust with prime motivation of financial gain.
These crimes are in relation to business in the upper class composed of respectable business men, professionals who perpetrates them.
A famous sociologist Edwin Sutherland defines white collar crime,
“ is a crime committed by a person of respectability and high social status in the course of his occupation”
It comprises violation of the criminal law by a person of the upper socio-economic class in the course of his occupational activities and these are gross violations of trust by businessman/woman and white-collar professionals.
The white-collar crime does not have any set definition, they usually consist of corporate crimes, defrauding banks by obtainment of money under false pretenses, misrepresentations in financial statements of corporations, money laundering, manipulations on stock exchange, embezzlement of funds, commercial bribery in commom parlance referred as kickbacks, bribery of public officials, evading corporate taxes, insider trading, ponzi schemes, pyramid schemes financial & securities fraud,m antitrust violations etc.
The public cost of these crimes are very high and is far greater than the financial loss from burglaries, robberies, and larcenies committed by persons of the lower socio economic class because it has the potential to shake the economy, destroying a company, costing investors billions of rupees and often leaves tangible and intangible impacts on the economy of the country and in cases of global and cross border nature of crime it impacts the whole world’s economy.
INVESTIGATION OF THESE CRIMES
Usually the police of the respective state in which the offence has been committed is primarily responsible for the investigation of crimes, investigation must be carried out strictly as per the procedure provided in the Code of Criminal Procedure 1973 (CrPC). The Economic Offence Wing is a specialised unit set up within the police force to prevent, detect and investigate economic crimes, including corporate fraud, the primary legislation governing the fraud is: Indian Penal Code 1860 (IPC), it sets out the penal provisions concerning the majority of criminal offences in India. with regards to fraud, it penalises dishonest misappropriation of property, criminal breach of trust, cheating and dishonestly inducing delivery of property, and forgery (among others).
VARIOUS SPECIAL STATUTES AND ENFORCEMENT AGENCIES AUTHORISED TO INVESTIGATE THESE CRIMES
Fugitive Economic Offenders Act, 2018, it is the latest statute which is brought to bring back the economic offenders who have left India so as to avoid criminal prosecution in India, a “fugitive economic offender” means 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;
“Scheduled Offence” under the Act is basically a list of existing offences (provided the total value involved is more that Rs. 100 Crores) under various statutes such as Indian Penal Code, 1860, Negotiable Instruments Act, 1881, Prohibition of Benami Property Transactions Act, 1988, Prevention of Corruption Act, 1988, the Companies Act, 2013, Prevention of Money Laundering Act, 2002 etc.
This Act applies to any individual who is or becomes a fugitive economic offender on or after 21st day of April 2018.
Companies Act 2013, It has various provisions and safeguards in relation to detecting, preventing and penalising corporate fraud. In addition to providing an inclusive definition of the term “fraud”, it sets out the responsibilities of various persons/authorities/officials for prevention and reporting of fraud.
Serious Fraud Investigation Office (SFIO). This is a multi-disciplinary organisation constituted under section 211 of the Companies Act 2013. The SFIO has been established for investigating and prosecuting cases of white-collar crimes/frauds relating to a company, it consists of experts in the field of accountancy, forensic auditing, law, information technology, investigation, company law, capital market and taxation for detecting and prosecuting or recommending for prosecution white collar crimes/frauds.
Central Bureau of Investigation (CBI), The CBI is the premier investigation agency of the country it was originally set up to investigate corruption cases but also conducts investigations into economic offences and other high-profile cases. The CBI has three divisions:
Anti-Corruption Division , Economic Offences Division, for investigations into major financial scams and serious economic frauds, Special Crimes Division, for investigations into serious, sensational and organised crimes.
Enforcement Directorate (ED), The ED is a specialized financial investigation agency under the Department of Revenue, Ministry of Finance, Government of India, which enforces the following laws :-
Foreign Exchange Management Act,1999 (FEMA) – A Civil Law, with officers empowered to conduct investigations into suspected contraventions of the Foreign Exchange Laws and Regulations, adjudicate, contraventions, and impose penalties on those adjudged to have contravened the law. Prevention of Money Laundering Act, 2002 (PMLA) – A Criminal Law, with the officers empowered to conduct investigations to trace assets derived out of the proceeds of crime, to provisionally attach/ confiscate the same, and to arrest and prosecute the offenders found to be involved in Money Laundering.
Securities and Exchange Board of India (SEBI), it regulates the functions of securities market, detects malpractice and protects the interests of investors. It is a statutory body, which operates within the legal framework of the SEBI Act, and is responsible for the investigation and prosecution of cases of insider trading and market abuse and enforcing the provisions thereof.
Apart from it, few other laws deal with corporate fraud’s are:
• Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations).
• Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 (SEBI LODR Regulations).
• Reserve Bank of India (Frauds classification and reporting by commercial banks and select FIs) directions 2016.
• Income Tax Act 1961.
• Central Goods and Services Tax Act 2017.
• Insolvency and Bankruptcy Code 2016.
• Indian Contract Act 1872 (Contract Act).
FEW PROMINENT EXAMPLES OF WHITE COLLAR CRIMES
Diamantaire Nirav Modi & Mehul Choksi.
Recently in 2018, PNB unearthed a Rs. 11,394 crore fraud perpetrated by diamantaire Mehul choksi and Nirav Modi’s firms in connivance with bank officials of PNB’s Brady House Branch Mumbai, during the period of over 7 years, these businessman gamed the system, got themselves issued unauthorised Letters of Undertaking (LoUs) to Nirav Modi’s & choksi’s firms without any collateral or margin money and the entries in respect of LOUs issued were not recorded in PNB’s core banking system (CBS), the colluding bank officials used to sent SWIFT messages from PNB’s Mumbai branch to overseas banks offering unauthorised LOUs, the both businessman are now in the list of fugitive economic offenders and Indian government is in the process of extraditing them to India, to face the law of the land.
LIQUOR BARON VIJAY MALLYA
Mallya known for his flamboyant lifestyle is declared as a fugitive who owes various banks over Rs 9000 crores, which he’d taken as a loan to keep his Kingfisher airlines from failing and had absconded the country, sought refuge in the UK after he was accused of fraud and money laundering in the country, the Indian government is already fighting a case in UK court with respect to his extradition.
CHANDA KOCHHAR, FORMER CEO OF ICICI BANK
She and her husband was booked by CBI , for alleged cheating and corruption in sanctioning loans to the Videocon Group, which caused a loss of Rs 1,730 crore to the bank. it was alleged that ICICI Bank sanctioned six high-value loans to various Videocon companies between June 2009 and October 2011, soon after Chanda took over as CEO, she was a part of the sanctioning committee which had approved a loan of Rs 300 crores to Videocon International Electronics Ltd (VIEL) and Rs 750 crore to Videocon Industries Ltd (VIL).
The former amount was reportedly disbursed into the VIEL account , and the very next day Venugopal Dhoot had transferred Rs 64 crore from VIL to NuPower Renewables Limited, the company owned by her husband Deepak Kochhar.
HARSHAD MEHTA SCAM
In 1992 the stock and money market broker Harshad Mehta committed the biggest money market scam ever in India, amounting to approximately Rs. 5000 crore. It was a systematic stock fraud using bank receipts and stamp paper which caused the Indian stock market to crash after it was saved by him from bankruptcy of India. The scam exposed the inherent loopholes of the Indian financial systems and resulted in a completely reformed system of stock transactions, including an introduction of online security systems. He committed a fraud of over 1 billion rupees from the banking system to buy stocks on the BSE, This impacted the entire exchange system as the security system collapsed and investors lost thousands of rupees in the exchange system. The magnitude of the scam was so big that the net value of the stocks was higher than the various heads under the budget of India. The scam was engineered in such a way that Harshad secured securities from the SBI against forged cheques signed by corrupt officials and failed to deliver the securities, he made the prices of the stocks soar high through fictitious practices and sell the stocks that he owned in these companies, The impact of the scam had many consequences, which included the loss of money to lakhs of families and the immediate crash of the stock market. The index crashed representing a loss of Rs.1000 billion in market capitalisation.
CONCLUSION
The development and boon in the economy had brought these vices of white collar crime with it, were the high and mighty, who are stakeholders in the growth of the economy at times had fallen for the easy way of rising to the glory by tweaking the system and milking the loop holes, the administration responsible for overseeing the affairs were often caught off guard or been found hand in glove with them, it is been seen that there is enough statutes and powers in the hands of investigating agencies to prosecute the offenders but due to various other factors like lack of political will for obvious reasons and connections of these upper class elites slows down the investigation and prosecution.
