2. the torts committed by his agent within the

2. Criminal vicarious liability for Indian companies

Vicarious liability as a concept of law has been with us
since the development of the traditional doctrine of tort law relating to the
liability of employers. An employer is liable for the torts committed by his
employee within the course of his employment. Likewise, a principal is liable
for the torts committed by his agent within the scope of the agency.

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In the case of  Iridium India Telecom Ltd. v Motorola Inc.1,
the Supreme Court discussed the issue of a company being criminally responsible
for the actions of its employees. In the case, Motorola sold a technology
product to Iridium that was accompanied by assertions and promises by Motorola
that allegedly turned out to be false. Iridium brought a case of cheating
against Motorola. The case was brought against the company itself and not the
employees. Under the provisions of the Indian Penal Code, cheating requires an
intention to deceive. What motorola had to argue was that a corporate body,
being an artificial person is not capable of a mental state and therefore
cannot be held criminally liable for offences such as cheating. Motorola’s
arguments were rejected by the Supreme Court after it considered the modern
approach to the problem of corporate criminal liability in the English courts.

Of particular relevance to the discussion is the UK Supreme
Court’s reference to the House of Lords decision in Tesco Supermarkets Ltd. v
Nattrass2
where it was held that, in the absence of a specific statutory or common law
exception, the principle of corporate criminal liability was not based on the
vicarious liability of an employer for the acts of its agents and employees.
Instead it was based on the concept of attribution. A company cannot think and
act on its own as it is a juristic personality. It thinks and acts through
certain of its employees. In other words, the mental states and actions of its
employees are attributed to the company. This is a legal fiction but a
necessary legal fiction in order for the separate legal personality of the
company to sustain itself over a period of time. Otherwise, the company would
not be able to sign contracts, acquire property, negotiate with business
partners, sue and be sued and make public disclosures and statements. It
follows from Tesco Supermarkets that corporate criminal liability is not a
species of vicarious liability but is a species of attribution of natural
actions and states of minds to artificial entities.

3. Liability of corporate officers on the basis of attribution

The actions and mental states of a company’s directors are
attributed to the company such that the actions and the mental states of the
companies’ directors are deemed to be the actions and the mental states of the
companies. This aspect of vicarious criminal liability was in issue in the
recent Supreme Court decision in Sunil Bharti Mittal v Central Bureau of
Investigation.3
The government issued telecommunication licences to a few companies. The
license process came under scrutiny for certain irregularities as a result of
which a criminal investigation was launched into the actions of various
companies. One of these companies was Bharti Cellular Ltd. (BCL). The special
court investigating the licensing irregularities decided to attribute the
actions of Bharti Cellular Ltd. to Sunil Bharti Mittal, its Chairman and
Managing Director, and made him an accused in the proceedings. The special
court’s directions to make the director of BCL the accused was challenged in
the Supreme Court as a mistake of law. The Supreme Court held that without
statutory backing, the persons in charge of a company cannot be held criminally
liable for the actions of a company. The court was firm in applying the
proposition that there is no special vicariously liability in criminal law
without a statutory exceptions in this regard.

One might quibble with Bharti Cellular’s refusal to
attribute the company’s actions to the directing minds of the company as the
Supreme Court had no such compunctions, when, in Iridium, the court extended
the actions of the directing minds of a company to the company itself, and held
that the company can be held criminally liable by attribution. One might argue
that instead of the post Iridium one way attribution, Indian jurisprudence
needs a two way attribution between the company and persons in charge of the
company to fully guarantee the reach of the criminal law. However, there are
some significant problems with a two way attribution of liability. The juristic
basis for the attribution of the actions and mental states of the directing
minds to their company is that the company cannot act otherwise. The legal
fiction of a corporate person has necessitated another legal fiction of
attribution for otherwise the first legal fiction would be meaningless. No such
necessity arises in the case of the actions of the company being attributed to
its directing minds. The directing minds are capable of thinking and acting on
their own and do not need attribution as a matter of necessity. The best
justification of the Indian Supreme Court’s decision is that attribution is not
the appropriate mechanism of imposition of liability in order to hold the
directing minds responsible for the actions of their company. In the United States,
the courts have taken a much more stringent line towards persons in charge of
companies that commit offences. In United States v Park, 4 the United States
Supreme Court considered the case of Acme Markets Inc. (Acme). Acme was a food
chain that operated throughout the United States. With an employee population
of thirty thousand and several hundred stores, its business operations were
large and complex. Acme’s President, Mr. Park, coordinated the business of the
company through several senior delegates. The US federal government detected a
rodent infestation in some of Acme’s warehouses and warned Mr. Park of
potential legal liability arising out of the unhygienic conditions in which
Acme stored its food. Mr. Park conferred with his legal team and referred the
warehouse hygiene problem to his delegates. When the rodent infestation problem
continued, the federal government sued both Acme and Mr. Park under a federal
legislation that made liable any person who trades in adulterated food. The
U.S. Supreme Court stated that a person who has a responsible relationship to a
corporate activity that leads to criminal liability is also liable under the
relevant legislation. The liability of the responsible corporate officer is not
vicarious liability: it is a species of primary liability. The liability arises
out of a voluntary assumption of responsibility coupled with a failure to
discharge the liability and resultant harm. In this respect, the liability of
the responsible corporate officer is akin to criminal negligence. It is
interesting that a statutory offence has been converted, through prosecutorial
zeal and judicial interpretation, into an offence similar to criminal
negligence. However, in practice, one could read Park as laying down a standard
that begins and ends with the question: did the corporate officer hold a
position of responsibility in the corporation? Has a de jure criminal
negligence test become in practice a de facto responsible position test? Some
remarks of the majority opinion lends credence to this proposition. The Supreme
Court remarked that while a corporate officer in a position of responsibility
for a certain state of affairs (for example, warehouse storage) would normally
be liable for any offences committed in furtherance of such a state of affairs
(rodent infestation in the warehouse), he can escape liability if he proves
that it was impossible for him to have prevented the offence. One way to
demonstrate the impossibility is to, as the Supreme Court itself stated,
affirmatively prove to the court that the responsible officer was powerless to
prevent the commission of the crime. That a person had to prove an
impossibility in order to escape from liability demonstrates how the Park
doctrine in practice is a responsible position test.

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