2. Criminal vicarious liability for Indian companies Vicarious liability as a concept of law has been with ussince the development of the traditional doctrine of tort law relating to theliability of employers. An employer is liable for the torts committed by hisemployee within the course of his employment. Likewise, a principal is liablefor the torts committed by his agent within the scope of the agency.In the case of Iridium India Telecom Ltd. v Motorola Inc.
1,the Supreme Court discussed the issue of a company being criminally responsiblefor the actions of its employees. In the case, Motorola sold a technologyproduct to Iridium that was accompanied by assertions and promises by Motorolathat allegedly turned out to be false. Iridium brought a case of cheatingagainst Motorola. The case was brought against the company itself and not theemployees. Under the provisions of the Indian Penal Code, cheating requires anintention to deceive. What motorola had to argue was that a corporate body,being an artificial person is not capable of a mental state and thereforecannot be held criminally liable for offences such as cheating. Motorola’sarguments were rejected by the Supreme Court after it considered the modernapproach to the problem of corporate criminal liability in the English courts. Of particular relevance to the discussion is the UK SupremeCourt’s reference to the House of Lords decision in Tesco Supermarkets Ltd.
vNattrass2where it was held that, in the absence of a specific statutory or common lawexception, the principle of corporate criminal liability was not based on thevicarious 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 andact on its own as it is a juristic personality. It thinks and acts throughcertain of its employees. In other words, the mental states and actions of itsemployees are attributed to the company. This is a legal fiction but anecessary legal fiction in order for the separate legal personality of thecompany to sustain itself over a period of time. Otherwise, the company wouldnot be able to sign contracts, acquire property, negotiate with businesspartners, sue and be sued and make public disclosures and statements. Itfollows from Tesco Supermarkets that corporate criminal liability is not aspecies of vicarious liability but is a species of attribution of naturalactions and states of minds to artificial entities.
3. Liability of corporate officers on the basis of attributionThe actions and mental states of a company’s directors areattributed to the company such that the actions and the mental states of thecompanies’ directors are deemed to be the actions and the mental states of thecompanies. This aspect of vicarious criminal liability was in issue in therecent Supreme Court decision in Sunil Bharti Mittal v Central Bureau ofInvestigation.
3The government issued telecommunication licences to a few companies. Thelicense process came under scrutiny for certain irregularities as a result ofwhich a criminal investigation was launched into the actions of variouscompanies. One of these companies was Bharti Cellular Ltd. (BCL). The specialcourt investigating the licensing irregularities decided to attribute theactions of Bharti Cellular Ltd. to Sunil Bharti Mittal, its Chairman andManaging Director, and made him an accused in the proceedings. The specialcourt’s directions to make the director of BCL the accused was challenged inthe Supreme Court as a mistake of law.
The Supreme Court held that withoutstatutory backing, the persons in charge of a company cannot be held criminallyliable for the actions of a company. The court was firm in applying theproposition that there is no special vicariously liability in criminal lawwithout a statutory exceptions in this regard.One might quibble with Bharti Cellular’s refusal toattribute the company’s actions to the directing minds of the company as theSupreme Court had no such compunctions, when, in Iridium, the court extendedthe actions of the directing minds of a company to the company itself, and heldthat the company can be held criminally liable by attribution. One might arguethat instead of the post Iridium one way attribution, Indian jurisprudenceneeds a two way attribution between the company and persons in charge of thecompany to fully guarantee the reach of the criminal law. However, there aresome significant problems with a two way attribution of liability. The juristicbasis for the attribution of the actions and mental states of the directingminds to their company is that the company cannot act otherwise.
The legalfiction of a corporate person has necessitated another legal fiction ofattribution for otherwise the first legal fiction would be meaningless. No suchnecessity arises in the case of the actions of the company being attributed toits directing minds. The directing minds are capable of thinking and acting ontheir own and do not need attribution as a matter of necessity. The bestjustification of the Indian Supreme Court’s decision is that attribution is notthe appropriate mechanism of imposition of liability in order to hold thedirecting 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 ofcompanies that commit offences. In United States v Park, 4 the United StatesSupreme Court considered the case of Acme Markets Inc.
(Acme). Acme was a foodchain that operated throughout the United States. With an employee populationof thirty thousand and several hundred stores, its business operations werelarge and complex.
Acme’s President, Mr. Park, coordinated the business of thecompany through several senior delegates. The US federal government detected arodent infestation in some of Acme’s warehouses and warned Mr. Park ofpotential legal liability arising out of the unhygienic conditions in whichAcme stored its food. Mr. Park conferred with his legal team and referred thewarehouse hygiene problem to his delegates.
When the rodent infestation problemcontinued, the federal government sued both Acme and Mr. Park under a federallegislation that made liable any person who trades in adulterated food. TheU.S. Supreme Court stated that a person who has a responsible relationship to acorporate activity that leads to criminal liability is also liable under therelevant legislation. The liability of the responsible corporate officer is notvicarious liability: it is a species of primary liability.
The liability arisesout of a voluntary assumption of responsibility coupled with a failure todischarge the liability and resultant harm. In this respect, the liability ofthe responsible corporate officer is akin to criminal negligence. It isinteresting that a statutory offence has been converted, through prosecutorialzeal and judicial interpretation, into an offence similar to criminalnegligence.
However, in practice, one could read Park as laying down a standardthat begins and ends with the question: did the corporate officer hold aposition of responsibility in the corporation? Has a de jure criminalnegligence test become in practice a de facto responsible position test? Someremarks of the majority opinion lends credence to this proposition. The SupremeCourt remarked that while a corporate officer in a position of responsibilityfor a certain state of affairs (for example, warehouse storage) would normallybe liable for any offences committed in furtherance of such a state of affairs(rodent infestation in the warehouse), he can escape liability if he provesthat it was impossible for him to have prevented the offence. One way todemonstrate the impossibility is to, as the Supreme Court itself stated,affirmatively prove to the court that the responsible officer was powerless toprevent the commission of the crime. That a person had to prove animpossibility in order to escape from liability demonstrates how the Parkdoctrine in practice is a responsible position test.1 2 3