SOCIO-ECONOMIC OFFENCES WITH SPECIAL

REFERENCE TO CORPORATE GOVERNANCE

Dissertation Submitted in Partial Fulfilment

of the Academic Requirement of Degree of Masters of Law

(LL.M) in (Corporate Law)

SUBMITTED BY: SUBMITTED TO:

AASTHA SHARMA Dr. POOJA MITTAL

LL.M (2nd Sem.) (ASSOCIATE PROFESSOR)

00312447024

DELHI INSTITUTE OF RURAL DEVELOPMENT

NANGLI POONA, DELHI

(Affiliated to Guru Gobind Singh Indraprastha University)

1
 DECLARATION

I, AASTHA SHARMA bearing enrolment no. 00312447024, 2nd Semester, pursuing LL.M
in Corporate Law at Delhi Institute Of Rural Development (GGSIPU), Delhi, do hereby
declare that this topic is my original work prepared by me in partial fulfilment of the Academic
Requirement of Degree of Master of Laws (LL.M in Corporate Law) under the supervision
of Dr. Pooja Mittal (Associate Professor of Law). Neither the said work nor any part thereof,
has earlier been submitted to any University or Institution for the award of any degree or
diploma.

Further wherever any book, article, research work or any other work has been used to carry out
this study, the same has been fully cited and acknowledged.

2
 CERTIFICATE

This is to certify that AASTHA SHARMA student of LL.M (Corporate Law) has completed
her dissertation, to be submitted in partial fulfilment of the requirement for the degree of Master
of Law bearing the title “SOCIO ECONOMIC OFFENCES WITH SPECIAL
REFRENCE TO CORPORATE GOVERNANCE”. It is further certified that this work is
the result of her own efforts and is fit for evaluation.

AASTHA SHARMA

LL.M. (CORPORATE LAW)

00312447024

Certified that, the dissertation report in partial fulfilment of degree of MASTERS OF LAW to
be awarded by GGSIP University, Delhi has been completed under my guidance and is
satisfactory.

Dr. Pooja Mittal (Associate Professor)

3
 ACKNOWLEDGEMENT

It is with immense joy and pleasure that I record my deep sense of indebtedness and gratitude
to Dr Pooja Mittal (Associate Professor), my esteemed guide, for her noble guidance and
continuous, galvanizing encouragement which has been the source of inspiration and great
driving force throughout the span of this work. It was very kind of her to have spent a lot of
her valuable time in the supervision of this work. While offering this piece of work I obliged
my sincere thanks, deep respect and gratitude to head of Department Mr. Vikram Duhan. I
want to take this opportunity also to express my genuine respect and gratefulness to all my
other teachers, Delhi Institute of Rural Development library, friends and family members, who
have helped me in my study.

I express my sincere thanks to Dr. Pooja Mittal (Associate Professor) who took personal pain
to help and direct me in collection of study material and prepare this dissertation at appropriate
stages. Thank You.

AASTHA SHARMA

LL.M. (CORPORATE LAW)

2024-25

00312447024

4
 TABLE OF CONTENTS
❖ Table Of Cases.................................................................................6
❖ Statement Of Problem......................................................................7
❖ Hypothesis...................................................................................….7
❖ Research Questions......................................................................…7
❖ Objective of the Study......................................................................7
❖ Literature Review.............................................................................8-9
❖ Research Methodology.....................................................................13
❖ Scope And Limitation of the Study..................................................13
❖ Chapterization Scheme.....................................................................13-14
❑ CHAPTER 1....................................................................15-16
❑ CHAPTER 2....................................................................17-35
❑ CHAPTER 3....................................................................36-56
❑ CHAPTER 4....................................................................57-81
❑ CHAPTER 5....................................................................82-98
❑ CHAPTER 6....................................................................99-105
❖ Bibliography....................................................................................106-107

5
 TABLE OF CASES
➢ Abdul Rashid v. State of Haryana

➢ Budh Singh v. State of Haryana

➢ CBI v. Jagjit Singh

➢ Ford Pinto case

➢ Iridium v. Motorola

➢ Mahesh Chand v. State of UP

➢ Manoharlal v. Cheif Secretary

➢ Mak Data (P) Ltd. v. CIT

➢ M/s. Attavar Medicals and Sri Ramdas Attavar v. SPP Hc Building

➢ M/s/ Kulswami Medical Stores v. the State of Maharashtra

➢ M/s. G.M.H. Laboratories, HP & Sri Ram Gopal Goyal v. The Asst. Drug Controller,
Bangalore
➢ Narayanan K. v. State of Kerala

➢ Nimmagadda Prasad v. CBI

➢ Niranjan Hemchandra v. State of Maharashtra

➢ Ram Swaroop v. State (Govt. Of NCT, Delhi)

➢ Renuka Kala v. State of Maharashtra

➢ Shriram Oleum Gas Leak case

➢ Standard Chartered Bank and others etc. vs. Directorate of Enforcement and other
➢ State of Kerala v. President, Parent Teacher Association SNVUP

➢ State of Rajasthan v. Bheru Lal

➢ State of Maharashtra v. Indian Hotel Assn.

➢ Swami Achyutanand Tirth v. UOI

➢ Thana Singh v. Central Bureau of Narcotics

➢ Vidya Dhar v. Multi Screen Media (P) Ltd.

➢ Y.S. Jagan Mohan Reddy v. CBI

6
STATEMENT OF PROBLEM

In the past 5 years, a step increase is visible in trends of Socio-Economic Offences in India. In
a Research Survey conducted by Indian National Bar Association, 3,766 cases of Socio-
Economic Offences were detected in Financial Year 2019, which is a 15% hike from the
number of a year ago, while the mislaying incurred saw an 80% rise from the previous year.
Companies are the most affected entities from this increase in socio-economic Offences,
thereby, affecting the core concept of Corporate Governance. This study tries to trace the
development and rise of Socio-Economic Offences and their impact on the notion of
governance in the corporate sector.

HYPOTHESIS

The research carried on the following hypothesis;

● Emergence of socio-economic offences along with evolution of the concept of corporate

governance.

● The increasing number of socio-economic offenses affecting the core concept of corporate
governance.

RESEARCH QUESTIONS

1. What is the significant historical Development of the concept of Corporate governance and
Socio-Economic Offences in the Indian context?

2. Why a steep increase in socio-economic offences having a straightforward influence on the

concept of Corporate governance?

OBJECTIVE OF STUDY

This study has the following objectives:

1. To have a thorough understanding of the notion of corporate governance and socio-economic

offences.

2. To compare corporate governance practices in Indian and Global Scenario.

3. To study the legal framework governing socio-economic offences.

4. To analyze the challenges to corporate governance posed by socio-economic offences.

7
5. To study various facets of Socio-Economic offences in India.

6. To suggest recommendations based on findings.

LITERATURE REVIEW

❖ “Corporate Governance Modules of Best Practices” by ICSI: In this book, issues like
corporate governance structure, ethical business, assemblies conducted by the management,
corporate governance at global level, transparency and disclosure legislative framework,
corporate governance reporting, risk management, and effectiveness of board are discussed in
addition to the corporate social responsibility and sustainability.

❖ Corporate Governance Critical Issues, By CV Baxi: C V Baxi in his book "Corporate

Governance Critical Issues" has elaborately discussed the issues related to corporate
governance in detail like accountability, board objective, board composition, the role of
independent directors, and board structure. As far as performance evaluation of board is
concerned, he has critically analyzed the criteria of performance evaluation, methodological
issues, typology of measures, legal criteria, board functions, corporate performance, board
effectiveness, social responsibility of business, and implication of performance evaluation.

❖ "Corporate Governance Principles, Policies, and Practices" by A.C. Fernando: The

Author gives a comparative study of how various countries approach the concept, how they
institutionalize mechanisms for governance, and how they are governed. It addresses multi-
dimensional perspectives of shareholders and other stakeholders like employees, regulators,
environmentalists, creditors, the government, and society at large.

❖ “The Company Law”, By CR Dutta: C R Datta in his book "The Company Law", has
evaluated the various provision of the Companies Act with the latest cases. He has critically
deal with the subject of corporate governance highlighting relevant provisions of the
Companies Act. The appendix of this book is very good.

❖ “Elements of Company Law”, By N.D. Kapoor: N.D. Kapoor in his book "Elements of
Company Law" has explained the fundamentals principles of Company law in a plain, easy
and intelligible language. The Companies Act,1956 which governs the Company Law in India,
is a formidable document. It requires a great deal of time, patience, and preserve to understand
thoroughly the intricacies of the subject.

8
❖ "Socio-Economic Offences" By Mahesh Chandra: Mahesh Chandra in his book Socio-
Economic Offences has evaluated all the offences which are economic in nature and affect
society at large. The impacts of these offences have also been very detailed manner and all the
offences were critically analyzed. This book has discussed the concept of socio-economic
offences in a comprehensive manner.

❖ "Socio-Economic Offences" By JSP Singh: JSP Singh in his book Socio-Economic

Offences has presented a very lucid explanation of this concept.

❖ "Prevention of Corruption Act with a treatise on Anti- Corruption Laws" By Seth and
Capoor: Seth and Capoor in their book "Prevention of Corruption Act with a treatise on Anti-
Corruption laws" have presented the type of socio-economic offence and also discussed all the
aspects related to this offence in a detailed manner.

❖ The Immoral Traffic (Prevention) Act 1956 (with state rules)By B.R. Boetra: BR Boetra
in his book “The Immoral Traffic(Prevention)Act 1956” has explained this type of socio-
economic offence in a detailed manner and had present it in a very comprehensive manner.

ARTICLES

❖ Mr.NJJhaveri in his article “Corporate Governance: The Concept and Its Implications
in the Indian Context”, has briefly discussed the hidden agenda for maintaining proper
governance in the corporate sector, discovers choices for reinforcing corporate governance
directed in self-interest, dealing with practices of corporate governance in a detailed manner. 1

❖ P.N. Shah in his article “Role of Audit Committee in Improving Corporate Financial
Reporting”, has examined the part played by the audit committee ameliorating corporate
financial reporting. He has also briefly discussed the Birla Committee on Corporate
Governance. In this, he has attempted to cover various provisions governing corporate law
including Clause 49 audit committee and Naresh Chandra Committee on Corporate
Governance.2

1
N. J. Jhaveri, “Corporate Governance: The Concept and Its Implications in the Indian Context”, 27 ASCI
Journal Of Management (1&2) 62 - 70.
2
P.N. Shah, “Role of Audit Committee in Improving Corporate Financial Reporting”, 30 Decision, 41 – 60
(2003).

9
❖ Reetesh K. Singh in his article, “Corporate Governance: A Conceptual Framework”,
has examined the concept of corporate governance with key issues like a family firm, board of
directors, communication, codes and violations, shareholders, financial disclosures, human
aspects, and ethics. 3

❖ Dr. Satyanarayan Dash in his article “Corporate Governance in India: Meeting

Challenges of Globalisation”, has attempted to elaborate on the basic tenets of corporate
governance while examining the challenges posed to it by this era of globalization. 4

❖ M.K Datar in his article “Corporate Governance in Financial Intermediaries”,

elaborately has examined alternative governance mechanisms, power of financial institutions,
governance issues in lending, and risk tolerance levels. He has also discussed liquidity and
governance, employees compensation, and disclosure standards. 5

❖ Dr. R Satya Raju in his article “Corporate Governance in a Changing Environment”,

has briefly attempted to throw light on the idea of corporate governance and its changing
dimensions concerning economic and demographic changes. While further covering the role
of corporate governors.6

❖ Dr. Debaish Sur and Kaushik Chakraborty in their article “Corporate Governance in
India-An Appraisal”, have explained the concept of corporate governance. They have also
briefly discussed the crucial suggestions of various committees formulated in India while the
focus of this written article, leads us to find out the significant inadequacy linked with it. The
article culminated that in full conjunction with global accounting and audit principles better
security of outnumbered shareholders entitlements and robust implementation of persisting
policies and laws are some of the domains that demand requisite heed in the coming years. 7

3
Reetesh K. Singh, “Corporate Governance: A Conceptual Framework”, 24 Business Analyst 47-53
(2003).
4
Dr. Satyanarayan Dash, "Corporate Governance in India: Meeting Challenges of Globalisation", 21
Industrial Engineering Journal 2 – 6 (2002).
5
M K Datar, “Corporate Governance in Financial Intermediaries”, Economic and Political Weekly, January
24, 2004
6
Dr. R Satya Raju, “Corporate Governance in a Changing Environment”, Indian Management, March
2000.
7
Dr. Debaish Sur and Kaushik Chakraborty, “Corporate Governance in India-An Appraisal”, Growth, Vol.
33, No.4, Jan-Mar, 2006.

10
❖ Narendra M. Apte in his article, “Corporate Governance, Risk Management & Internal
Audit”, has elaborately discussed the concept of risk management and internal audit in
corporate governance.8

❖ Yogesh Upadhyay and Shive Kumar Singh in their article “Corporate Governance Role
of Corporate Laws”, have discussed the role of corporate laws in corporate governance. They
have observed that declaration of adoption of norms of good corporate governance, is rapidly
becoming a part of the annual reports of companies. Indians have to catch with the scene to
remain in the boat.9

❖ Ashok A. Desai in his article “Towards Meaningful Corporate Governance”, has

critically examined the concept of corporate governance. He has also observed that corporate
governance is demonstrated to be the only international route for corporate success. 10

❖ M. Sarngadharan & Mini Mol in their article “Corporate Governance In India”, have
examined the notion of corporate governance. They have also stated that e-governance has
emerged in the corporate environment as a parallel phenomenon to redefine work, defeat time,
shatter bureaucracies, and intellectual orthodoxies, instill a strong sense of commitment and it
is the only factor that ties together everybody involved in a business transaction inside a single
cyber-market that remains active throughout the twenty-four-hour day.11

❖ K.R.S. Murthy in his article “Corporate Governance: A Sociological Perspective”, has

stated that the crucial matter in corporate governance in India is sub-cultural. He has also stated
that proponents' families have an idea of what should be done but persist to do what is
contentious. The incompetence of non-executive directors to interrogate managements assist
them to be less responsible to shareholders. He has critically examined the CII code, juxtaposed
corporate governance exercises in the USA, Germany, Japan, and India taking a sub-cultural
developmental outlook, and suggests education of boards to play their part in the evolving
contentious environment in India. 12

8
Narendra M. Apte, "Corporate Governance, Risk Management & Internal Audit", The Chartered
Accountant, November 2004.
9
Yogesh Upadhyay and Shive Kumar Singh, “Corporate Governance Role of Corporate Laws”, Pranjana,
Vol. 3, No.1 &2, 2000, pp. 107 - 118.
10
Ashok A. Desai, “Towards Meaningful Corporate Governance”, Chartered Secretary, August 2003.
11
5 M. Sarngadharan & Mini Mol, “Corporate Governance In India”, Yojana, April 2003.
12
N. Balasubramanian, “Changing Perceptions of Corporate Governance in India”, 27 ASCI Journal of
Management, 55 - 61.

11
❖ Dr. S. Selvarani in her article “Corporate Governance-The Role of the Board of
Directors”, has briefly analyzed the role of the board of directors in corporate governance. 13

❖ C.Gopinath in his article “Corporate Governance Failure at Enron”, has critically

examined Enron failure.14

❖ Syamlal K. Ghosh and Shailesh Budhia in their article “Corporate Governance: How
Effective Is It?”, have examined the effectiveness of corporate governance practices in several
countries with special reference to India. They have also stated that some of the major corporate
scandals which have shaken the confidence of people, at large, all over the globe, in institutions
and mechanisms governing the corporate sector are the result of poor corporate governance
and corruption.

❖ Rajeev Sinha in his article “Corporate Governance and Shareholder Value Analysis”,
has critically examined the response of shareholders vis a vis and corporate governance. 15

❖ Dr. Onkar Nath Dutta in his article “Corporate Governance-Codes and Ethics”, has
discussed, in brief, the concept of corporate governance with special reference to India. 16

❖ N.J. Jhaveri in his article “Dilemma of Corporate Governance”, has critically examined
the incidental issues of corporate governance. 17

❖ B.B. Pradhan and S. Pattnaik in their article “Corporate Governance and Shareholder
Value Analysis”, have overviewed corporate governance and stakeholder’s worth evaluation
in different perspectives. They have also observed that corporate governance depicts the
principles of a corporation, which, in return, conjointly manifests the principles followed by
the society. So, in many independent companies, stakeholders are driving rigidly to clutch top-
level managing individuals more responsible and answerable for their resolutions and the
outcome they produce.18

13
0 Dr. S. Selvarani in her article "Corporate Governance-The Role of the Board of Directors",
Organisation Management, July- September 2001.
14
5 C. Gopinath, “Corporate Governance Failure at Enron”, ICFAI Reader, 49 – 52, May 2002
15
Rajeev Sinha, “Corporate Governance and Shareholder Value Analysis”, Global Business Review,1 to
16
16
Dr. Onkar Nath Dutta, "Corporate Governance-Codes and Ethics", Jan-Mar, 2006.
17
N.J. Jhaveri, "Dilemma of Corporate Governance", Chartered Secretary, August 2003, pp. A 261 - A 262.
18
B.B. Pradhan and S. Pattnaik, “Corporate Governance and Shareholder Value Analysis”17 Journal of
Accounting and Finance, 73 - 80 (2002-2003)

12
RESEARCH METHODOLOGY

The Research Methodology shall be Doctrinal: The Researcher has conducted overall research
predominantly by using the 'Doctrinal Method' of research. The mechanism opted by the
researcher for presenting this dissertation is doctrinal, methodical, and illustrative. The
researcher in overall research mostly relied on preliminary resources as Statues and Committee
reports. The objective of this research is to organize an assessment of persisting literary sources
and undertake an ancillary evaluation of released outcomes of experimental statistics, die
secondary. Therefore, the sources used are articles, official reports, and the Internet.

Two of the advantages of researching literary works which are published are those of expense
and moment. The evaluation of ancillary resources eases the availability to the requisite
standard of information for a piece of the sources supplemented in the accumulation of data for
preliminary research evaluation. The benefits of reevaluation of published or existing literature
might suggest a noble elucidation of available data; but also notifies against ancillary resources,
as it has been verifiable that some writers or authors can misconstrue the result of the
evaluations. It exhibits that various published literature and articles discussed the
questionnaires of the actual research, misconceived the results of the evaluation. The Internet
can be a useful instrument in researching pertinent literary works as it can facilitate, availability
of literature in a swift manner. However, it is significant to be vigilant while utilizing the
internet for some details or information, it should be ensured that the information you are
accessing is up to date, valuable, and is from a reliable source.

Once the pertinent studies get recognized, it became evident that most of them are officially
recognized records or government-funded research projects. The political panorama may
configure the resulting research, and there is a propensity towards endorsement prejudiced,
whereby the researcher may reduce unfavorable attestations.

SCOPE AND LIMITATION

Present Researcher tries to research the consequence of Socio-Economic Offences on the

notion of Corporate Governance while tracing the historical growth of the notion of Corporate
Governance. While covering the origin and growth of Socio-Economic Offences, It further
tries to study the global scenario concerning the Socio-Economic Offences and their impact on
the notion of Corporate Governance.

CHAPTERISATION SCHEME
13
Chapter-1: Introduction- This part of the dissertation dealt with “Introduction”, which gives
the contour of the whole dissertation. It elucidated the importance of the research, its pertinence,
place, and need for probing into the research subject. It also deals with the structure of the
research, the purpose of the overall research, theories of the research, and the mechanism opted
to present the same.

Chapter-2: Historical Development of Socio-Economic offences and the Concept of

Corporate Governance- This chapter traces the origin and development of basic concepts of
Socio-Economic offences. It analyses the notion of corporate governance; the elements of
corporate governance, factors influencing corporate governance, and its evolutionary
framework over the years.

Chapter-3: Legal Framework governing the Regulation of Socio-Economic offences in

Indian Scenario- To conduct a penal proceeding on the criminal laws were framed. These
laws also give direction for channelizing activities of trade, commerce, contracts, etc. The Third
Chapter, therefore, deals with the "Legal Framework governing the Regulation of Socio-
Economic offences in Indian Scenario".

Chapter-4: Corporate Governance under Global and Indian Scenario- This chapter leads
the path to other countries recognizing the notion of governance in the corporate sector, along
with the Indian perspective.

Chapter-5: Socio-Economic Offences and Corporate Governance- An uneasy relation-

This chapter gives a peep into the relation of the most important concept in the governance of
the company affairs and the broadest aspect covering the criminality involved in the company
affairs, with a focus on the uneasy relation shared by these two concepts.

Chapter-6: Conclusion and Suggestions- This chapter discusses the cessation of discussion
done in various chapters. Here researcher has endeavored to pin point drawbacks and loopholes
in persisting laws and regulations and has also recommended some measures to assure good
governance in the corporate sector and monitor socio-economic offences. This chapter will in
a concise form re-enlighten and provide for a conclusive insight into the essence of the whole
dissertation.

14
 CHAPTER 1: INTRODUCTION

With increasing technological advancement and development, there is an increase in advanced

malpractices. These practices have advanced in proportion to the advancement and
development in the present state. The awareness that people have on conventional crimes and
the urge to eradicate them is lacking when it comes to unconventional crimes.

This lack of awareness set the scene for socio-economic crimes to slowly feed on the resources.
A collective effort and proper awareness will only help in preventing the offences. Moreover,
the role of the legislative and judiciary is also important. It should more actively be involved
in addressing socio-economic crimes. In that way also they can spread awareness among the
people about the offences of this nature. Judiciary should be more careful in using legal
principles, policies, and precedents while dealing with these types of crimes.

The criminal acts with the benefits of business or profession are referred to as socio-economic
offences. When an offence is committed by highly influential and mighty people of the society
it is referred to as white collar crimes. These offences bring a traumatic threat to the survival
of social order. These crimes go against the economy and interest and are also committed with
no guilty intentions where the offender tries to increase his gain regardless of the consequences
of the society. They are dealt with special laws of crimes to tackle the problem, it becomes
acute and then chronic. In this, the concept of mens rea was diluted, said to be minimal, or
declared as nonexistent. Many times the term "white-collar crimes" is used as a synonym for
socio-economic offences, but socio-economic offences are much more than that. White-collar
crimes are also a part of socio-economic offences where they are categorized as a separate
criminal offence under the tag "crime by the upper class of the society".

A big corporate guilty of fraudulent tax evasion and a workman submitting false returns of
income are not different. In the end, either of the acts obstructs the economic growth of the
country, but the former one is classified as white-collar crimes because of its status.

With more than 20 million stakeholders, India in the contemporary world is one of the evolving
markets. The examination of corporate governance in India was integrated with the industrial
revolution in 1991. The activities including commercial and other structural reformation in the
nation are depictions of preferences of lawmakers to put well-organized allotment and
utilization of resources at the heart of financial activity. Among all the things, this relies upon
whether a firm’s managing system can be persuaded to utilize resources proficiently and this
is why corporate governance as an issue becomes significant.
15
According to the UK'S Cadbury committee proposition, corporate governance is the
arrangement by which corporations are monitored and regulated. It mentions the set of
guidelines and directives, mechanisms, and operations which assure that a corporation is run
in a way to accomplish its purpose and aim, supplements utility to the corporations, and also
dispenses advantages to all the shareholders in the longer run.

In India, many corporations, including the huge corporate associations, were inherent as
family-owned corporations. All the Family members have designated the position of managers
in such corporations and are authorized to take key decisions. This exercise had obscured the
distinguishable features between the company's economical conditions and the owners of the
family. With the advancement of egalitarian markets, most such families run businesses and
record themselves on the stock markets. These family businesses led to a division of the
possession from the management of firms. Despite all these proponents persistently wielded
unreasonable prejudice over decisions taken by the corporations. Corporate governance
standards are essential to assure that a corporation is running for the welfare of all the
shareholders, without the proponents and lining their own pockets. Moreover, a corporation
operating with good governance principles enjoyed substantial investor credence,
supplementing utilization to its share price in the stock markets.

India has a considerable number of recorded corporations across the world, and the proficiency
and welfare of the economical merchandise are censorious for the finance in particular and the
community as a whole. It is of the essence to structure and apply a spirited apparatus of
governance, which secures the welfare of pertinent shareholders without hampering the
development of corporations.

16
CHAPTER 2: HISTORICAL DEVELOPMENT OF SOCIO-ECONOMIC OFFENCES
AND THE CONCEPT OF CORPORATE GOVERNANCE

There are numerous sorts of social and economic offences. A few of the social wrongdoings
are murder, assault, man butcher, child labor, and human disparities whereas a few of the
financial violations are imitation, grand robbery, organized crimes, credit cards fraud, etc.
These offences when combined associated together i.e. when any economic crime committed
against society at large will be categorized as socio-economic offences. The consequences of
these are often perceptible. For illustration tax avoidance lead to diminishing income for the
treasury, bribery leads to one-sided administrative choice-making, insider trading which
ultimately resulted in the misfortune of investments in investors. There's ethical complexity
and vulnerability in socio-economic crimes which isn't obvious in other offences. There are not
any definite strata of the society which commits these offences, but it is anyone from any class
of the society who commits these offences. The intent behind these crimes is their corrupt
behaviour because of their disregard at school, domestic places, other sub-cultural organization,
their eagerness, profit-making lunacy, or need to reach on best by a short cut. These people
don't were so lost in making profits that they don't care about their loss of reputation or status.

These crimes are the result of the competitive economy that occurred in the mid-twentieth
century. The broad political, social, economical, and innovative changes, as well as various
enactment, strategies, and approaches in numerous nations on mutual help in criminal offences,
have permitted these socio-economic crime groups to become progressively dynamic within
the global platform. These types of criminal offenders take the advantage of the globalization
of world markets. These offenders are involved in nefarious activities which are not permitted.
As the main motive of these offenders to earn huge profit, and they are ready to stake everything
for these offences. This topic is the most serious concern for every administration functioning
at the national or international level. As the impact of these offences is deep-rooted with the
society which cannot be tolerated. Socio-economic offences are a heated topic at a global level
as well.

EVOLUTION OF SOCIO-ECONOMIC OFFENCE

The offences which are affecting society are economic nature are in existence for ages but
never came into the limelight before the start of World War II. However, as stated by Prof.
Albert Morris the earliest paper titled "Criminal Capitalists" on the topic was presented by
Edwin C.Hill before the global assembly on the Prevention and Repression of Crime in London

17
in 1872. In this paper Prof, A.Morris had tried to acknowledge the concept of this newer type
of criminality in 1934.19

Not only Prof. A.Morris, but many other academicians started recognizing the term the concept
of this latest form of crime was by a well-recognized criminologist Prof. Edwin H. Sutherland
in 1939. Sutherland interpreted these offences as White Collar Crimes.20

The war occurring at a global level has brought destruction in society and affected negatively,
ultimately resulting in an instantaneous surge in different society-related issues. The biggest
issue of that time was the scarcity of necessities and a great number of demands for these
commodities. The individuals involved in trade (i.e. businessmen) began taking benefit of the
adverse situation which the world was going through; this led to the development of greed and
usury among people living in the same community, this whole situation hastened the birth of
the newer forms of offences considerably. One instant situation was observed, in the big
corporations of USA — as observed by Sutherland that these corporations are involved in the
execution of different white-collar crimes, which are as follows: "Promulgating false or
misleading advertising, illegal exploitation of employees, mislabelling of goods, violation of
weights and measures statutes, conspiring to fix prices, selling adulterated foodstuff and
evading corporate taxes, etc."21

The formulated principles of Laissez-faire or intervention of the State is not allowed in the
monetary benefits of the individuals and groups has given birth to an extensive environment
having at its extent to fulfill monopolistic benefits; again this particular atmosphere encouraged
the multiplicity in the commission of socio-economic offences, which cannot be controlled by
easy methods especially in the industrial sector. Therefore, the rampant growth in a capitalist
society threatened the concept of social welfare.

However, the State in return was not able to maintain its silence for a longer period and be the
victim of the situation where the accused is trying to govern the nation according to its terms
and conditions. The state started processing these dangers imposed by the unrestrained growth
of capitalism and decided to adopt some steps in this regard. All the countries came together
and adopted policies and schemes so that adverse conditions can be improved, and individuals
can enjoy their social and economic entitlements which are just according to natural justice.

19
Barners and Teeters, New Horizons in Criminology (3rd ed.) 41, Prentice-Hall, New Delhi, 1966.
20
Sutherland: White Collar Crimes, Holt, Rinehart, and Winston, New York, 1949
21
Ibid

18
Society can be kept in a balanced position by keeping a check on offences or crimes committed
at a societal level. These socio-economic offences of different categories should be kept in
check to ensure secure ethical behaviour, protection towards the health of the general public,
and societal well-being.

Nowadays, the state is contemplated as a 'Welfare State' tends to regulate extensive domain
regarding means of production and man other industrial activities. This particular notion was
working on the principle of "the king can do no wrong" and the state was ruling to its extent.

But certainly, the state got overburdened with responsibilities which led to the inefficient
system, and ultimately resulted in the collapse of the functioning of proper administration.
Additionally, one more problem was observed that corrupt, inefficient, incompetent, dishonest,
and unscrupulous individuals got a position in public administrations. These factors were
majorly responsible for the evolution of socio-economic offenses in the world e.g. hush money,
deception, prejudiced and discrimination in the appointment of public officials and among
persons holding higher authority, counterfeiting in certification, permission, and quotas,
pilferage, swindling, and cheating concerning to public property, and infringements of
identification in public contracts, etc.

EMERGENCE OF SOCIO-ECONOMIC OFFENCES IN INDIA

If Indian chronicles are read, it is acknowledged that India was the country where believers
used to exist. In simple words this land is contemplated as a land of honesty, truth, benevolence
is observed while laying down any principle and laws. The situation got revamped after the
British invaded India and won the succession of the Mughal empire, this particular incident
gave birth to adverse conditions which ruptured the socio-economical framework of the
country.22In the year 1717 Mughal empire gave signed the charter and issued Royal Farman
which provided the East India Company the liberty to carry on trade in Bengal without paying
any tax. This Farman also gave them the freedom to issue passes which give access to
transportation of goods from one place to other. In simple words, it can be stated that this newly
released Farman gave a conducive atmosphere to Britishers and also encouraged them to
commit economic offences which can affect the society at large. Bipan Chandra observes:

"the power to issue dastans(Passes) for the company's goods was misused by the company's
servants to evade taxes on their private trade."

22
Mahesh Chandra, Socio-Economic Crimes 45 (N.M. Tripathi, Bombay Publication, 1979)

19
These incidences helped socio-economic offences to hold a stronger grip in India as well. It
can be witnessed through the saying of Lord Clive, "I shall only say that such a sense of anarchy,
confusion, bribery, corruption, and extortion was never seen or heard of in any country but
Bengal; nor such and so many fortunes acquired in so unjust and rapacious a manner." 23

The next phase of this new criminality i.e. socio-economic offences initiated with the freedom
movement carried by India and partition of India into two parts. When India became
independent, the condition of the country was very pathetic people were suffering from the
scarcity of resources, the country as a whole was suffering from the lack of administrative
control. As when Britishers left India, the situation was not apt to create a piece of machinery
for operating its administrative functions. One more adverse impact was because of the
partition the refugees from Pakistan were shifted to India to get shelter. These all situations
contributed to the disorganization of the society and collapse of the economy. Ultimately it
gave birth to the execution of these crimes which affect society and rapture the economic
condition of the country. India also came in the grip of socio-economic offences due to these
adverse conditions.

The third phase started with the beginning of an industrial era which was associated with the
process of urbanization, this step gave a proper platform to the commission of socio-economic
offences which ushered in the growth of this new crime. Thus noticing the extent growth of
these offences in India, the first step was taken by the committee named Sanatham committee.
This committee to improve the situation first recognized the offences which will cover the
domain of socio-economic. This list released by the committee were as follows;

1) The offences which were executed to prevent the growth of the economy of the country and
poses danger to the existing economy of the country.

2) The offences regarding payment of taxes;

3) The offences committed by public servants by using their position or designation such as
disposal of property, taking bribes and transferring documents which should not be transferred,
etc.

4) The offences related to contract formation, where terms related to contracts in any industrial
and commercial organization are not fulfilled accordingly by public servants.

23
Ibid

20
5) Black marketing of scarce goods or corruption in public offices;

6) Adulteration in edibles

7) Theft, mischief, misappropriation of state properties

8) Commission of fraud and trafficking in license making and deliverance. 24

The socio-economic offences is an extensive domain not only above mentioned will be
categorized as socio-economic offences but other offenses such as plundering, infringement of
foreign exchange rules, counterfeiting, offenses committed during expertise profession such as
medical, legal and deception in the political context.

The GOI after looking at the reports presented by Santhanam Committee took another step and
appointed one more committee named the Wanchoo Committee on the 2nd of March, 1970.
The obligation imposed on this committee was to pay special attention to the most prominent
issue country was dealing which is the problem of black money which comes by infringing one
more law that is foreign exchange regulation working regarding combat black marketing
hoarding etc. The Wanchoo Committee appointed with a specific purpose come up with some
recommendations which were regarding amendments that were needed in the provisions related
to Socioeconomic offence. The suggestions given by this committee compelled the state to
think on the matter and enact some legislation relate to the same. of those committees led the
Indian legislature to enact more laws, e.g. FERA197325; SFEMA 197626; FEPSA 197427; and
CrPC 1973 28 etc. After these observing the gravity of the situation Law Commission also
recommended some measures which can be brought by incorporating it under some statutes
related to Socio-Economic Offences so that these offences can be sanctioned by imposing strict
punishments to the offenders and the safety of citizens can be ensured.

What is Socio-Economic Offence?

The expression "Socio-Economic Offence" and its offspring, "organized crime", manifest a
half-century former initiative to reform interpretations of the adjacent offences related to socio-

24
Government of India, “Report of the Committee on Prevention of Corruption” (Ministry of Home Affairs,
1963).
25
The Foreign Exchange Regulation Act, 1973, No. 46, Acts of Parliament, 1973 (India).
26
THE SMUGGLERS AND FOREIGN EXCHANGE MANIPULATORS (FORFEITURE OF PROPERTY) ACT, 1976,
No.13, Acts of Parliament, 1976 (India)
27
THE CONSERVATION OF FOREIGN EXCHANGE AND PREVENTION
OFSMUGGLINGACTIVITIESACT,1974, No.52, Acts of Parliament, 1974 (India).
28
Criminal Procedure Code, 1973, No. 2, Acts of Parliament, 1973 (India)

21
economic. A layman will never notice a difference between white-collar crime and socio-
economic offence, but a law student or a person associated with the field will never ignore the
difference as they are two different concepts. The crime is a matter of confusion in the modern
era is the very new emergence and covered under the scope of socio-economic offences.

So, now the question popping is what is a socio-economic offence? The offence committed in
any social and economic in nature and impact that society adversely will be called a socio-
economic offence. These criminals are not any extraordinary people, they are from general
society. This penultimate line is the point of difference between white-collar crimes and socio-
economic crimes. As white-collar crimes are mainly committed by particular strata of the
society mostly business associates, but socio-economic offences are not so divided.

Socio-economic offences are considered as the demerit of an industrial and digital revolution.
With growing technological developments the pace of these activities has also triggered. As it
is proximate to the digital revolution, these offences are difficult to trace the real criminals
behind these offences. For these matter cyber cell has been functioning in different territories.
These offences are declared illegal and have different laws to prevent them according to lex
loci.

CONCEPT OF SOCIO-ECONOMIC OFFENCE

The expression SOCIO-ECONOMIC OFFENCE is used to refer to crimes. As this offence is

diverse and increases its umbrella time and again, sociologists and criminologists not able to
reach a consensus regarding its conception of socio-economic offence for more than sixty years.
This offence has even been included in the curriculum of American Law schools. Many law
enforcement agencies are functioning in the country to combat these offences. This expression
has gained attention in foreign countries as well.

The concept of socio-economic offences is different from white-collar crimes this fact has been
cleared by the scholars time and again. The socio-economic offence in the modern era gets
progressed with the development of culture, economic values, and social sphere, which renders
a broader scope to socio-economic offence compared to white-collar crimes. Even the law
commission has given the distinction in 47th Report of Law Commission of India. If a big
manufacturer of drugs sells cheap quality drugs, this type of offenses committed by a person
belongs to the upper strata of the society. On the flip side, a person belonging middle class of
society smuggled television in huge quantity, then this type of offence will be categorized as a
socio-economic offence not under white-collar crimes.
22
To have a deeper understanding of the expression of socio-economic offence, there is a need
to break the expression and elucidate it separately. Firstly this category of offence involves an
economic aspect(trade, business, tax, bank robbery, etc.) misused by any person belonging to
any class of the society. Secondly, the reason for doing committing these offences mostly
comes from non-emotional persons, in the sense that perpetration is not an emotional reaction
against a particular victim. It means that it includes avarice instead of hate, vengeance, or lust
noticed in traditional crimes of murder, rape, etc. Thirdly, these crime impacts the whole
society or country. The major difference which has been recognized in the distinction between
white-collar crimes and socio-economic crimes is the class of the society committing these
offences.

As it is mentioned before, the law commission paid attention to these offences and interpreted
the term. It is necessary to mention the suggestions recommended by the law commission in
the 47th Report in terms of penal reforms for socio-economic offences. The report along with
reform also mentioned the concept of mens rea and also the party bearing burden of proof. The
reforms suggested were:

● Punishment should be rigorous

● In the conception of minimum punishment, the amendment should be done.

● There should be provisions that strictly punish these offences, the phenomena of discretion
of the court should be removed.

● There should be provisions to appeal if the judgment is inadequate.

It has been asserted that these recommendations can be interpreted and can be suggested to the
commission so that reformation can be made functional in legal administration. Even a
sentencing policy has been sanctioned for socio-economic offences, these policies are made
mandatory by the commission to prevent socio commission crimes. These mandatory
provisions are specified not only for some peculiar cases but mostly socio-economic offences
are covered under this domain and punishments are specified for all degree of socio-economic
offences. As earlier countries were struggling to find the solution for these offences, the same
was the condition of India. The added suggestion and recommendations in the commission are
not at their best but it is just a better option than the worst to resolve the issue till the proper
laws and regulations are sanctioned. These solutions are placed under a proper statute of socio-
economic offences. The main objective behind these was, to avoid the discretion of judges

23
which they use to minimize the punishment of the offender and gave him again the chance to
commit these offences which affects society at large. 29

Despite being a very popular expression in academics, professional and popular culture, the
term socio-economic offence is rarely mentioned in the substantive form of criminal law. It
doesn't mean that this term is absent but it has been mentioned only in a handful of relatively
obscure criminal laws. The reason behind this notion is no specific or straight jacket formula
is there to recognize socio-economic offence. The dilemma which India is facing in socio-
economic criminality thrives because of public apathy. This apathy or denial nature is because
of loose legal administration which India is having, the victim is dragged for years fighting the
battles, sometimes victim gets dead but the legal battle never ends. This phenomenon is
encouraging socio-economic offenders to commit these offences. If the root of these offences
are considered it will result that some of the other way general audience are responsible for the
commission of these crimes. A very prominent and common example is giving bribes to
government servants so that completion of work can be done quickly, black marketing in times
of scarcity, price infringement is such examples where it can be traced that society who is a
victim in socio-economic offences is itself involved in these offences.

The very true which can be stated here is illegality will not occur till we demand them, so
consumers who are claiming to be a victim is themselves accomplice to the crime. After getting
a basic understanding now the concept is when clear about socio-economic offences then it can
be said the socio-economic offences are crimes that can be committed by any member
belonging to any strata of the society, the crime which will be committed shall be economic in
nature and heavily impact the society at large. Though there is no settled elucidation for this
extensive domain generally it includes hush money, misappropriation, cheating, counterfeiting,
and infringements of trust perpetrated by the general public which influences society at large.

There is a shortage of definition of this expression in the literary world and legal world, but
from time to time interpretation has been done to combat the problem faced by society due to
lack of elucidation or definition.

In ancient times, the U.S has. many socio-economic offences and their forms such as white-
collar crimes have not received adequate punishment as these crimes were considered as not

29
Diva Rai, Sentencing policy with respect to the socio-economic offenses in India, available at
https://blog.ipleaders.in/sentencing-policy-with-respect-to-the-socio-economic-offenses-in-india/ (last
visited on 02 April 2021).

24
much serious, nowadays these crimes are considered most violent in nature. Today, stringent
punishment is been awarded to all the offenders as it is affecting the two most prominent
domains simultaneously.

REASONS FOR THESE OFFENCES

There are some factors or reasons, which are responsible for the happening of these offences;
mostly these are economic, social, and political which are noticed for the occurrence of these
offences. The foremost problem which is considered the primary reason is the problem of
globalization and liberalization. The common problems which popped up after these
developments are:

The transformation in the socio-economic scenario which is aptly associated with escalation in
wealth and prosperity has encouraged such offences. Among all the elements responsible the
most prominent were economic and industrial development in the entire world has been the
most significant reason for the growth in socio economic offence currently. Even the report
which is release to keep check and balance of the situation i.e. reports of law commission. In
the 29th report of the law commission, it has been manifested the reason behind enormous
growth in socio-economic crimes, as the digital era is helping them in easily executing these
crimes.

The post-independence era gave authority to the state to regulate the means of production and
distribution so that it can be ensured that everyone is getting the necessities. Theses regulatory
step on the part of the state gave rise to the greed to get more than other, this sprouted the socio-
economic offences. Even Marshal B.Clinard argued that these scientific developments are
helping these offenders in committing these crimes and completing profit maniac motive which
is impacting society negatively. But the total responsibility of these offences cannot be imposed
on scientific developments, there is much other reason which compels men to commit these
crimes. For example, the economic condition of a person also compels them to carry on socio-
economic offences. To detect these causes there are practicing lawyers who are responsible,
they used different tactics and ethics codified in law to combat these offences, but the problem
here arises is that these lawyers use unlawful tactics to conceal and misrepresent the fact and
circumstances which releases the offender free.

Even there is a very famous example of private institutions in India which receive public aid,
they provide the wrong information for the sake of attaining more grants. This particular

25
exercise is covered under socio-economic offence. Like many other offences are going on
which even people don't pay heed to, but they are impacting society negatively.

The recent scientific development brought computers, mobile phones which is encouraging
these offences. With the invention of mobile phones, these offences can be committed with a
single click from any place. The invention triggered the growth of these crimes and became a
challenge for law enforcement agencies at a domestic and global level in the new millennium.
These offences affect the economy of the country because of the very nature of the offence.
The offences committed through these developments are known as cybercrimes. Because of
the specific nature of these offences they are not easily traceable that those who have committed
the offence as they are mostly anonymous in nature.

Further, these criminals have the leverage to use computer technology to inflict the loss without
being haunted. It is predicted that in the coming future these crimes will increase with the
development of websites and the growth of the digital era. The most affected areas are the
banking sector and economical organizations, vigor, information technology services, business,
etc.

As it is mentioned in the chapter scheme given by the researcher that the topic is socio-
economic offences are acting as barriers in the functioning of corporate governance. Before
further discussion, it is essential to acknowledge the concept of corporate governance, it's
functioning, element, and the factors which can influence the function of this particular arena.
To have a greater understanding the corporate governance has been described in detail.

CONCEPT OF CORPORATE GOVERNANCE

The notion of corporate governance has popped and evolved since the last century. It was
affected by the economic scandals which were committed at a huge level. But, some of the
other way this crisis had the affirmative effect in evolving the concept corporate governance
and identifying different ways to improve the existing situations which ultimately gave rebirth
to the economy. The term "governance" is adopted from the Latin "gubernare" which means
"to lead", recommending rather that "the governance" (Corporate, in this case) applies more to
the steering operation than the control one. In Romanian, the term "government" is
synonymous with "administration" or with the one of "leadership", referring here to all pursuit
conducted under business domain will come under the scope of management. If the expression
of “governance" means leadership, then the corporate governance induces the notion of leading
the overall institution, because the expression “corporate” comes from the expression “body",
26
suggesting the idea of an ensemble, of the whole unit. In the first papers on this topic appeared
in Romania they were talking about "corporate management" and now about "Governance /
Corporate Governance" with the variants in Romania "corporativa"/"corporatista" (corporate)
that although are non-unitary, yet take the already established terminology in the world. In the
business environment of Romania, the corporation is elucidated as a joint-stock enterprise,
usually a very large company, which through its strength and market position plays an
important role.

Corporate Governance is a very new concept used in the professional world; the expression
'corporate governance' and its daily basis use in the economical domain is a new concept of the
last twenty years or so. However, the hypothesis which led to the growth of corporate
governance, and the domain it possesses, are too primitive and has been opted from different
sectors including financial status, the economy of the business units, auditing, legal
management, administration, and institutional attitude. The thought which is remembered
always is that the credit of the development of corporate governance goes to international steps
taken and, as such, is a complicated arena, which includes lawful or legitimate, heritage,
possession, and other fundamental variations. Some of the described hypothesis are considered
more proximate and needed to some nations than others, or more useful at various situations
relying on what circumstance a nation, or association of nations, is going through. The
development of these stages may indicate the inception of the framework of the corporate
sector, financial status, or possession associations, all of which impact the development of
corporate governance and settled within its domestic structure. One more aspect is of specific
significance, that these corporations operate by focusing on shareholder framework or their
approach is inclined towards all the members involved in the same.

WHAT IS CORPORATE GOVERNANCE?

According to the developments taking place in CORPORATE GOVERNANCE, the

expression can be elucidated as: The arrangement of governing and watching corporate conduct
and of maintaining equilibrium position in the welfare of all shareholders involved internally
and all other members of the society who can be victimized by the company's code of conduct
or rule and regulations framed. To assure ensure appropriate conduct by these governing
companies or enterprises and to attain a higher standard of proficiency and financial benefits
for a corporation.41 Thus, the significant element of this interpretation are that corporate
governance:

27
● is an arrangement of controlling corporate conduct

● Considers the interests of stakeholders involved internally and all other members who are
being the victim of the conduct followed.

● Have the goal to attain proper behaviour by these enterprises

● has the one and foremost goal of attaining the maximum level of profit and efficiency in their
employees.

A juxtaposition with the interpretation given in the first above is revealing that the definition
has been changed and the initial statement of the definition from 'procedure of governing
management' to 'an arrangement of governing and watching corporate conduct'. This change
was needed to manifest the extensive behaviour of the corporate governance debate and the
significance of the added phrase that governing and watching corporate conduct has attained
since 2005.

The crisis (GFC) of 2008–9 occurred at the global level necessitated and provoked to look once
again towards the interpretation of the term corporate governance in a more wide context. Many
different views existed about the same,42 but it is significant to note that the GFC never the
result of the failure of the notion of “CORPORATE GOVERNANCE”. Even this particular
statement is mentioned in the King Report (2009) from a South African and UK perspective to
make it clear to the general public, but it rings true much wider:

Most of the time what happens is the occurrence of some events such as credit crunch, or any
crisis that resulted in the financial sector, which is considered the result of governance in
corporate sector. However being a new concept there are many shortcomings but things should
be sorted properly to make a y inception successful, unnecessarily blaming will ultimately fail
the very prominent step taken for enterprise or companies functioning all over the world.

EVOULUTIONARY FRAMEWORK OF CORPORATE GOVERNANCE

The chronicles of the inception of corporate governance can be traced by Bob Tricker's initial
investigation done in the development of schemes or ideas of governance in earlier times which
was mostly carried on by merchant and traders around the 17th and 18th century most probably
after the establishment of trading empire East India Company. The notion that currently
elucidate the term corporate governance was in existence from the establishment of the Dutch
EIC with investors who were seriously worried about the problem of transparency and liability

28
of the enterprises, the competency of directors, the 'exhibitionist self-enrichment by employees
who were holding senior positions, evidence deficient of risk management, and the consequent
insecurity of investments, with dividends denied for periods up to 10 years (Frentrop, 2003).
Following corporate ventures persistent in the arrangement determined the degree of risks
collaborated with the governance of these enterprises including 'managers of other people's
money in the resounding words of Adam Smith.

Bob Tricker narrated the story of how the inception of the concept of limited liability came into
the picture in the 19th century and rendered a how advanced platform so that the activities
coming in the domain of corporate governance can be flourished. The key concept of this
inception was “ The incorporation of a legal entity, separate from the owners, which
nevertheless had many of the legal property rights of a real person − to contract, to sue and be
sued, to own property, and to employ. The company had a life of its own, giving continuity
beyond the life of its founders, who could transfer their shares in the company." With the start
of the 20th century, this indigenous corporate notion has formulated complicated corporate
structures and possession, and the development of extensive governance processes. Berle and
Means (1932) were the earliest members to take into consideration the keen entanglement of
the shift of authority from different and remote shareholders to executive management in the
growth of separation of ownership and governance.

Subsequently, after the growth in complexity of global corporations, the corporate governance
and enterprise which were in existence at that time were imposed with various limits. The
scams in corporate industry were lined up after this particular incident, the scandals including
junk bond merger and the storm which took place in the USA in the 1980s, the collapse of
Robert Maxwell Group in the UK in 1991, evoked the need for strict rules and regulations for
disclosure, responsibility and management issues. The attempt to reframe the policies for
governance in corporations accumulated the propulsion in the coming decades of the 20th
century with the domestic and global attempt to disseminate the code of conduct in which
should be religiously followed while governing these enterprises or companies. Despite starting
this effective drive to promulgate the robust rules and regulation of governance, but it came to
an end with the fall of NASDAQ and the successive fall of Enron(2001), World Com (2002),
and many other sequential failures of technological enterprises in the USA and other nations.

29
After the major failure, a considerable approach was chosen and interference was done with
new laws and legislation30 and with an escalation in robust governance codes of conduct which
should be applied while governing 31 Code. Yet the severity and persistence of the crisis
(2007−2008) occurred at the international level in the economic domain highlighted deep-
rooted feeble rules and regulation used for governing systems, board effectiveness, risk
management, and executive incentive structures. This manifests the collapse of authority
needed for operating governance domain and development of regulatory measures with
changing scenario markets, corporate structures, and financial securities. As Bob Tricker
concludes, this also shoes the restrictions of our awareness of corporate governance, both in
theory and practice, and the many unresolved issues concerning board accountabilities, free
functioning of directors and auditors, and the measures of controlling or regulating and code
of conduct.

THE EMERGENCE OF CORPORATE GOVERNANCE

Nowadays, corporate industry has come in limelight as a subject of deep understanding and
enduring importance. Many aspects are there to increase the curiosity and delight among the
public about corporate governance32 . Concerning the policies, code of conduct for governance
in corporate sector is a widely accepted domain. The discipline which should be acquainted by
managers and directors, to have proper responsibility and performance according to policies
designed.As there are company laws, where the expression corporate governance has gained
specific attention in the modern era. The issues related to governance are quite prominent in
the domain of company laws and pose questions for the better development of the governance
of the enterprise associated with the same. Even domestic governance of any nation pays heed
to the issue of proper governance measures in corporate sector as this notion is quite significant
for vital integrity, efficiency, and a necessary underpinning for economical stability in the
nation.

The leading global organizations such as the G20, OECD, IMF, and World Bank have captured
a huge arena in the corporate sector not only to resolve management issues if corporate
governance gets collapsed but also to adopt a channelize way to improve the economy of the

30
Sarbanes–Oxley Act of 2002 (Pub.L. 107–204) 116 Stat. 745. (U.S.A)
31
the UK Corporate Governance
32
Thomas Clarke and Marie Dela Rama, "THE FUNDAMENTAL DIMENSIONS AND DILEMMAS OF
CORPORATE GOVERNANCE" SAGE Publications (2008) London, file:///C:/Users/hp/Downloads/SSRN-
id1423004.pdf (Last visited April 09, 2021).

30
associated members and overall of the organization, giving ease of accessing the capital,
diminishing market volatility, and encouraging the investment sector33 . The repetitive storm
of the collapse of corporate governance, culminating the systemic 2007/2008 international
economic catastrophe, has mostly paid attention profoundly to the perceptible shortcomings in
enforcing agencies and corporate governance. These drawbacks noticed in the arrangement of
the governance have made this particular area a subject of curiosity and interest for
academicians and other scholars or commentators. As the ethical economy of Adam Smith
(1776), the predicament associated with the formulation of these enterprises and companies
operation have been accentuated by scholars existed in chronicles of corporate governance and
economists. 34 The enormous works of Berle and Means (1937) has introduced the idea of
corporations into the 20th century. After this, an association of economists left an indestructible
rationale impression for the issue of enforcement bodies in corporate governance 35 . The
academic arena has contributed a lot in ushering the growth of this domain and has also
associated it with legal administration to have regulatory measures of governance in the USA,
with the corporate governance assignment sanctioned in the year of 1980s of the US Law
Institute.36

Since the last two decades, the growth in research and literary works are noticed in the arena
of this specific subject. But there were many barriers in governance because the sequential
collapse of governance in the UK even led to the development of the LSE37 commissioning a
report on FACORPORATE GOVERNANCE38. This declaration of the rules and regulation of
openness, honesty, and responsibility as the crux of corporate governance has been helped in
the regulation of this arena in many other nations towards these ideals (1992: 16). Since most
nations have by now came up with their codes of conduct necessary in corporate governance
by various recurrence, the EU Corporate Governance Institute Index of Codes (E-
CORPORATE GOVERNANCE, 2011) lists over 200 codes across 85 countries39

33
OECD Principles of Corporate Governance, 2004
34
Paul Frentop, A History Corporate Governance 1602-2002, (Deminor January 1, 2003).
35
Michael C. Jensen & William H. Meckling, "Theory of the Firm: Managerial Behavior, Agency Costs, and
Ownership Structure", 3 Journal of Financial Economics 305-360 (1976).
36
Douglas M. Branson, "The American Law Institute Principles Of Corporate Governance And The
Derivative Action: A View From The Other Side" 43 Wash. & Lee L. Rev 399 (1986).
37
Government of United Kingdom, “Cadbury Report on The Financial Aspects of Corporate Governance”
(Financial Reporting Council, 1992).
38
Ibid
39
(European Commission, 2002; Aguilera & Cuervo-Cazurra, 2004)

31
With all these codes of conduct designed, in contemporary times research in the educational
sector and scholarship in corporate industry have ushered exponentially. In 1992 the specific
attention was paid to few publications related to corporate governance; by 2011 Google
recorded 18.5 million hits in this arena. Academic research or the educational sector has
extended the awareness of the concept and this particular concept got a place in various
disciplines of the academic arena such as social science disciplines, including economics, law,
management, accounting, finance, psychology, organization studies, and politics. There are
various interpretation and ways of exercising governance in corporations which begin with
various elucidations of what corporate governance is before:

The striving definitions attempted to define corporate governance, not in a very broad approach,
but these definitions were generally concerned with the connection of shareholders and the
directors with a special focus on the rule of companies in aligning to their roles in maintaining
corporate governance. 40 . If a broader perspective, is taken into consideration then it can be
stated that governance applies a huge and more complicated notion of order, proficiency and
equity are in equilibrium: While traditional economics presumed markets to be unprompted
social arrangements that will bloom best in the lack of any interruption, many political scholars
and advocates of law initiate from the opposites side of the presumption. Following Hobbes,
they presume that one of the dilemmas is societal conditions and not having certainty in this
arena and conflict. The newly established organizations of economics, economic sociology,
and comparative political economy came up with the approaches associated with special
emphasis on the markets which are not unprompted social systems but have to be developed
and managed by these organizations. 41 These organizations render services related to
monitoring the governance and enforcing the policies of, resolving issues related to property
rights, contract related issues, prevent competition, and also take care of the issues related to
risk and uncertainty. Societies have developed various organizations to monitor transactions
carried on in the economic arena, which assist in reducing the fraud that occurred in these
domains and hence increase the likelihood of their occurrence.42

40
Clarke, T. and dela Rama, M (eds), Fundamentals of Corporate Governance: Volume 1 Ownership and
Control, London: Sage, 326–42. (2006).
41
Clarke, T. and Chanlat, J-F., European Corporate Governances: Readings and Perspectives, London:
Routledge (2009).
42
Van Kersbergen & Van Waarden, “Governance' as a Bridge between Disciplines. Cross-Disciplinary
Inspiration regarding Shifts in Governance and Problems of Governability, Accountability, and
Legitimacy”, 43 Eur. J. Political Res 143-171 (2004).

32
FACTORS INFLUENCING CORPORATE GOVERNANCE

Globalization:The biggest factor affecting corporate sector is globalization so it should be

given utmost importance in the discussion of factors influencing governance. The exchange of
trade barriers and the internet which globalized us holds a most significant place in the
transmission of details and connection to the outer world, many countries have increased their
scope and horizons. People living in one country or anywhere on the globe have the access to
information from other people living on the same and that is affecting cultural developments.
The governance process in corporate sector, in specific, has seen more and more companies
adopting innovative methods from all the corners of the world or sliding to adopt these
innovative methods so that they can also pace up with the ongoing globalization phase. The
individuals who purchased diamonds in Europe must be apprised of the issues to do with
conflict diamonds in Africa for example. The situation was that the Customers and
communities as a whole were expecting the same needs.

Technology:Technological sector is again on of the important domain which affected the

growth of corporate sector. It has been already stated that scientific advancement in the
technological sector has made the conveyance of the details related to the particular company
much easier across trans borders. The same situation can be noticed within organizational
arrangements. Also, the collection, inspection, and data manipulation, nowadays done without
any complication. Due to this institutions are operating at a greater pace covering a wider area.
The growth in operating these mechanisms got increased rapidly. Manufacture who sends their
goods at the global level were expected to have a higher degree of care so that nothing can go
wrong. The best and recent example which can be stated here is the collapse of the Samsung
Galaxy Note 7 in the year 2016.

Increased Population and Population densit:The population is increasing and to its extent
nowadays. The unrestrained growth and density is again a very important element that affects
the governance of the corporate sector. Because the growing population markets have increased
their domain, businesses are acquiring greater markets and covering a large number of people
under its umbrella. The density of population increased states that "more people in a given
geographical region". These industrialist or manufacturer who involved in affecting nature and
the whole ecosystem are much responsible for the situation which mankind has faced and
facing and will encounter in the future.

33
Free Market Economics:This particular domain is a slow process but economies having free-
market policies are becoming quite famous around the world. Transparency is a key to have a
free market economy and this particular feature makes a prominent part that can affect the
governance of the enterprise or company. With corporate practices hurling away from
monopolies, oligopoly and conduct manifesting cartel, free-market economics is the most
important factor which affects the functioning of proper governance. This is witnessed in both
the activities related to corporate sectors and in transparent operations of and stakeholders
being stubborn about the policies and functions related to this corporate sector.

Cultural Governance:The culture of managing any company or enterprise is again one factor
that has influence the scheme of governance since its inception. This particular culture includes
various provisions regarding leadership and management of that particular company which is
mostly derived from the previous experiences of the company had. This is considered as a sub-
component of institutional culture that demonstrates management actualities beyond provision
governing officially. With this interpretation, it can be deciphered that managing a company or
enterprise may have a profound impact on transparency, practices carried on in an enterprise,
chronicles, and administrative mindset. The atmosphere of any company or it can be said that
cultural management is also a very significant factor that affects the functioning of corporate
governance. This manifests the leading minds which are involved in the establishment and
existence of that company. The economic system which experiences huge emigration, lose their
opportunity to select brightest individuals from a wider pool.

Professionalism And Collaboration:Professionalism comes under the domain of conduct,

way of conduct, and etiquette of employees in any company or enterprise. An individual is not
expected to be involved with any specific profession to gain this quality of professionalism, it
is something which is innate acquired quality and is expected from employees associated with
governance measures. Professionalism is a prominent element in determining the influence on
any governance existing. Central management of any company is a significant operation in
corporate governance. If an enterprise or company has an operation that involves regulatory
measures in internal function and that excluded the quality of professionalism in an employee,
it will be difficult for that particular enterprise to function well in an audit. The association
among the different professionals in an enterprise or company from responsibility, sales,
interior management, an audit from the outer atmosphere and other faculties of that particular

34
company will be accountable for the proper operation of corporate governance measures. The
team solely will not help, but there should be unity in their thoughts and their decisions.43

43
Major Factors Influencing Corporate Governance, https://www.businessballs.com/organisational-
culture/major-factors-driving-need-for-improved-corporate-governance/ (last visited on April 02, 2021)

35
 CHAPTER 3:

LEGAL FRAMEWORK GOVERNING THE REGULATIONS OF SOCIO-

ECONOMIC OFFENCES IN INDIAN SCENARIO

SOCIO-ECONOMIC OFFENCES are mostly contemplated similar to white-collar crimes but

when studied with proper research as mentioned in the previous chapter both are different
concepts. White-collar is species of socio-economic offences and socio-economic is the wider
domain that contains many species as same as white-collar crimes. White Collar crimes are
associated with a profession mostly committed in the corporate sector or members associated
with lucrative professions equipped with prosperity and wealth. In simple words, it can be said
that the upper class of the society commits these crimes e.g., a big multinational corporation
guilty of tax evasion. An individual who is granted a pension from the government is involved
in wrongful acts such as the returns which are filed were false it will not be categorized as a
white-collar crime but it will be covered under the domain of socio-economic offences. These
crimes disrupt the social health of any country very badly, as these crimes are economic in
nature so not only the victim but other members of the community get affected after the
execution of these offences. Therefore it can be said without any doubt that these offences
affect society at large and the economy also gets disturbed.

India after observing the unrestrained growth in these offences took a step further and
recommended that the solution proposed by the 29th Law Commission Report released by the
Santhanam Committee Report of 1964 should be taken into consideration to resolve the issue.44
The committee reported that, “The Penal Code does not deal with any satisfactory manner with
acts which may be described as social offenses having regard to the special circumstances in
which they are committed and which have now become a dominant feature of certain powerful
sections of modern society. In most of the offenses that were identified, two features could be
witnessed, economic benefit and unjust enrichment. It suggested that a separate chapter should
be included in IPC to deal with socio-economic crimes.”45

Afterward, the 47th Law Commission Report included some more offences under the
classification of socio-economic offences. The basic inclusion which took place was of three
categories of crimes i.e. unlawful financial scandals, unlawful route of conducting business and

44
Law Commission of India, “29th Report on Proposal to include certain social and economic offences in
the Indian Penal Code” (1996).
45
Supra note 50.

36
associated transactions and not paying or evading taxes or monetary liabilities and covered
various laws concerning socio-economic offenses namely ECA 1955, 46 PBMSEC 1988 47 ,
FSSA 2006 48 , PCA 1988 49 , NDPS, 1985, FERA 1973 50 and FEMA 1999 51 , ITA 1961 52 ,
COFEPOSA 197453, DCA 194054, DPA 196155, and ITPA 195656.

PBMSEC ACT 1988 & ITS RELATION WITH ECA,1955

ECA, 195557 was the first step which was taken in the epoch of food paucity and when food
dispensation was solely in the hands of the government. The o to the objective of this law was
to make food supply available to every citizen of the country and to save them from private
traders who charge extra money for supplying the food items. As the major problem faced by
consumers in consuming essential food items was the black marketing in times of scarcity and
rich traders used to hoard these basic commodities and then exploit the consumer's earnings.
To combat these activities which were carried on by private players of the society two acts
named, the PBMSEC Act, 1980 were brought into force. These laws provided detention to the
individuals or private players who are involved in these unscrupulous activities and one more
aim which these laws were targeting was to supply these basic commodities to consumers
without any hurdle. Even different schemes were brought to tackle these issues which were
ultimately affecting the economy and society at large and promoting this new type of offence
i.e. socio-economic offence. One such scheme was Public Distribution Scheme

Public distribution scheme:This scheme was brought to assure the supply of basic
commodities to consumers, without the involvement of any private players. Judiciary has also
played an important role in making this successful to a greater extent. In PUCL v. UOI,58 the
petition was brought in Apex court which focused on bringing reforms in the existing PDS.
The main argument behind this petition was that despite having a huge store of food

46
THE ESSENTIAL COMMODITIES ACT, 1955, No.10, Acts of Parliament, 1955 (India).
47
THE PREVENTION OF BLACK MARKETING AND MAINTENANCE OF SUPPLIES OF ESSENTIAL
COMMODITIES ACT, 1980, No.7, Acts of Parliament, 1980 (India).
48
THE FOOD SAFETY AND STANDARDS ACT, 2006, No.34, Acts of Parliament, 2006 (India).
49
THE PREVENTION OF CORRUPTION ACT, 1988, No. 49, Acts of Parliament, 1988 (India).
50
Supra note 26.
51
THE FOREIGN EXCHANGE MANAGEMENT ACT, 1999, No. 42, Acts of Parliament, 1999 (India).
52
THE INCOME-TAX ACT, 1961, NO. 43, Acts of Parliament, 1961 (India).
53
Supra note 28.
54
THE DRUGS AND COSMETICS ACT, 1940, NO. 23, Acts of Parliament, 1940 (India).
55
THE DOWRY PROHIBITION ACT, 1961, No. 28, Acts of Parliament, 1961 (India).
56
THE IMMORAL TRAFFIC (PREVENTION) ACT, 1956, NO. 104, Acts of Parliament, 1956 (India)
57
Supra note 53.
58
(2013) 2 SCC 663.

37
commodities and even a large number of subsidies are there the too the availability is not
adequate among the poorer section of the society. Because on the way of distribution
misappropriation of food grains occurs and the food grains never reach to the person for whom
it was allocated.

The court before giving any judgment focused on the CVC report59 given by Justice Wadhwa
which manifested that the PDS which is having the largest network in supplying basic
commodities, its purpose is getting defeated because of corruption of agents and officials
involved in the same. Apex court after considering the report ordered CVC to give its final
recommendation regarding the issue at the national and state level. The court also asked from
CVC to prepare a report of measures that can be carried on in the long run and measures for
shorter-term objectives. The longer-term objectives which were decided by CVC and the
central government were to set up some corporation which will be taking care of these supplies
and also to digitalize the process of PDS so that the commodities and subscribers can be traced
and everything can be done in a recorded way. One more provision was brought regarding the
operation of the newly formed corporations was that these corporations will function
independently at the state level and will sell the commodities at Fair Price Shop(FPS). This
order scrapped all existing FPS. It was held that to keep a check on corruption digitalization is
the only way.

The report of recommendation submitted also consists of shorter-term objectives which

included that every beneficiary should be traceable and should be registered; proper
infrastructure should be maintained by FCI60 for storing grains; all the intermediates should be
removed between the beneficiary and distribution corporation. In the places where corporations
do not exist there as well, no intermediaries should be involved after lifting the stock from the
godown of FCI.

Another short-term recommendation was made for increasing the feasibility of FPS; liability
and regulation should be increased by establishing a transparent system; allotment should be
done and each allotment must be recorded by vigilant committees while food grains were
distributed. Many measures and recommendations were mentioned in the report, but the most
important one was proper enforcement agencies should be established and complaints of

59
Ministry of Consumer Affairs, Food and Public Distribution (Department of Food) constituted a Central
Vigilance Committee (CVC) under the chairmanship of D.P. Wadhwa J, to look into the maladies affecting
the proper functioning of the PDS and also suggest remedial measures on 01.12.2006
60
Food Corporation Of India

38
misappropriation should be registered and if someone violates the provisions they will be
punished according to the mentioned punishment. The objective was to establish zero-tolerance
against these acts and provisions mentioned in EC act 1955 and PBMSEC Act 1980 should be
followed rigorously. This enforcement is necessary as there are regions that are totally
dependant on PDS food grains supply, so to feed them is a significant responsibility. Hence if
violation or infringement occurs these acts should be invoked.

In another landmark judgment of Ranjit Kr v. State of Bihar,61 here a petition was filed by
the accused who was being caught under section 6A62of EC Act 1955 of carrying grains in
sacks having FCI marks on his tractor and the driver who was driving the same tractor when
asked for the paper, he ran away. So the accused filed a petition stating that sacks bearing the
FCI mark should not be the basis of deciding violation of statutory provisions. The basis of the
argument of the accused was that usually, the dealers of PDS sell the whole sacks to
agriculturists so agriculturist may carry their sacks having FCI marks in large qualities by the
tractor. The court considering the circumstances of the case held that confiscation is not valid
so, the petitioner should be released. Here the court has played a vital role as if these thoughts
will not be taken into consideration then innocent people may get wrongly incriminated.

In another remarkable case of Abdul Rashid v. State of Haryana,63the person was seized with
kerosene oil which was more than the allowed limit and was declared as illegal possession.
Here in order to bring the act of accused under the domain of section 764 of EC Act which was
brought in the year 1955, the appellant was needed to prove that he was the dealer of PDS
taking care of the supply of kerosene. The petitioner and driver(deceased) were discovered with
possession of extensive tankers containing kerosene but it was not disclosed whether they were
dealing or what plan they employed to sell those drums. It was also directed that if the offence
of the accused would be brought under the domain of section 1165 of the mentioned law, the
court has the authority to go for cognizance of the matter if it is signed by any government
official.

FSSA, 2006 The objective behind this law was to make food accessible to the general public,
and the food should be highly nutritious, healthy, and pure and should fulfill the need of the

61
AIR 2014 Pat 14.
62
THE ESSENTIAL COMMODITIES ACT, 1955, No. 10 OF 1955, s. 6A.
63
2014 Cri LJ 1588
64
THE ESSENTIAL COMMODITIES ACT, 1955, No.10, Acts of Parliament, 1955 (India), § 7.
65
Id. § 11.

39
family. All the laws that existed before for regulation of food supply are incorporated under
this single umbrella act. This law has established as authority FSSAI66 for regulation of food
quality using scientific methods, their manufacture, sale, import, and also ensure wholesome
food for consumption.67 This law mentions compensation as well in case the quality of food is
not matching the required standards and are not regulated in conformity with the mentioned
provisions of law. The law also punishes the officials who try to deceive the consumers with
any wrongful or negligent act. There are many types of offences that are committed concerning
the supply of basic food.

ADULTERATION

In the noteworthy case of Swami Achyutanand Tirth v. UOI, 68 a petition was filed by the
citizens led by this Swami against adulteration of milk which was carried by using products
like urea,white paint, caustic soda etc. Which was posing danger to the health of the consumers,
even death can occur with the consumption of such adulterated products.The objective behind
the PIL was to ask the court to bring some comprehensive policy to combat such acts and
ensures a healthy hygenic and natural supply of milk.

The Supreme Court paid special attention to this PIL as the matter was the health of the
consumers.The court directed in the cases of this kind that the individuals or private players
whosoever is found indulged in these activities will be punished with imprisonment of a
minimum of six months.The court also gave freedom to the state high courts to decide the
penalty according to the degree of the crime committed and circumstances related to
adulteration in their states. After this some states such as UP, West Bengal, Odisha took serious
note of these offences and increase the punishment under section 272 IPC,1860 which mentions
that punishment will be lifetime incarceration and some amount of money in the form of fine.
The court also directed the states to submit the report of the number of cases reported and
punished and also monitor the situation, especially during festivals.

This writ petition Centre for PIL v. UOI, 69 was chosen for forming a committee that can
function independently and can monitor the dangerous effects of softy dring on human health,
especially on children. The main issue which arose in front of the public and consumers was
the absence of a proper legal regime that can check the content of these drinks available among

66
Food Safety and Standards Authority of India (FSSAI).
67
THE FOOD SAFETY AND STANDARDS ACT, 2006, No. 34, Acts of Parliament, 2006 (India).
68
2013(5) SCALE 23.
69
AIR 2014 SC 49.

40
the general public. Here the court emphasized Article 21 which is the entitlement for life in
India and elucidated the domain of the same and stated that any food item which is dangerous
or can destroy public health will be a violation of Article 21.

The FSS Act 200670 has been brought into the picture to establish a proper legal framework of
all laws related to food safety and it also establishes the authority i.e. FSSAI to lay down
scientific standards of the quality of food and regulation of the same. Lack of fixed standards
had posed greater health issues to human beings because many food articles include hazardous
substances, if consumed by a human being it can cause death as well. The court after observing
the situation directed FSSAI to coordinate will all the states and UTs and monitor the situation
seriously to ascertain whether manufacturers are conforming to the decided standards or not
fixed by the provisions of then act.

In the famous case of Mahesh Chand v. State of UP,71 the suit was rejected on the grounds
of delay in filing the same. This particular suit was filed in the year 1994 where the petitioner
was involved in the business of manufacturing mustard oil, and that was found adulterated.
And then the petitioner was required to send a second sample to Central Food Laboratory (CFL),
from here the sample took 20 years to reach court. The court while expressing discontentment
stated that if the situation will remain the same in the coming future as well, where the societal
health which should be the priority of the state and law enforcement agencies is neglected or
they are not paying attention even serious issues and not conscious about their obligation and
responsibilities towards the society it will ultimately defeat the purpose of the laws such as
PAA 195472 which is now replaced by FSSA 2006.

PREVENTION OF CORRUPTION ACT, 1988

Corruption is a hurdle for developing countries like India and is recognized as the worst of
socio-economic offenses. These crimes are prevalent in each sector of society whether private,
public, or charitable. But the corruption sector which affects society at large is corruption
prevalent in the public sector. The PCA 1988 73 was enacted to prevent corruption in
government offices. The major step taken by this law was increasing the domain of the term
'Public servant'.

70
THE FOOD SAFETY AND STANDARDS ACT, 2006, 34, Acts of Parliament, 2006 (India).
71
2013 (10) ADJ 222.
72
Supra at note 77.
73
THE PREVENTION OF CORRUPTION ACT, 1988, No. 49, Acts of Parliament, 1988 (India).

41
In the remarkable case of Manoharlal v. Cheif Secretary, 74 the CBI registered primary
investigation against some unknown public servants under PCA 1988 as the accused was found
to be in the possession of coal blocks for around one and a half years.The significant contention
which was posed in this case was whether before investigating under PCA 1988 the
authorization from the Centre is an essential of section 6A of the DSPE Act 194675.As the
purpose behind the insertion of section 6A was to assure that government officials are not being
victimized by trivial complaints and there should some screening mechanism behind these
trivial complaints. The court here held that in this particular case the screening mechanism has
been followed as constitutional courts that regulate the examination mechanism by CBI act as
watchman of the entitlements of the individual and if needed can always combat the
unacceptable acts by CBI against senior officials of central administration when brought before
it. The court in the concluding statement stated that section 6A doesn't demand approval from
senior officers of the central government while investigating public officials if the situation is
regulated by constitutional courts.

BAIL IN ECONOMIC OFFENSES

In Y.S. Jagan Mohan Reddy v. CBI,76 the appellant here opted for numerous ways to pile up
unlawful cash which ultimately preceded in huge damage to society. The challenge confronted
here was whether the petitioner herein made a case out of bail. The Apex court stated that in
economic offences which affect society at large the provisions of granting bail will be different.
As the economic offences are mostly committed after proper planning which includes deep-
rooted conspiracies and these offenses affect the economy of the country and sometimes
financial system as a whole gets collapsed. So it should be dealt with a higher degree of care
and the court while granting should be looked at inner and outer perspective of the offence such
as the nature of the accusations, loss caused, the character of the criminal committing and all
minute details adjacent to the crime should be looked into.In this case, the court rejected the
bail because after looking into the details of the case the court found that the release of the
criminal may obstruct the process by hampering the witnesses and investigation.

In another case of Nimmagadda Prasad v. CBI,77 the individual who was appealing in the
Supreme Court was guilty of executing an offence of estranging a prominent piece of land to

74
2013 (15) SCALE 305
75
Delhi Special Police Establishment Act, 1946, No.25, Acts of Parliament, 1946 (India), § 6A.
76
(2013) 7 SCC 439.
77
2013) 7 SCC 466.

42
the selected private corporation under the clutch of growth using deceitful means ensuing in
illegal possession and regulation of material resources. Here court stated that the commission
of such grave offences took place after a lot of planning and with cool calculations. The motive
behind these executions was personal profit without taking into consideration the loss of society
or an economy. The court considered the precedent decided in the Reddy case and stated that
bail would not be accorded in these offences. These decisions were celebrated judgment in
Indian history as the people involved in these crimes were big shot people and they deserve the
same.

LIMITATIONS ON BROADCASTING OF CORRUPTION CASES

Here the issue was regarding the irregularity in the hiring of JBT (JUNIOR BASIC TRAINED)
teachers in Haryana which ultimately resulted in the sentencing of the appellant according to
section 13(2) 78 of PC Act which was enforced in 1988 and section 120-B mentions the
sentencing in IPC,1860.79The name of the case was Vidya Dhar v. Multi Screen Media (P)
Ltd., 80 here when the case was not decided respondent proposed to broadcast the case of
conviction of the appellant. The petitioner after hearing this proposal filed the petition in the
court stating his issue that this broadcasting might result in prejudice which was opposing the
notion of free and fair trial. The court asserted that I agree that conviction is in the public
domain but broadcasting it will lead to unnecessary biasness against the petitioner, once the
matter is disposed of the respondent is free to do the same but before that, there should be no
broadcasting of the same.

REVOCATION BASED ON DELAY

In the famous case of Niranjan Hemchandra v. State of Maharashtra,81 the appellant went
to court for revoking the case which was unsettled since 1993. The case was registered under
section 13(2)82 along with section 13(1) 83 of the PC Act, 1988.As it is very comprehensible
that there is no restriction of duration till which criminal case can exist. But there are some
norms which have been fixed for weighing these delays, it should be measured on the actual
score, concerning the gravity of the crime and notion of social justice should always be

78
THE PREVENTION OF CORRUPTION ACT, 1988, No. 49, Acts of Parliament 1988) §13(2).
79
The Indian Penal Code, 1860, No.45, Acts of Parliament, 1860, (India), §120-B.
80
(2013) 10 SCC 145
81
(2013) 4 SCC 642
82
Supra note 85.
83
Supra note 87, §13(1).

43
considered and cry of the general public on the same. The legislative assembly to eliminate
corruption and provide rigorous punishment for the same. Corruption is the activity that has
the potential to destroy the economy of the country and even this destruction can cause chaos
among the society which will disturb the situation of law and order in the country. Sometimes
corruption occurs and loss used to be minimal but sometimes it collapses the economy of the
particular country.

These corruption activities are conducted by using one's position for the fulfillment of his own
needs and lust for money it violates the norms of democracy, erodes faith in government
institutions, and violates the fundamental right of other citizens. Good governance can only be
carried on when the members of public associations are fair regarding their obligations. If these
cases will be rejected solely based on delay without considering adjacent factors related to the
case, then the time is not far when we will live in an autocratic state governed by these
corrupted members whose petitions and cases will be quashed because of delay. So it is a matter
of significance that before rejecting any case on the grounds of delay, other factors associated
with it should be scrutinized. Sometimes delay maybe because of the remissness on the part of
law enforcement agencies or the fault of the system. But every time a situation differs so it
should be evaluated cautiously. It is also interesting, that there is no rule or order directed at
staying that petition should have stayed in trial courts, and sometimes on the instance of the
person guilty, adjournments can be obtained. The court has given a very celebrated concept of
rejecting the petition on the grounds of delay, as the facts and circumstances should be given
prime importance while rejecting these factors should be evaluated and one more thing which
should be taken into consideration is the effect of the crime on society.

CORRUPTION IN BANKING

In CBI v. Jagjit Singh,84 Jagjit Singh has attained a loan of fabricated documents with the
assistance of some office bearer of the bank, and a case was filed against him under section
13(1) (b)85 of IPC,1860 along with section 13(2) 86 of the PC Act, 1988.

Here when Debt recovery tribunal asked the accused to pay back all the loans taken by him to
the bank. The accused after paying back all the money went to the high court to ask the court
to quash the criminal proceeding against him. Here the court said the decision of the high court

84
(2013) 10 SCC 686.
85
Supra note 90.
86
Supra note 85

44
of quashing the punishment against this criminal offender is erroneous on grounds of settlement.
It was held that quashing the case on the grounds of amicable settlement between the criminal
and victim is faulty because this was not a matter of out-of-court settlement, the tribunal which
is the legalized authority of the court has ordered the accused to do the same. The one more
significant thing, in this case, was which type of offence has been committed? The offences
committed with the financial or economic system have a greater impact on society as well. So
this type of case where society is also the matter of concern, settlement or quashing is not
allowed. As not only the bank or economy of the nation but society at large is victimized.

CORRUPTION IN EDUCATION

The education sector is an important institution of the government sector, and if it is associated
with the government in any way it will not be a matter of shock for the readers that corruption
is prevalent at a very wide scale here as well. The problem here starts with not appointing staff
and bogus admission policies. The is a case related to this matter is the State of Kerala v.
President, Parent Teacher Association SNVUP87 .Here the court first interpreted the procedures
through which this government-aided school was running,and nullified their expenses which
they were spending in scholarship grant, books or providing midday meal. The court stated that
it is a great responsibility on part of the education department of the state to find bear these
expenses of providing it in any way to students. The courts ordered the education department
of Kerala to issue (UIDAI)88 cards to each student of the school so that government can have
a proper record of each student studying in government-associated students and can solve these
issues by using scientific techniques. This can be verified only with time because doing
anything utilizing the available scientific techniques will require huge infrastructure.

NDPS 1985

The NDPS is the department of the medicinal branch of science. This branch has been
considered as a boon for mankind,but as it is the fact that things will be boon till then you will
use it as a boon.The things start showing their demerits once you start exploiting them. This is
what happened with NDPS, these drugs are been used and trafficked and these circumstances
compelled the state to come with the law of NDPS Act 1985 considering the Indian’s obligation
under conventions signed concerning drugs as well as Article 47 of the constitution places
compulsion and states that "State shall endeavor to bring about prohibition of the consumption

87
AIR 2013 SC 1254.
88
Unique Identification Authority of India

45
except for medicinal purposes of intoxicating drinks and of drugs which are injurious to
health".This Act regulates these activities such as the manufacture without authorization,
production,illegal trade etc.The exception is only the use of medicinal purposes.

In case of State of Rajasthan v. Bheru Lal89,the accused got convicted under sections 8 and
18 of the NDPS Act, 1985. Here the accused was involved in possession of 3kg of opium by
SHO of place at that time. The accused got convicted by the trial court. But when the appeal to
the high court was made then he got acquitted because the investigation conducted by the
officer here was not officially recognized SHO. Here Apex Court stated that though he not
officially recognized SHO but temporarily charged as SHO, and his grounds of the
investigation were discovered to be reliable and collected necessary evidence to prove the
commission of the crime by the accused before the court. Then in the further course of justice,
the Apex court quashed the order given by the high court and reimposed the order given by the
trial court. In Navdeep Singh v. State of Haryana,90here the accused was seized with 1kg of
hashish and was prosecuted was according to section 20 of the NDPS, 1985 for possessing 1kg
of hashish and punished for rigorous imprisonment of ten years along with one lakh fine. Here
the accused was sentenced by both the session court and high court for the crime of possessing
prohibited drugs without a license. The defence took by the appellant side was that the illegal
substance was less than the allowed quantity,so the punishment should be awarded according
to the recent amendment done in NDPS Act in 2001. The court directed that in conformity with
the altered section 20 of the Act, the minimal punishment can be rewarded if there persists
direction of persuasion under the law is 10 years and the confirmation was given to the same
by the high court. The punishment cannot be reduced as the provision does not allow to do so.

PHYSICAL DISABILITY UNDER THE ACT

In Abbas Ali v. State of Punjab,91 here the person was accused as the amble recorded on his
name, was transferring sacks filled with polished rice and pod was convicted under section 2592
of the NDPS Act, 1985. The accused was not able to rebut the statutory presumption of the
existence of the culpable state93 and ultimately not able to give any concrete evidence that the
canter which was by his name was carrying this devoid of his acknowledgment and he has

89
(2013) 11 SCC 730.
90
(2013)2 SCC 584.
91
(2013) 2 SCC 195
92
THE NARCOTIC DRUGS AND PSYCHOTROPIC SUBSTANCES ACT, 1985, §25,No.61,Actsof Parliament,
1985, (India).
93
Id. § 25.

46
taken reasonable precautions to ensure such activities do not happen. 94The appellant took the
plea that he was physically disabled hence, the physical disability, which is a crucial element,
functioning in his approbation, to decide his accountability vis-à-vis the utilization of his amble
only at the higher court.The court here stated that the disability of a person does not give him
the freedom to give his vehicle to anyone who is carrying illegal activities by the same and
penalized under the law.

NO REVICATIONS UNDER THE LAW

In case of Budh Singh v. State of Haryana,95 the legality of section 32A96 of the NDPS Act,
1985 was questioned by the petitioner that whether this provision is infringing article 14, 20(1)
and 21 which is fundamental entitlement as it extended the duration of imprisonment. Section
32 A provides that no judgment should be allocated under the Act shall be rebutted or quashed.
Here the petitioner claimed that considering the revocation which was pending to him he must
have been resolved if he was released from the prison on time. The Apex Court while
investigating the case held that it was in not infringing the Indian Constitution and while the
disposition of the case held that intent of section 32 A of the NDPS act is to diminish the merit
of remission that an inmate under the mentioned law would have generally attained. But it
never increases the duration of imprisonment.

Under trials: In Thana Singh v. Central Bureau of Narcotics,97here the individual was guilty
and was imprisoned via section 37 of the NDPS Act 1985.He has spend more than 12 years in
jail and continuously his bail proposition has been denied by High Court.The actual retribution
for the crime was twenty years but the accused has been in jail for more than 10 years. The
court directed that in earlier cases also it has been emphasized that NDPS cases pendency
should be reduced and and trial should be conducted as directed,as in these case generally
incriminated individuals do not get bail. The court gave bail on some stipulated conditions and
held that if anyone’s personal liberty and freedom is violated for unnecessary reason it will
violate the article 21 of Constitution. The court also released a notice and send it to all the states
and asked for the report of convicted persons under NDPS Act, 1985 who have been
imprisoned for a duration of five years or more and their trial has not been conducted.

94
Supra note 101, § 60(3).
95
(2013) 3SCC 742
96
Supra note 101, § 32 A
97
(2013) 2 SCC 603

47
Reliability of police witnesses: In Kashmiri Lal v. State of Haryana,98the accused was found
in possession of opium and was caught in Dhaba. He was held guilty by the trial court and high
court of Punjab. The accused pleaded that he is not guilty he has been fabricated in this offence
and someone has planted opium in his vehicle. The person convicted attempted to safeguard
himself by section 50 of the NDPS, 1985 as he argued that no prior information has been given
and he should be rummaged in front of gazetted officer. As he has been searched according to
the provisions mentioned in law the judgment is prejudiced. The court here directed that section
is 50 is not applicable everywhere, its application can only be done if an accused is searched
not the vehicle or any other things and there is not any restriction mentioned in the law that
police officials are not capable of acting as witnesses and always their deposing will be
considered with suspicion an doubt. In this case, these police officials had bequeathed all the
people who were witnesses to the incident, to present before the court but they refused to do
so. Besides, there were many other arguments of the accused, which the court rejected to accept,
that is,the provisions for utilization of amount of heroin and for selling or purchasing was
altered in 2001 but this issue was of the year 1993. Here the court rejected all the arguments of
the accused and upheld the conviction.

In Ram Swaroop v. State (Govt. Of NCT, Delhi), 99 A similar judgment as given in of

Kashmiri Lal case was repeated. The accused herein has been discovered guilty of the crime
according to section 15100 of the NDPS Act, 1985 and penalized with incarceration for 10 years
along with a fine of Rupees 10 lakh. The lawyer of the appellant took defence that though the
subjugation of prohibited substance took place at a public place, as witnesses refused to
participate in proceedings and without any witness, the police officials statement could not be
taken into consideration otherwise it will violate section 50 of the NDPS Act, 1985 even if the
violation of not informing his entitlement that he was searched in absence of a gazetted officer
or a magistrate which is the violation of the mentioned law due to which the conviction process
has been vitiated because of the absence of the independent witness. The court ordered that if
the court has any feasible reason believe on the testimony of police officials and should ensure
that there was no independent witness present and if present they are not ready to be a witness,
then the courts are permitted to record their statement. The court also directed that recording
statements of police officials in the absence of witnesses will not be an infringement of section

98
(2013) 6 SCC 595
99
(2013) 14 SCC 235
100
Supra note 101, § 15.

48
50 of the Act is. The petitioner was found along with a bag on his shoulder, when police
officials approached him they searched the bag and not the person carrying the same and found
unauthorized items. Hence the search was valid and not In Gian Chand v. State of
Haryana,101 here the individual who was appealing was found in possession of poppy hush in
the automobile in which the accused was traveling. Here the petitioner asserted that no
independent witness has been examined before conviction even though many people were
witnesses at the time of seizure. The court first held that if anybody is convicted of possessing
and contraband content, the person is required to give the rationale for how the substance came
into his possession. The court on the assertion of the petitioner said that though there were
many witnesses present at the time of the incident, they didn't agree to be the witness of the
same. In these conditions when a witness refuses to be a witness then the official who has been
appointed for the same is taken into consideration as the process carried by the person
appointed is scrutinized by following due process and will be considered reliable.

In NDPS if the independent witnesses are not ready to depose, police officials can testify along
with some corroborating documentary proof.

FERA AND FEMA In Venkat N.R Akkineni v. Appellate Tribunal for Foreign
Exchange, 102 a corporation named Heart Entertainment took the authorization from RBI to
establish a body which will be responsible for managing foreign concern in the USA. But there
are some stipulated conditions, if the mentioned conditions will be fulfilled then assurance of
proper functioning can be given. First is that all the companies who want to take the assistance
of this newly developed body are supposed to submit the authorized copies accounting records,
and secondly the records manifesting gain and loss of the corporation accompanied with the
report of the director of overseas which will manifest the details of their alliance. The
companies which acquired the securities from foreign companies are supposed to submit an
annual report of RBI every year concerning the alliance with foreign companies within 30 days
form the day report was released.

The penalty report of RBI has the condition that an annual performance report by RBI should
be submitted within 6 months from the day of the auditing report released, according to the
nation where the host company was located. But the court said that defence cannot be sustained
as the subsidiary companies associated with the host company were not ready to disseminate

101
(2013) 14 SCC 420
102
2013(3) ALT 700

49
its record for auditing where there is mandatory provision is not present. The court while
concluding its judgment said that it is the infringement of 15(iii) of FEMA (Regulation), 2000,
along with section 37 of FEMA, 1999 along with section 131(1A) of Income-tax act of 1961.

In Basant Kumar Sharma v. Government of India, 103 the person filing the petition was
employed in Saudi Arabia based on a contract of six years, after accomplishment of the same
the petitioner will return to India. The individual has bank accounts in India in a bank based in
Mumbai, among all the accounts one was a capital NRE account accessible only to non-
residents.After the accomplishment of the contract, when the petitioner return to India wrote a
letter for transforming his current status of the bank account into NRO as he has been returned
on the possibilities of having resettlement and also has to keep the option open for other
overseas projects. The bank after reading the letter and considering the gravity of the situation
granted him Non-Residential External account status. The bank also took certification from
RBI as the individual is the beneficiary of 'transfer of residence' and has also bequeathed the
correspondence in India.On this appellant file a complaint. There were two questions in the
front of the court, the first being whether the individual will be contemplated as NRI under
FERA and the second question was whether laws under FERA are infringing article 19(1) (g)
of the constitution. The court ordered that the first question will be answered by article 2 (p)
(ii) (c) of FERA, he will be considered as a resident and the clauses in a very clear manner
expressed that any individual who stopped to be a citizen of India on grounds of leaving India
and settling in foreign countries for employment and has come back to India will be considered
as a resident. . The second question posed will be answered by section 2 (p) of FERA being
illegal and infringing of article 14 and article 19 (1) (g) of Constitution. The petitioner was
satisfied that he was qualified as generally non-resident and can recollect his assets in India
overseas.

The FERA was brought to integrate and alter the persisting laws and regulations concerning
activities of foreign exchange. It was brought into the picture for the larger welfare of the nation
and to regulate the worth of foreign exchange sources of the country. The law has shown the
necessity to regulate foreign exchange for the welfare of the country and therefore denying
deportation advantages to the defendant from attaining posed on not reasonable limitation. It
did not limit the defendant of carrying on any trade or business, the limit is only posed on the
deportation of funds from India.

103
[2013] 120 SCL 122 (Del)

50
IT ACT 1961

Among all the financial crimes, evading taxes is the most illicit conduct which is carried on by
fabricating the documents, vanquishing the true statements, and bluffing of reports by
corporations, managing directors and other qualified taxpayers. Evading Taxes: The accused
in the case of Mak Data (P) Ltd. v. CIT104 veiled his salary during filing for income tax return.
A legal notice was issued whereby the appellant was to settle the dispute amicably without
getting involved in trial and proceedings by giving a sum of money mentioned in the notice.
The departmental trial started under section 271(1) (C)105 of the IT,Act 1961 for concealing his
salary and posed sanctions. The court ordered that the law does not recognize the form of
defence of voluntarily surrendering. The Apex Court ordered that relinquishing of salary
involuntarily implicit that the proposal for surrendering was made with intent after the
evaluating officer was appointed for the search conducted. If the intention behind it was good,
he must have deposited the return inclusively with the sum which was deposited after
evaluation.

COFEPOSA 1974

The objective of this act is to allocate preventive detention in some cases to conserve and
augment the foreign exchange and obstruct the activities of bootlegging. The opening statement
of the discussed law also manifests that it is essential to carry on detention to ensure adequate
obstruction from these activities.

In Subhash Popatlal v. UOI, the pertinent proposition that popped up was that the detained
individual who has escaped the process of the incarceration order can eventually question the
incarceration order which was still not executed. The court ordered that an individual against
whom a preventive detention order has been released under section 7(1)(b) 106 of COFEPOSA
is obligated by law to present before the concerned authority. If the accused evaded the
detention proceedings and later questioned the order on basis of non-execution cannot be
allowed as it will give a free hand to all the lawbreakers to reap benefits from their misconduct.
The order of the court was appreciated by other members of the society as quashing the petition

104
(2014) 1 SCC 674.
105
The Assessing Officer or the Commissioner of Income Tax in the course of any proceedings under this
Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate
particulars of such income.
106
THE CONSERVATION OF FOREIGN
EXCHANGEANDPREVENTIONOFSMUGGLINGACTIVITIESACT,1974, § 7(1)(b), No. 52, Acts Of Parliament,
1974, (India).

51
merely on the grounds of non-execution without carrying any investigation will defeat the
purpose of the formulated law.

The principle that came out in the previous also applied in the case of Narayanan K. v. State
of Kerala. The appellant, in this case, argued that real incarceration happened after 5 months
and hence it is depicting that 107 there is the factor of prejudice as well because delay in
incarceration defeated the purpose. Hence, the incarceration order according to section 3108 of
the COFEPOSA was not valid. The court ordered that the appellant was evading the detention
proceedings as it has been held before in the Subhash case that those who abscond the legal
system, their appeal will not be heard by the courts as well.

IMMORAL TRAFFIC PREVENTION ACT, 1956 (PITA)

In of CBI v. Birendra @ Virendra @ Pandit, 109 the defendant and other accomplices
convicted for offenses under sections 4 and 5 of PITA, 1956.110They got bail from session court.
Whereas when the appeal was made to the high court, where they rejected the bail petition and
ordered duration of imprisonment will never decide whether bail would be given or not and
would not entitle accuse to release on bail. In this case, the victim was missing from her place
and when police officials started searching she was found with the accused, she was a girl of
14 years and was raped by the accused. The accused not only raped her but allured her with
some amount of money and started calling customers for her, and here in return for some
amount of money, she was compelled to have intercourse with various clients on a routine basis.
Here the accused was punished with rigorous punishment.

In Renuka Kala v. State of Maharashtra111 the appellant license of a running brothel or any
similar institute was quashed. Here the accused was convicted under section 3,4,5,6 of PITA,
1956. When this was brought to the notice of the court mainly for quashing the license of the
accused. Here court directed that after examining the whole case, that the license granted for
the brothel was managed by the accused. And this brothel was indulged in illegal exercises.
Even the gram panchayat of the village has also objected to the persistence of the license.the

107
The live nexus theory states that there should be a live nexus between order sought to be quashed and
intentions of the authorities to detain the detenue by virtue of such detention order.
108
Supra note 115, § 3.
109
207(2014) DLT 680.
110
The Immoral Traffic (Prevention) Act, 1956 (104 of 1956) ss. 4, 5.
111
2013 ALL MR (CRI) 2165.

52
previous records also evidenced the fact that complaint regarding this particular brothel has
been registered 72 times before.

In State of Maharashtra v. Indian Hotel Assn.,112 the short certitude of this case is that the
Bombay Police Act was brought in force in the year 1951 to integrate and alter provisions
concerning to monitoring of powers and conduct of operations by the cabinet responsible for
managing state and balancing it with legal administration. Consequently issuance of reports
and suggestions on the negative influence of hotels where the activities similar to brothels were
conducted, the Maharashtra Legislative Assembly put forth section 33A113 and section 33B114
to the mentioned law via an amendment in 2005 which was questioned as beyond powers as it
infringed articles 14 and 19(1) (g) of the Constitution.

The significant assertion provided by the state that these functional clubs and dance bars are
now like a pool of pick-up joints for prostitution. The state gave case in a compiled manner
where 34 cases were reported under PITA, 1956 from 2000 to 2005. There were many women
at that time who are associated with prostitution activities, but the state cannot make themselves
free from their obligations by stating they are involved with their own will even it is not under
the state's regulation. Here the Home Minister asked for the report which has been filed
concerning the issues of prostitution or brothel. There were many cases discovered for breach
of conditions for licensing according to newly established the Bombay Police Act, 1951 for
salacious and lewd activities have been filed and recorded under the domain of sections 33(w)
and section 110 of the Bombay Police Act, 1951 along with the PITA, 1956. The highest court
of law in the country rejected the issue and ordered that section 33 A in along with section 33B
is an infringement of articles 14 and 19 (1) (g) of the constitution. It was directed by the Apex
Court that the Government of Maharashtra was not right classifying between forbidden and
discharged foundations and even this has not contented the comprehensible differentia doctrine
under article 14 of the Constitution. Moving further the court stated that that the
presuppositions that drive via section 33A and 33B of the Act that the amusement gained by
the upper class leads only to mere entertainment and things certainly get changed when it comes
to lower strata of the society there it would result into wickedness, dissipation, and debauchery

112
2013(9) SCALE 47
113
S. 33A prohibits holding of performance of dance, of any kind or type, in any eating house, permit room
or beer bar and declares it as a cognizable and non-bailable offence
114
The establishments covered under s. 33B which includes establishments where entry is restricted to
its members only, or a three-starred or above hotel or in any other establishments for promoting tourism
and cultural activities enjoy complete exemption from any such restrictions.

53
which was considered unacceptable. For contravention of article 19(1) (g), the Apex Court
stated that the outcome of these clauses was the shutting down of the establishments where
these activities are performed. When the brothels were closed down after 2005, the court
observed that approximately 75000 females are out of work, and many other reports and
discoveries were done which manifested that these females have no means to carry on their
necessities, their situation compels them to opt for prostitution. Hereafter concerning the
worrisome position of female workers, the court directed that legislation is proving to
inexpedient and is infringing on article 19(1)(g), which is entitled to all the citizens. The court
in its concluding statement expressed that some controlling measures should be opted for
regulating these brothels, as we cannot infringe anyone's fundamental right. The court to
accomplish the objective formulated a committee that was responsible for issuing a guideline
or a rule book that will monitor these institutions, so that women associated with the same
cannot be subjected to something wrong activities.

DRUGS AND COSMETICS ACT, 1940

In Madan Lal v. State Drug Inspector,115 the appellant was responsible for the management
of the trust, the police officials on Reid found a hidden dental and mental clinic function under
the garb of trust. It was also discovered that the place does not contain any inventory of
medicines sold. The only drug which officials found was present in the clinical laboratory, but
the appellant was not able to dispense the detail of the same. Later on, it was discovered that
running a medical clinic without authorization, they were by their fake advertisement were
cheating on customers. The suit filed by the appellant was dismissed and it was ordered that
drug discovered in any of the health concerning premises is sufficient enough to fall under the
elucidation of section 3(d) 116 of the law and the certitude that the owner was not able to
dispense any details concerning the origin of acquisition of drugs was an infringement of the
mentioned clause of the law.

LICENSE WILL BE GRANTED ONLY TO COMPETENT INDIVIDUAL

Due to a lack of competent individuals for managing the medical store, the license was not
granted in the case of M/s. Attavar Medicals and Sri Ramdas Attavar v. SPP Hc Building
from the state’s side.117 Then too appellants were held liable under section 18(c) 118 of the

115
2012 Cri L.J. 2584.
116
THE DRUGS AND COSMETICS ACT, 1940, § 3 (b), NO. 23, Act OF Parliament, 1940.
117
MANU/KA/1231/2013.
118
THE DRUGS AND COSMETICS ACT, 1940, § 18 (c), NO. 23, Act OF Parliament, 1940

54
mentioned law. The court declared them guilty under the said provision. Another case is of
Namdev through M/s/ Kulswami Medical Stores v. the State of Maharashtra.119 In this case,
it was directed that permission to initiate a general store of medicines will not be given until
the authority charged with according licenses believes that the store will be managed by a
person who is competent enough in this discipline.The competency of a person is of supreme
importance, as the person who is responsible for selling, purchasing, supervising should be
competent enough to understand the consequences of the same. Here the license was not
granted to petitioners as they were not able to prove before the court that they have a competent
person to manage the same, and it was also discovered that the petitioners' store contained a
huge quantity of unauthorized drugs.The decision of court was celebrated one as managing
medical store involves a higher degree of risk so the managing individual should be competent
in medical discipline.

DISSEMINATION OF SUBSTANDARD DRUGS WILL BE PENALIZED

In the case of M/s. G.M.H. Laboratories, HP & Sri Ram Gopal Goyal v. The Asst. Drug
Controller, Bangalore, 120the appellant was convicted according to section 18 (a)(i) 121of the
mentioned law and argued that they were not given chance to dispatch the drugs which
pronounced as substandard for testing in the Central Drug Laboratory prior to cessation of life
span of drugs which were given for sampling. The defendant party manifested that instantly
after discovering, they were notified and the appellant also answered back by stating that they
had forwarded a letter to the drug manufacturers asking the reason for drugs being substandard.
Even, the appellant themselves accepted the infringement as in the letter which was written to
the manager of the drugs production unit, they manifested that when they assessed drug to they
discovered it to be substandard and hence were pulling them out from the market. The courts
are supposed to follow strict procedures in these types of cases where manufactures or
distributor is negligent.

A good number of cases have been mentioned above by the researcher which manifests Indian
courts have considered the issue of socio-economic offences seriously. In cases of deception,
the courts are very strict with their provisions and the criminals are not getting bail even in
high-profile case. The courts have also actively participated in setting precedents and giving
several suggestions in issues such as that of PDS, deception in the education domain but the

119
2014 (1) MHLJ 266
120
MANU/KA/0440/2013
121
THE DRUGS AND COSMETICS ACT, 1940, § 8 (a), NO. 23, Act OF Parliament, 1940.

55
pertinent thing where the court has to pay attention to is that these suggestions do not just retain
on paper, they should be applied and followed religiously.

56
 CHAPTER 4:

CORPORATE GOVERNANCE UNDER GLOBAL AND INDIAN SCENARIO

The expression ‘Corporate Governance’ is the most used in this globalized world. The question
which will pop up in the reader's mind after reading the first line is a corporate governance is
a key component of any flourishing business or its just a rage in this new globalized world and
will collapse with time? So the response which we are getting from close observation that yes
corporate governance is the key element, the reason behind writing these lines has been cited
in the chronicles of failures of corporate governance. These failures resulted in the development
of the same. The collapse of Enron in 2001, one of the major enterprises of the US has gained
global attention on these common collapses, but the collapse of this enterprise was a major
shock which leads to the growth of the notion of good governance to combat the failures of
such huge companies. The different countries came up with a different approach to confront
these failures as the UK came out with Higgs Report(2003) and Smith Report (2003), the US
came out with Sarbanes-Oxley Act (2002). All countries across the globe were trying to adopt
measures of to manage the governance of corporate industry according to the suitability of their
needs based on the policies and reforms mentioned by the global platform. It has been believed
that the need for corporate governance issues will going to usher day by day it will never
diminish. The sudden growth of this particular domain has been contributed by academic
research. As the domain of this particular field will mature interpretation will be more proper
and its adjacent fields can be explored. In this chapter, researcher has discussed the extensive
approach of the notion of corporate governance. The research has also further discussed the
scenario of corporate governance at the domestic and global levels.

CORPORATE GOVERNANCE IN UK

UK being an advanced nation has fully developed industrialized sectors and markets with
foothold diverse stakeholders including institutions which invests on behalf of the client,
economic organizational units, and individuals. The UK is master in explaining issues related
with the division of proprietorship and regulation of companies and hence has correlated
business issues. The embezzlement issues concerning corporate revenues by directors and no
regulation on accountability of directors actions, all these issues corroborated together and
encouraged a flood of scandals in the UK. Every country has its reason and approach for
carrying the governance drive.The corporate industry in the UK flourished with propewr

57
governance with the inception of trilogy of codes: the Cadbury Report (1992), the Greenbury
Report (1995), and the Hampel Report (1998).

Reports on Governance in the UK: Cadbury Report (1992) When misconduct of corporation
disintegration initiated people started losing their faith in these companies and apathy came
toward the whole financial department.The many companies along with Financial Reporting
Council122 and London Stock Exchange collaborated to find the solution for the same and came
forth with and establishment of the Committee for looking into the matter of financial domain
of the corporation and can ensure proper governance in the year in 1991. After the
establishment of the committee,some offences were reported at BCCI, and Maxwell and the
committee deciphered its cause and even extensively looked at surmounting the financial
domain of corporate governance. This committee was founded under the chair of Adrian
Cadbury,and when the committee published its first report it came to know as Cadbury Report.
The suggestions given by the committee was: functioning of the principal board; foundation,
constitution and functioning of elementary board committees;the significance of,and
endowment that can be done by non-executive directors; the broadcasting and regulating
system of business. The most significant suggestion of the Cadbury report was the "code of
best practice" these codes were supposed to be followed by all registered companies in the
UK.This also includes the penalization of non-compliance. The free hand in these mechanisms
was that if the compliance has been not been performed by any company then rationale for
non-performance should be given.This process of submitting rationale was mandatory because
this gives the full information about non-compliance which allow them to decide whether the
non compliance was genuine or unjustified.

Greenbury Report (1995)123 When the defects in disclosure of annual reports presented by
companies and remuneration packages of directors were discovered a committee was
formulated to tackle these issues and the establishment of the Greenbury committee took
place.In 1995 this committee came with the Greenbury report which included some prime and
comprehensive suggestions to combat these unscrupulous activities in functioning of the
company. The issue related to disclosures and remuneration was present since the inception of
the business domain, but no step has been taken till 1995. The Greenbury was the first report

122
Financial Reporting Council (FRC) (2017) “25th Anniversary of the UK Corporate Governance Code”
https://www.frc.org.uk/directors/corporate-governance-and-stewardship/uk-corporate-governance
code/25th-anniversary-of-the-uk-corporate-governance-code. (last visited March 31,2021).
123
Study Group on Directors' Remuneration: Final Report (The Greenbury Report) - 1995 (UNITED
KINGDOM).

58
in the UK to pay close attention to this part of corporate governance.The suggestion which was
of prime significance in this report was: This report strengthens the responsibility of the
directors; a committee should be established which looks specifically to remuneration of the
directors and will prepare a policy of remuneration and report it to the shareholders for the
whole year and full disclosure of individual directors should be performed; the measures should
be taken to link awards of the performance of directors and company so that welfare of both
shareholders and directors can be aligned. These were the significant suggestions suggested by
the Greenbury Report. From 1995 the disclosure of director's remuneration in the UK became
productive for accounts of the company.

Hampel Report (1998) 124The Hampel Committee formulated in 1995 to check whether the
application of the recommendations of Cadbury and Greenbury are being followed or not. This
committee issued its first report in 1998. This report stated "We endorse the overwhelming
majority of the findings of the two earlier committees"the most discussed issue of that time
was that to what extent the welfare of stakeholders such as consumers, working staff, general
public etc will be taken into consideration. The report published by the Hampel committee
reported that directors will be accountable for the shareholders and will be responsible for
stakeholders.The report also expressed that directors can accomplish their responsibilities
imposed by law towards shareholders and achieve their goal of keeping intact shareholder's
worth conveniently,just by maintaining the relationship with these stakeholders. The Hampel
Report similarly their predecessors paid attention to the significant role played by institutional
investors in companies.It is highly prioritized that these corporations and investors who are
involved should make considerable use of their shares,or it can be said that the involved
investors should properly utilize their right to vote after using their own rationale rather than
engaging in 'box ticking'.

Combined Code (1998) In 1998 a step was taken to keep the suggestion given by different
reports in consolidated form and the formation of Combined Code took place. This code
consolidated the suggestions given by previous three reports. The code has been divided into
two categories one designed for Corporations and another for institutionally recognized
investors. This code functions on the ‘follow or elucidate’ grounds.For the interior regulations
of the business, this code states that ‘the board is obligated for maintaining conducive system
to regulate internal atmosphere to give security to investments done by stakeholders and the

Hampel Report (1998) The Final Report, The Committee on Corporate Governance. Gee Professional
124

Publishing, London

59
revenue corporation’ and that ‘the managing individuals should, at least , organize an
assessment of the potency on the annual basis of the association’s arrangement of regulating
the internal environment and should bring it to the knowledge of shareholders. These
assessment activities should be like an umbrella which includes all types of regulations,
including economical, functional, and regulation regarding acquiescence with rules and
management of risk’. The Turnbull Report released in 1999 provided directors guidelines on
the process of assessment

Turnbull (1999) 125 The Turnbull Committee, was founded under the presidency of Nigel
Turnbull by the ICAEW (Institute of Chartered Accountants in England and Wales) to guide
properly regarding the application of rules and regulation mentioned in Combined code for
controlling the internal environment of the companies. This report throws light and gives
confirmation that maintains a conducive atmosphere is the accountability of the board of
directors. The members on board are accountable to monitor the situation of the internal
atmosphere and mention it in their annual report.It's not just the accountability for internal
atmosphere,as a company posed with many external challenges as well so the decisions taken
by the members of the board should be taken thoughtfully keeping in the objectives and goals
of the company. These board members are also responsible for changing their regulating
policies with time and according to the risk posed on the company.All the new risks adopted
or posed should be dealt with proper care and caution.

Institutional Investors and their Representative Groups: The huge institutional investors,
majorly pension funds and insurance companies, which commonly be part of the two
representative organizations then act as a professional platform. These are Association of
Britishers Insurers and National Association of Pension Funds, these organizations are
considered having the best implementation of corporate governance guiding principles as it
constitutes the suggestions given by combined code.These guiding principles help in regulating
the operations carried on in corporate governance and also give suggestions to members of the
companies.Many large investors were very aware of their entitlements in the domain of
corporate governance. There was case named Hermes which helped in developing Hermes
principles,which signified the perception of the relationship between companies and

125
The Institute of Chartered Accountants in England & Wales, Report on Internal Control Guidance for
Directors on the Combined Code, September 1999.

60
investors,what they want from their companies where they are investing huge amount,and all
the expectation by an investee is covered under the Hermes principle.

Companies Act 2006 The development of corporate law was the need of the UK since the
inception of the different socio-economic crimes in its operation.This need was fulfilled to
some extent when in 2002 Modern Company Law Review was released which outlines
proposal for a wide range of rejuvenation of company law, that involves different domains of
corporate governance. 126 The offers included various situations: the codified law for directors
obligations which arises from common law; uplifted the reporting policies and requirements
posed by the audit department, inculcating all requirements that financially well-versed
companies produce while operating mechanisms concerning financial reporting;all the details
from every minute detail to voting-related information should be posted on the website so that
what are the annual accounts and what is the position of the company everything exists in the
public domain.The government took steps to include all these suggestions in one consolidated
law and came up with Company Law Reform Bill 2005 and later onwards in 2006 Companies
act 2006 was brought to secure the interests of the companies. This newly enacted act
consolidated all the previous legislation which were enacted to protect companies, but it also
included some new provisions which affirmatively affected the directors, shareholders,
auditors, and secretaries. This act also analyzed the provisions mentioned in the company law
review. The significant provisions of this act were:

The obligations which have to be performed by directors were all written in statute. The
development of scientific techniques should be used by companies to transmit information to
their shareholders.

The directors are free to use their companies address for filing anything instead of mentioning
their addresses.

Shareholders will be capable of understanding the restrictions on directors' liability.

There will be arrangements where the rule book named Articles of Association would be
released which will constitute the procedures to be followed by small companies while
managing their companies.

126
Shleifer, A. & Vishny, R. “A Survey of Corporate Governance”, The J. Finance, 52:737-783 (1997).

61
The corporations classified under the private sector are not supposed to have a company
secretary.

The principles which were mentioned by the Operating Financial evaluation have not been
altered, instead, companies were motivated to develop a well monitoring system.

The nominees of the shareholders have the power to ask for the information in hard copy or e-
format. The companies are supposed to provide timely information to shareholders.

The developed proxy rights assist shareholders in attending all the general meetings and give
their positions in these meetings.

Stakeholders of recorded corporations may have a shareholder resolution.

These resolutions should be disseminated at the corporations' cost when the financial year is
about to complete.

Various methods has been used to encourage these institutional investors to prepare annual
reports, disclose their method of operation on their website so that corporate governance can
be operated smoothly.

After studying these features it can be deciphered that the burden on whilst companies have
been increased and it has been reduced for private companies. If the entitlements of
shareholders is been taken into consideration, various methods have been adopted such as
communications through available scientific means, disclosure of information of the
companies, proxy entitlements were encouraged, even breakthrough step was taken that
proposal of shareholders will be circulated at company's expense. The entitlements along with
them always bring obligation, so here also there are some obligations on part of shareholders
that they have a show their active participation in activities happening in companies and should
reveal the process of voting. 127

FINANCIAL SERVICES AUTHORITY Financial Services Authority in 2002 caw up with

a policy of reviewing the listing regime, the main objective behind this process was to figure
out worn out laws and remove them, and to identify the law which need amendment and which
should be carried on in the longer run. The major areas on which the review focused were:
Corporate governance, financial details, and the subscribing authorities. The FSA review was

Thornton Grant, Corporate Governance Review, https://www.grantthornton.co.uk/globalassets/1.-

127

member-firms/united-kingdom/pdf/publication/corporate-governance-review-2017.pdf (last visited 31

March 2021).

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conducted in the light of alterations occurred EU and UK concerning control mechanisms and
even one more reason was that there was much perennial in the proposals brought in 2005.The
review was conducted on the order of the chairman of FSA who was directed by the chancellor
of the exchequer in the light of the banking crises and was directed to suggest some reform
measures for monitoring the banking sector in the UK. In 2008 Turner review was released.The
major sector which covered this review policy was compensation measures should be
formulated to keep away from unnecessary risk; whether the alteration is needed in governance
laws to bring autonomy in management operations;there should be an arrangement where non-
executive directors are directed to give their active participation in the governance of the
system.

FINANCIAL REPORTING COUNCIL The FRC has six operational organizations:

Accounting Standards Board, Auditing Practices Board, Professional Oversight Board, the
Financial Reporting Review Panel, and Accountancy Actuarial Discipline Board. The
significance which has been given to corporate industry and ensuring its proper governance
can be witnessed by the a fact that in 2004 Financial Reporting Council came up as the
committee to manage the governance work. In comprehensive form, it can be said that the
Financial Reporting Council was responsible for the management and encouraging the whole
of a corporate sector and ensuring it proper governance. It works with the following objectives:
Implementing all the guidelines of combined code on corporate governance and encourage it
application in a rigorous manner;

Assuring the principles utilized for controlling the internal atmosphere had relevance according
to the time,it should not outdated otherwise it will defeat the purpose. Modifying EU and global
corporate governance developments. Companies should be motivated to increase
communication with institutional shareholders. Assisting the promotion of board room
professional varsity.

Financial Reporting Council since its inception was engaged in carrying out assessments of
combined code which even led to alteration of the same in 2006 and then in 2008. The latest
amendment was done in 2008. The prevalence of the evaluations signifies the Financial
Reporting Council's accountability for governance of corporations in the UK which includes
leading public debate in its horizon in its reaction to the international economical disaster which
has in response effected credence of the horizons of corporate governance. Financial Reporting
Council has posted on its website the governance of the banking sector is carried on

63
independently directed by Sir David Walker.In his name the review report was published in
2009, from this report some suggestions were included in the amended combined code.The
Financial Reporting Council even has conducted the review on the report published by Walker
and analyzed whether the suggestion which has been given in this report are assisting or not. 128

‘External’ Influences The report published by the EU group of corporation law experts had
analyzed the company law concerning the whole of Europe including the UK. The report
mentioned the developments which should be done at the global level.As in a globalized world,
the laws and regulations of other countries also affect the management of corporate governance.
The consequences of current laws brought into force in the USA, the Sarbanes Oxley Act, have
also left its impact in the UK.

CORPORATE GOVERNANCE IN GERMANY In 1994 Charkham expressed that "if there

were spectrum with confrontation at one end and cooperation at the other end we would
definitely place German attitudes and behaviour far closer to the cooperation end than say those
of British or Americans".This expression by Charkham has great significance in developing a
comprehensive idea of the German perspective of doing business and managing corporations,
whereby it can be understood that all the members associated with the company were taken
together and every person associated with the company hold an important place. This statement
came from the observation done in industrial relations of German companies:In any of the
country proper industrial relations are not much significant for the governance in the corporate
sector,but in Germany, the proper industrial relations are quite near to the center stage. This
can be proved by the Works Constitution Act 1972,which constitutes entitlements of the
council of workers and generally speaking dispense with all the issues concerning employees
working in the companies. The council of the workers is the collaborative system between
employers and workers,the notion of cooperation means there is a fiduciary relationship
between the employees and working staff. The Co-Determination Act 1976 explains the part
of the employees and shareholders leading individuals of the supervisory board and also
specified that the managing board has noteworthy accountability for issues concerning to
labour. The 129 structure of the corporate sector of Germany has been provided in detail by
Wymeersch (1998). They recognize the most utilized form of business activities in different

128
Bebchuk, Lucian A., Alma Cohen, and Scott Hirst., "The Agency Problems of Institutional Investors." J.
Econ. Perspect, 31 (3): 89-102 (2017).
129
Wolfgang Bessler and Wolfgang Drobetz, “Corporate Finance in Germany: Structural Adjustments and
Current Developments,” 27 (4) J. Appl. Corp. Finance, 44-55 (2015).

64
continental European nations. The huge business establishments in Germany have forms of
business which inclined towards the public (Aktiengesellschan AG) or private corporations
restricted by shares (Gesellschaft mit beschrankter Ha(tung, GmbH). However, he recognized
a amalgamation that is even utilized in Germany as well- specifically, a hybridization of the
GmbH & Co. KG, amalgamating the benefits of the not fused Kommanditgesellschaft and the
restricted accountability of GmbH. In continental countries of Europe including Germany and
the UK, there is a tendency in business activities that individual would share his ownership.
The dominant shareholders are commonly the fiscal and non-fiscal corporations, there are
various strategic partnerships, which indicates that while examining the share possession and
regulation in Germany the connection between the companies should also be analyzed.As far
as the representation board of supervisory committee in German corporate governance is
concerned, usually it is managed by banking sector especially larger entities of this
sector.Charkham has even realized several reasons for giving the banking sector such a
significant place in corporate governance. 130 Firstly banks had direct possession of shares of
the corporations; Secondly, the shareholders of Germany file their shares with their trusted
banks and those banks should have permission to give voting instructions; Thirdly banks lend
shares for a longer period which developed the stronger relationship between the companies
and banks; fourthly, the services offered by the bank to companies had a lot of relevance for
operating the functions of the company.All these factors contributed to the banks such a
significant place in the supervisory board. Hence the Corporate arrangement in Germany can
be called an insider system. The corporate governance of Germany is grounded on twofold
board administration, and this arrangement constitutes management (Vorstand) and
supervisory board (Aufsichtsrat). The management board was obligated with a duty to manage
the companies. All members of this board were collectively accountable for managing the
company and the leading individual of this board prepares the plan of managing the same. On
the flip side, the supervisory board were involved in supervising the management board, major
appointments of the management board is also carried on by the supervisory board. The leading
individual of the supervisory board decides the way of operating the board. The appointments
of all the individuals who get seated on the supervisory board take place in general meetings
by shareholders. The guiding principle of co-determination has a provision which states
mandatory representation of the employees in general meetings. So, for corporations which are

Rapp, Marc Steffen, and Strenger, Christian, Corporate Governance in Germany: Recent
130

Developments and Challenges 27 (4) J. App. Corp. Finance, 2015.

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exceeding the constitution of 500 or 2000 working staff in Germany, the supervisory board
constitutes these employees which then constitutes one-third employee representative or one-
half employee representative respectively. The mouthpiece of these employees who are chosen
by stakeholders and the one who represents employees have the same duties to serve i.e. to act
for the welfare of the company. The notion of having representatives on board was
contemplated at many times a bad idea,as this makes the representative a sole decision-maker
sometimes these decisions affects the other employees of the company. For illustrations, would
be where enterprise want to vindicate its functioning and cease the work of a factory but the
comprehensive understanding of the practical aspects of attempting to get these types of
resolutions certified by the employee representing the supervisory board, and the consequences
of such a resolution proved too great for the strategy to be made a reality. The Cromme Report
or Cromme Code on corporate governance131 was published,the name of the report was on the
name of the chairman i.e. Dr. Gerhard Cromme who lead the committee on corporate
governance.The code coordinated various laws and regulations and also constituted
suggestions to act following the best practice which has been followed on a global level for the
governance of the corporate sector.This particular report was published in 2002 and is divided
in various sections, initiated with the section of shareholders and the general conferences.It
also manifested technological advancements. This code was updated in the year 2005. Not the
whole code was altered but some significant alterations had been done which is mentioned in
detail under 1-4 below:

1) Shareholders and the general meeting: The managing board under the supervision of the
supervisory board prepares the report on yearly and collectivized economical reports and
submits at general meetings and then they decide on the adequacy of net salary and validate
the decision taken by both the prominent boards. The most significant part of general meetings
are the election of the members of the supervisory board and auditors as well. The Cromme
code has different provisions that management boards are not only required to submit the report
needed by the law but are also supposed to post this detailed information on their website with
the proper objective. To post these things on the website also encourages the use of
technological developments and these ideas should also be applied in the whole governance
process. The shareholder's entitlement to vote is eased by different ways, such as the private
exercise of shareholder's voting entitlements, proxies, etc.

German Commission, The German Corporate Governance Code (The Cromme Code) 26 February
131

2002.

66
2) Co-operation between both the boards: The collaborative behaviour among management
and supervisory board is of prime importance for governing any company. Even the Cromme
code has also mentioned in one of its provisions that the there should be mandatory presence
of cooperation between both the boards and have detailed discussion on the strategic
approaches and application strategy at regular intervals.There are some circumstances such as
those concerning planning, the developmental activity of business activities, contemplation of
risk,and managing the conducive atmosphere in companies in these situations management
board is supposed to inform the supervisory board.So that the supervisory board can figure out
how to detail these reports and information. The discussion between these board is of utmost
importance and the communication between members of these boards are also one of the
essential for proper governance system. These boards are also supposed to publish the annual
record of their company and should also mention all the points where Cromme code has not
been followed or they have deviated the way.The corporations are supposed to preserve
previous pronouncements in confirmation with the Code accessible on the corporations'
website for at least five years.

3) Management board: As mentioned before this board is constituted by the supervisory board
and this board holds a duty to serve that is to report each and everything to the supervisory
board.All details including conflict of interest should be reported to the supervisory board.The
Cromme code expresses that "the management board is responsible for independently
managing the enterprise" but this is subject to the condition that independent act should
constitute welfare of the enterprise.But the strategic approach should be discussed with the
supervisory board,and independent acts will also impose accountability on the management
board towards the supervisory board.The report also gives compensatory norms to be
constituted by settled salary and variable elements. In different nations, the fluctuating
reimbursement component should be connected to the business conduct along with inducement
for longer term. Stock choices availability is manifested as one feasible component of
fluctuating reimbursement elements and these should be connected to definite conduct on the
basis such as the accomplishment of predetermined share prices.

4) Supervisory board: The supervisory board should always constitute members having great
knowledge of the particular field and should be level up for carrying on the functions of the
board. Independence is also the essential component here, and there should be some
independent workers on this board. Independence here signifies no relation worth any of the
members or chairman or enterprise which creates a conflict of interest. To assist with the

67
operation of autonomous assure its significance not exceeding two members of management
board should be placed in supervisory. One more prominent thing that should be kept in mind
that no former chairman of the management board should lead the supervisory board. The
members of this board are not allowed to hold the position of directors or any indistinguishable
position or any supervisory role with significant contenders of the company. The supervisory
board carries various functions: This board provides controversy-free advice to the
management board and also supervises the business activities carried by the same. These two
boards are supposed to assure that plan they are opting for is a long-duration succession plan.
This board has the authority to divide its work among other committees mainly reimbursement
and audit committee. The chairman of this board cannot lead the audit committee to collaborate
its work and lead the operation carrying by the members of the board and ensure that everything
is carried on smoothly without any controversies and issues. It is a matter of prominence to
elucidate on the committees that are formulated for keeping check on different horizons. The
first on is the audit committee who are not allowed to participate from the management board;
the leading individual of the audit committee is supposed to have deep knowledge and should
be a specialist in the implication of auditing standards and managing the internal atmosphere
of the company. The second prominent one compensation committee which plays a crucial role
in managing the reimbursement of the management board. The committee has also the
authority to look after the nomination of the members of the board. The Cromme code contains
provisions that the management board of recorded corporations should not constitute more than
5 members in supervisory boards in non-recorded corporations. The reimbursement of
supervisory boards is manifested either by proposals which are proposed in meeting organized
or in articles of association. The parties of the supervisory board were allocated compensation
according to their performance on the board and there is also the arrangement of pre-estimated
compensation. There is one requirement related to the reimbursement of the members on board
that should disclose these compensations in the annual governance report. A very interesting
provision mentioned in the Cromme code that if any member of the supervisory board has not
attended even half of the meeting conducted by the board then this will be recorded in the
annual report. If there is any conflict of interest it should be reported and this issue must be
discussed in the general meetings and how this issue would be resolved.

5) Transparency: The code also provides that there should be transparency, this will only exist
if disclosure of activities can affect the interests of the governance system. The report also paid
attention to the rights of shareholders where it is mentioned that shareholders should be

68
considered at par whiled disclosing information and company can use any available
transmitting mode such as internet, mobile phone but should ensure that information has been
delivered to shareholders and investors on time. There should be disclosure concerning
shareholders, including availability and cognate, which are directed by the members of both
the boards, these issues must be recorded and should be reported if they increase 1% of shares.
The code also expresses " If the entire holdings of all members of the management board and
supervisory board exceed 1 percent of the shares issued by the company, these shall be reported
separately according to the management board and supervisory board."These revelation should
be added to the annual statement of governance.

CORPORATE GOVERNANCE IN JAPAN:

The Japan’s economy got acceleration after second half of the 20th century.To be very specific
the developmental phase started from 1985-1989,this phase was known as bubble economy
featured by steep increment in share prices and worth of land; the initial years of 1990s
witnessed bubble burst as share prices fell down and value of land got depreciated,even
shareholders and landowners found themselves under huge debt and lost wide variety of
fortunes and banking sector were also affected. During this crisis duration,the banks lend huge
sum of money in return for the worth of land and,as the remuneration and the banks were left
with huge bad debt. The collapse in share prices and worth of land affected the each sector
related to Japanese economy,which became constant for some years.This adverse situation not
only affected Japanese economy but also left its impact on other nations economy,triggering
territorial revocation.The Japanese government desired to reinstate the devastated economy of
the country and to develop confidence in country’s stock market and to influence Foreign
Direct Investment to assist in regenerating the growth in enterprises.The amelioration in
corporate governance was seen as essential part of the ladder in accomplishing the goal. Japan’s
corporate system sometimes associated with Germany’s corporate sector because here also
banking sector plays vital role in managing corporate governance. 132

However,notable difference has been pointed out between the governance of both the
countries,that is carried on by partially by culture and another part by Japanese shareholding
framework with the impact of the keiretsu. Charkham summarizes the three notions that
affected the behaviour of Japanese towards corporate governance:duty,family or near
relatives,and consent.The first being the obligation will bind them as the citizens had some

132
N. Demise, Y. Miwa, M. Nakabayashi, Y. Nakoshi, Corporate Governance in Japan (Springer, 2006).

69
obligations to serve to their families,enterprises or nation;second being the family,this is
powerful feeling of obligation towards their near and dear ones or whether it is the company
where person’s forms his family or it is nation where he develops the feeling of oneness;third
notion being the consensus,this notion paid attention on the agreement instead of
antagonism.These three concepts formulated by Charkham profoundly affected the Japanese
corporate governance. The keiretsu is the reproduction of zaibatsu. Okumura (2002) expresses:
‘Prior to the World War II, when zaibatsu captured the whole of the economy of Japan , the
corporations which was managed by the family group as crucial stockholders flourished. As
compared, to the post-war conditions, by integrity of corporations capital, companies became
huge stock owners, and corporation became crucial stockholders of each other’s stock.’

The enterprises forming the keiretsu may be in various industrial establishments combining to
form a conglomeration with banking sector at the central level.Charkham once again expressed
that “banks are said to have encouraged the formation and development of groups of this kind,
as a source of mutual strength and reciprocal help”.Indeed banking sector has created special
tie up with the companies and they lend huge amount to these companies.These banks also take
advantage of these relations and they usually buy shares in their customer’s companies to make
the association more firm between companies and banks. Certainly, banks with their own
capability developed outstanding relationship with companies who they use to provide loans
specially or if the company is associated with some leading bank.Banks usually develop these
relationship by buying shares with associated companies or from their customer companies to
establish these relations.Nevertheless these banks are restricted to per cent holding in particular
companies,but if practical aspects are looked upon then it will be known that association of
primitive bank relationship with its customer and holding shares in the company means that
they can be prejudiced,and sometimes very thoughtful, if the company is confronting some
economical issues, considering these issues as their duty to resolve they try to assist them and
find solutions of the same.If this arrangement is juxtaposed with system existing in
Germany,then it will be acknowledged that there is mechanized clauses or provisions for
employees to constitute supervisory board. 133 However here the working members or
employees of the company have accepted a fact that they will serve a single company in whole
life,but this notion also got suppressed and this guarantee also got diminished.The Japan
corporate governance committee released it amended corporate governance code in 2001.This

133
Md. Dulal Miah and Md. Golam Mostofa, Corporate Governance in Japan: Persistence and Change.
8(1) Bangladesh Res. Pub. J. 79-88 (2013).

70
newly released code contained six chapters and all these chapters explained total 14
principles.This code constituted fascinating introduction it can be understood by the glimpse
of the one part of the statement “a good company maximizes the profits of its shareholders by
efficiently creating value, and in the process contributes to the creation of a more prosperous
society by enriching the lives of its employees and improving the welfare of its other
stakeholders.”The short summary of the code mentioned by Japan corporate governance
committee were given below in brief.

CHARACTERISTICS OF CODE RELEASED BY JAPAN CORPORATE

GOVERNANCE COMMITTEE The prominent business type is Public limited
company,chief possession structure Keiretsu; but possession by institutional investor was
expanding legal administration. Hence the Code attempted to opt for equilibrium position of
what is the purpose and concept of company is all about, and to accomplish this the contribution
of stakeholders were looked as significant horizon.The preface of the code elucidated upon
basic characteristics of governance in corporate sector to assist the readers in understanding the
concept of the code with specific domains such as part played and functions of board of
directors,supervisory body, autonomous functional directors,remuneration grounded on
incentives,disclosing the facts and relation between investors.

Objective and part played by the board of directors: The earliest elucidation in preface
consist of five rules concerning to: the designation and objective of constituting the board of
directors; the operation and authorities of these members who constituted the board; the
consortium of the board; directors off the board and their autonomy; the part played by the
chairing individuals of the board of directors. The directors board constitute directors not only
from board but also outside the board mostly the directors from board. The autonomous
directors are directors not from the board and who are capable of taking decision
autonomously.The part played by directors is considered as regulating provision such as taking
prominent strategic decisions,choosing candidates for directors designation,selection and
suspension of CEO and common faults in accounting and auditing.The members constituting
board are also supposed to ratify decisions taken by CEO’s.

Objective and part played by the committees established within the board of directors:
The members constituting suggested to set up different committees such as audit committee,
reimbursement committee, and selection committee.The committees which has been
established are supposed to constitute at least three directors,and director outside from the

71
board who is nominated as chairman of the committee.The audit committee should constitute
autonomous directors in majority,while the other two committees are supposed to constitute
majorly directors outside the board and among those one should be an autonomous
director.These committees should constitute minimum of three directors and one director off
the board should be selected as the chairman of the committee.The majority should consist of
autonomous directors.While the majority of directors in other committees should be from off
the board,and one should be autonomous.

CEO asrepresentative of the company: The part which a CEO plays is that is composes the
regulation strategies with the objective of bumping the governance and value in longer
term.Board of directors gives advice to CEO.The CEO has the authority of setting up regulating
committee of executives to help him in all horizons of business activities.As listed CEO may
not be the member of those committees.

Addressing Shareholder Derivative Litigation: One legal suit committee was formed which
constituted maximum numbers of autonomous functioning directors.The objective behind the
establishment of the same was to figure out whether litigation suit should be initiated against
directors and executives against whom the enterprises can claim.

Protecting integrity and lucidity in executive management: Two prominent sectors of

corporate governance were engulfed in this section of the code: the first one is management of
internal conditions and disclosing significant facts. The CEO is responsible for assuring
whether the an effective governance system in corporate sector is prevailing with proper
management of internal environment or not. The audit committee is supposed to examine the
rules and regulations formulated by CEO’s. Even CEO is supposed to formulate the annual
report about the internal management and regulation,which should be ratified by a authorized
public accountant.The CEO’s should also disclose the facts which can affect share prices,this
disclosure should be made with stakeholders as well. The CEO is supposed to devise an yearly
report concerning the internal audit and regulation, which should ideally be audited by a
authorized public accountant. CEO is even responsible for revealing all the details or
information which can directly or indirectly affect the share prices;also these information
should be made accessible to all the concerned members of the company.

Shareholders should be reported and Investors should be communicated all the

information: The general meeting organized by supervisory board is considered as an
opportunity where shareholders can make themselves acquainted with the reports of directors

72
and executives,and can question them as well. If question is not answered in the meeting then
person asking the same should post it on the company’s website immediately after the meeting
is over. The executives of the company are supposed to connect themselves with different
analysts who can assist in transmitting material details to the individuals who are investing and
shareholders about the corporations management. Even the information which are material and
significant should be posted on company’s website in order to assure that it reaches to each and
every investors. The commercially used code of Japan provides the authority for nominating
auditors to regulate the different horizons of the activities in which company is functioning.In
2002 these commercial codes were amended and got the option of opting for ‘US STYLE’
corporate operations framework.The US style was designed as main board of directors to
operate the neglected functions,which should include the foundation of audit,compensation and
selection committees and each of them should constitute minimum three members,major seats
will be of non-executives.There should be one board of corporate executive officials for
carrying on daily business activities. Under this structure,the commonly functional board of
statutory auditors was put an end to.It was noticed that Japan corporate governance committee
code suggestions harmonized with commercial code. Tokyo Stock Exchange came up with it
rule book in 2004 consisting standards of corporate governance for notified companies.In the
foreword the objective behind the settled rules has been mentioned as to dispense the essential
common ground for acknowledgement,thereby promoting corporate governance via
collaboration of discretionary operations by notified corporations and stipulations by
stakeholders and investing individual. The mentioned five standards are grounded on OECD
principles of corporate governance.

The first rule concerns practising different entitlements of shareholders,along with the right to
take part and vote in general meetings conducted by supervisory board.The major issues where
participation is needed is nominating,suspending of directors and auditors and basic changes
in operation of corporate governance,the very fundamental right to divide equally the profits
specially dividend,and exclusive entitlement to file derivative law suits and preventing actions
such as injunction of activities on violation of laws,policies and regulating measures.The
internal ans external environment should be managed properly so that voting atmosphere can
be maintained and it can be carried on in smooth manner.

The second principle concern with equality,that is equality between the rights of
shareholders,along with the rights of minority and shareholders form foreign.For achieving this
goal the transactions and procedures should be forbidden via corrupt officials,employees and

73
regulating measures fro shareholders,which oppose the preliminary interests of enterprise or
shareholders.There should be promotion of disclosures where there is doubt that mishaps could
happen because of intermediaries and there should be elimination of exclusive advantages to
particular shareholders.

The third standard is the association of shareholders in corporations.While corporate

governance should assist in creating benefits and occupations the very common gospel that
corporations retain and ameliorate their durability or robustness and promote the worth with
passing years and coming developments is ‘the effect of the clauses of corporations assets by
all shareholders’, so the foundation of better association with shareholders is significant. Till
this time, enterprises are supposed to develop corporate civilization and internal management,
which is concerned about the different shareholder associations and assure correct revelation
of details along with reasonable time concerning the same.

The fourth principle discusses about disclosure of facts and also to establish transparent
system.For disclosure it states that companies are supposed to disclose the essential facts on
time and with precision,they are also required to submit reports which disclose the economical
condition of the company and dissemination of possessions by using quantitative and
qualitative modes.The companies are responsible for assuring that any details or current
development should be notified or accessible to the investors easily and there should be
equality in making the information available to all the investors at same time via same means.
The managing body of internal system is also responsible for assuring accuracy and timely
disclosure of material facts.

The final rules laid down to discuss the accountability and responsibility of members of
board,members of audit committees,board of corporate auditors and all other groups working
in this domain.The corporate industry should promote the regulation of internal atmosphere by
the above mentioned associations or boards and at the same time should assure their
accountability of shareholders.The system working for the corporate governance should be
structurized in such a way that all the essentials should be followed and necessities can be
fulfilled.

In the end it is significant to discuss that the legit or legal foundation in Japan,through
Commercial codes amendment in 2003 dispensed two structures for corporate governance: an
arrangement of corporate auditor’s,incorporating assemblies or general conferences organized
by the board with shareholders,directors on board,leading individuals responsible for overall

74
management,executive directors,auditors from corporate system,and the board consisting
auditors,and a committees arrangement,where there are general assemblies of
shareholders,directors on board and committees constituting directors on board of various
committees,leading executives,all officials outside the board.It depends on the company which
system it opts for.The difference which exist between two structures is that the enterprises or
companies with committees are required to nominate their directors yearly via general meetings
of stakeholders or investors,because the directors on board has the power to formulate
elucidative scheme for dissemination of profit,whereas in auditor’s arrangement this authority
lies with shareholders participating in general meetings.

Charkham in 2005 talked about various alterations that have been done in Japaneses corporate
governance and expresses that”The significant role banks played has plummeted.The replace
structure has better organized boards,for more efficacious auditors of companies,and from time
to time more vital shareholders.An escalation of interest and adequate activities on their
part,can reimburse the balance that banks removed from the picture has diminished.

Ahmadjian and Okumura in the year 2006 talked about the alterations that took place in Japan
in current years.During the last decade,the controversy on corporate governance has brought
two contrasted opinions:whether to opt like US or hold on to after war arrangement of Japanese
governance arrangement.

As mention in previous para that holding on to “traditional post-war” governing arrangement

is not an option now,as it has became fragile after the collapse of the role played by the
prominent bank ,disentangling cross shareholdings,alterations in auditing policies and
escalation in investment by foreigners.It is fascinating to remark that Japan is using toxic pellet
to avoid aggressive bids ,whereas it does not have bigger problems connected with discerned
excessive directors compensation as its members of the board were not given salaries of even
a general employee of the company as this would be contemplated as intolerable. Asian
corporate governance Association in 2008 released its “White Paper on Corporate Governance
in Japan”.It expresses that prominent corporations in Japan have made in corporate governance
in current years,it has been yielded that arrangement of governance in notified corporations
was not rendering the necessities of shareholders or the country as whole in three following
ways:

● By not establishing sufficient regimes for governing corporate sector;

75
● By securing administrative strategies from market domain,thus providing the growth of
healthy and proficient market in whole of the corporate sector but not possible;

● Bynotable to avail the returns that are significantly needed to secure Japan’s soda!security
netits pension system. It then supports six areas for upgradation: all the shareholders were
functioning as the actual owners; using the capital proficiently;supervision should be
independently; pre-emptive entitlements; toxic tablets and takeover defences; shareholder
meetings and voting.

CORPORATE GOVERNANCE LISTING AGREEMENT IN INDIA

Applicability of Clause 49 The Clause 49 of the recorded Agreement will apply to all
enterprises whose egalitarian shares are recorded on a acknowledged stock exchange. However,
conformity with the mentioned rules and regulation of Clause 49 will not be compulsory, for
the time being for specific class of the corporations. Corporations who had submitted all equity
shares not more than’10 crore and Net worth not more than 25 crore at the end of the
economical year’;Given that where the rules and regulation mentioned in Clause 49 becomes
implied tot he company. The enterprises whose equity shares is mentioned explicitly in SME
and SME-ITP stages.The compliance with the provisions mentioned under the clause has been
accepted by the companies,so as to accomplish the goals mentioned below.When the provisions
are ambiguous,the mentioned rules and regulations are deciphered concerning any implied
standards or principles.

The Rights of Shareholders The companies are supposed to secure the entitlements of
shareholders and make the easily accessible.They are required to transmit accurate details to
shareholders on time.While granting these rights the companies must manifest equality
between all shareholders along with minority and foreign.

Role of stakeholders in Corporate Governance The companies are supposed to acknowledge

the entitlements of stakeholders promote collaboration between companies and stakeholders.

Disclosure and transparency The companies are required to depose all information with
precision on time specially on issues like the economic condition of the company,how the
company is performing,possession,and the procedures followed for governing the same.
Responsibilities of the Board members For accurate disposal of materials the directors on
board and chief executives are responsible whether they have personally or indirectly or on
behalf of third party should disclose all material facts which can affect the company.The top

76
designated members of the company should have the capability to serve all the duty which the
designation demands in operating the enterprise at the same time they are also supposed to keep
the matters confidential so as to accomplish at culture of good decision formulation.
Composition of Board The composition is very important factor which affects the functioning
of the corporations.The directors on board should constitute the managing and co- managing
along with one female director and it is also essential that board should constitute approx 50%
as directors who are not involved in executive team and is not responsible for day to day
management.If the person leading the board is co-managing director minimum one third of the
board should constitute autonomous functioning director and if the company is not having any
regular co-managing chair,minimum half of the individuals constitutes autonomous
directors.Given that the regular co-managing chairman is proponent or related to any any
promoter or individual owning any regulating designations at the Board or at some step below
the Board, at least 1/2 of the Board of the company shall constitute autonomous directors.

Autonomous Directors For the objective of clause A the term ‘independent director’ states
that non executive director rather than a nominee director of the company: who, according to
the board is a individual oh great honour and had specialized skill related to the domain; this
individual is not responsible for promoting the company or its any of the possession,subservient
companies or any of its organization; Other than collecting director’s company,the person is
not concerned with any pecuniary interests of the company.

Maximum tenure of Independent Directors The duration of directors who will function
independently should serve their term according to the provisions mentioned in Companies act
2013 and notification released by Ministry of Corporate Affairs concerning this issue on timely
basis.

Non-executive Directors’ compensation and disclosures All emoluments or remuneration if

rewarded to any co-managing directors, along with autonomous functional directors, should be
settled by directors on board and shall also keep prior authorization of shareholders n general
meetings.But the shareholders decision should have some restrictions for number of stock
choices than can accorded to non executives directors in any economical year and in
comprehensive.Give that the essential is to take prior authorization from shareholder in general
meeting does not imply on payments of sitting fees to non executive directors formulated with
in the boundaries of Companies Act 2013 for paying sitting emoluments without authorization

77
form Union Government.It is also given that independent directors will not be given any stock
option.

Audit Committee

Qualified and Independent Audit Committee: An audit committee should be formulated

with the individuals who are having qualification of the same and they should also be the
independent directors,the terms of references are subject to the following conditions: ● The
committee should constitute minimum three directors as members among the total members of
two third should be from the category of independent directors. ● Each member of the
committee are supposed to have deep knowledge and expertise of economics and at least one
member should hold specialized knowledge in auditing or concerning economical expertise. ●
The individual leading the committee should be a independent director; ● The leading
individual or chairman have the obligation to present at annually held general meetings to
respond to all the queries. ● Audit committee bears the power to invite person whom they
consider appropriate for leading the finance operations in the meetings of the committee but
occasionally it might met in the absence of any prominent managing directors of the
company.The chaired director of the financial reporting council and the leader of the statutory
auditor could come as the invitees of the meeting of the audit committee. ● The secretary of
the corporations will only hold the position of secretary in this committee.

Audit Committee meetings: The Committee is needed to keep meeting minimum 4 times in
a year and in two subsequent meeting there should be the difference of more than 4 months
between two meetings. The plenum must be of two or three members or one third of the
members of the audit committee which is greater than,but there should be at least two
autonomous directors present.

The authorities given to Audit Committee: This Committee have various authorities which
incorporates the following: ● To examine any issues which are mentioned in guiding principles.
● To look for details from any of the employee. ● To acquire all the information along with
legal and occupational advice.● Toprotect the attendance of persons who are not part of the
company with pertinent expertise ,if it is essential.

Part played by Audit Committee: The part played by the Audit Committee will include
following roles: ● Togive the update of reporting process of financial department and to reveal
all financial details on their website and in general meeting to give assurance to shareholders
that the report released by financial reporting council is reliable,enough and reliable; ●
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Suggestions for nomination, compensation and conditions of nomination of corporations
auditors; ● To give authorization of rewards to auditors selected by statute for the favour
furnished by the statutory auditors; ● Evaluating the managing procedures of the corporations,
the financial statements released on yearly basis and report published by auditor’s committee
prior to capitulation to the board for authorization, with specific reference to: The issues which
will be mandatorily added in the Director’s accountability Statement in clause (c) of sub-
section 3 of section 134 of the Companies Act, 2013. The alterations if any, in auditing rules
and regulations and exercises and purpose for the same. The crucial auditing ingression
including estimates grounded on the practise of evaluation by management. The important
adaptation made in the financial reports coming out of audit findings. The conformity with
listing and other legal nessecities concerning financial reports. If any transactions has be
executed it should be revealed. The stipulations mentioned in the draft audit report ● Evaluating
the management procedures by financial reports released on quarterly basis prior to the
submission of the report to the board for authorization; ● Evaluating the managing, the reports
of significance / implementation of funds uplifted via an issue the statement of funds corporate
governance usage for reason other than those expressed in the proposal/compendium/given by
the regulating agency regulating the usage of derivatives of a public or entitlement problems,
and making estimate suggestions to the Board to take further steps concerning this.

Nomination and Remuneration Committee The enterprises are supposed to take the
assistance of the members on board and formulate selection and compensation. These
committees must constitute minimum three individuals who are responsible for the
management of the corporation, but these individuals should be co-managing directors and
minimum half of them shall be autonomous functioning. The leading member of the committee
shall be an autonomously acting director. It is permitted that chairman of the board can
participate in membership but cannot chair or lead these committees.

Related Party Transactions An associated party business is a transmission of assets, favour

or duties among corporation a and a associated parties, notwithstanding of whether a price is
imposed. For the objective of Clause 49 (VII), an institution shall be contemplated as associated
to the corporations if: ❏ such organization is a qualified associated party under Section 2(76)

of the Companies Act, 2013; or ❏ such set up is a associated party under the implementing
auditing principles.

79
Disclosures relating to ❏ Associated party business ❏ Auditing Treatment should be revealed

❏ Compensation of Directors ❏ Procedures of managing the company ❏ Stakeholders ❏

Profits from general problems, entitlement problems, preferential problems, etc.

CEO/CFO authorization The CEO has the authority to nominate, a whole time Director
according to the procedures mentioned in Companies Act, 2013 and the CFO shall authorize
to the Board that: They have evaluated the financial reports and the liquidity released annually
and that to the best of their comprehensive awareness and faith: 1. These reports are ought to
be true to best of their knowledge and should not contain and untrue statements and non of the
mentioned facts should be misleading; 2. These statements cooperatively represent that the
company is operating with the decoded standards and complying with all the rules and
regulation decided for the operation of the company.

These reports also manifests that the company throughout the year were not involved in any
illegal activities or infringing or fraudulent transactions. The companies give implied
acceptance for maintaining regulations for financial reporting ad they have also examined the
efficacy of the arrangement existing for regulating internal atmosphere of the company.They
are also required to reveal all the material facts with their shareholders and all other concerned
members of the company.And thew auditors committeee in company is responsible for
resolving the issues related to disclosure of the material facts. They have stipulated some
conditions for auditors: ● Important alterations in regulating procedures of internal atmosphere
over financial reporting throughout the year; ● Important alteration in auditing rules and
regulations throughout the year and that the same have been revealed in the financial reports;
and Example of prominent frauds of the which the company is very well aware and indulgence
therein if any,of the managers,employees have any important part played on company’s
internal regulation over financial reporting.

Report on corporate governance It should be ensured that there is distinct unit for corporate
governance in the reports released annually by the company along with comprehensive report
on conformity odf the provisons and codes of corporate governance.If any of the codes or
provisons are not followed by the company then that code or provision with the rationale for
not following,and the extent to which the particular code or provision cannot be complied with
should be specifically highlighted in the the annual reports released by the company.
Compliance The companies are supposed to attain an authorization for the auditors or
secretaries of any operational company concerning the conformity or compliance of terms and

80
conditions of governance in corporate sector is mentioned in this provision and annex
authorization with the reports give by director which is yearly submitted to all the investors
concerned with the corporation.The same authorization shall also be submitted to stock
exchanges accompanied with yearly report released by the corporation.

CORPORATE GOVERNANCE IN USA

“The world moves forward on the character of good men” —Rev. Edmund A. Walsh. S. J. The
duration between August 2, 2012 and Saturday August 4, 2012 was an felicitous period while
exsercising internal audit in Ghana.The Institute of Internal Auditors in Ghana was conducted
by Mr.Philip Tarling addressed the audience at British Council Hall,Accra, on the subject
“Expanding the Frontiers of Internal auditing– A perspective from the Global Chairman”.He
even conducted different conferences with chief stakeholders of the corporate industry along
with chief administrative officials,their prominent internal auditors and Institute of Internal
Auditors chairman form the West African Institutes.

The IIA is the international organization for profession of internal audits.This body was
founded in the year in 1941,and it is global group for auditing members with its headquarters
in Altamonte Springs, Florida USA.This group represent the all the internal audits functioning
in all over the world and is also contemplated as the voice of auditors have proper recognized
authorization constituting various experts such as recognized chairman,prominent
proponent,and a chief instructor.

The individuals who were part of this committee work for internal auditing, managing the
degree of risk and their solution in corporate governance, regulating internal environment of
company, IT audit, awareness, and protection. The roots of auditing can be traced even in
primitive era as merchants used to check the receipts for gain brought to market. The actual
expansion of this particular domain initiated in 19th and 20th centuries with the development
of corporate industry.The clamour for regulating arose with the development of the corporate
industry as the domain was widespread,business activities were conducted at different locations
employing thousands of workers. Conventionally, internal auditing is related with accounting
and economical issues.In ancient times this profession came to contend the some very famous
and well elucidated managing essentials in the domain of accounting and financial issues. 134

134
Anup Agrawal and Tommy Cooper, Corporate Governance Consequences of Accounting Scandals:
Evidence from Top Management,CFO and Auditor Turnover, 7(1) Quart. J. of Fin. (2016).

81
 CHAPTER 5:

SOCIO-ECONOMIC OFFENCES AND CORPORATE GOVERNANCE-AN UNEASY

RELATION

“The social classes of the highest culture furnish few convicts, yet there are educated criminals.
Advanced culture modifies the form of crime; tends to make it less coarse and violent, but more
cunning; restricts it to quasi-legal forms. But education also opens up the way to new and
colossal kinds of crime, as debauching of conventions, councils, legislatures, and bribery of
press and public officials. The egoistic impulses are masked and disguised in this way, the devil
wearing the livery of heavenly charity for a cloak of wrong. Many of the Napoleons of trade is
well named, for they are cold-blooded robbers and murderers, utterly indifferent to the
inevitable misery which they must know will follow their contrivances and deals.”-Charles
Henderson135

We are surrounded by the flourishing corporate industry. Corporations are now considered as
an inalienable part of our lives that their crucial contribution to the society is generally gone
overlooked until the happening of some considerable incident bring it to our notice. 136
Corporations played a very significant part in our lives as they dispense or regulate our
availability of goods and amenities, labor and recreation, comprehension, and details. However,
what we know about the corporate world is communicated through media that are controlled
by corporations.137The power of these corporations have increased in such a proportion that in
modern society the significance of corporations is not only restricted to private business
activities, the activities of corporations formulate or dominate the economy of the country, they
influence the standard of the maintained environment, and they also affect the action taken by
different states or countries. These Corporations are progressively invited to bestow their
efforts in promoting social welfare and ultimately developing the countries either working in
collaboration or taking over some responsibilities by the government. However, it is of prime
importance to understand that every time these corporations act, they do so for their interests
as correctly put forth by Adam Smith:

135
Gilbert and Colin Goff, Introduction to Edwin Sutherland's White Collar Crime: The Uncut Version, Yale
University Press (1983).
136
Bottomley, Stephen, The Constitutional Corporation: Rethinking Corporate Governance, Ashgate
Publishing Ltd (2007).
137
Id.

82
"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our
dinner, but from their regard to their interest. We address ourselves, not their humanity but to
their self-love, and never talk to them of our necessities but their advantages."138

These Corporations operate behind the curtain (and increasingly on center-stage) to affect
many horizons of policies and legislative action taken by the government of the country. The
contribution by the corporate industry has become a vital source of funding the political
parties.139 It is large corporations that determine the formulation of a wide array of regulatory
standards on issues ranging from air safety to pharmaceutical products and
telecommunications. 140 The corporation’s prosperous soliciting attempt can be witnessed from
the prepared rules and regulations restricting access to court via the narrow approach of the
rules and regulations settled, restrictions imposed on standing to sue, higher standards of intent
for fraud, expansion of entitlements for dismissing federal courts for protecting fraud litigation
and class actions, restricted civil liability and damage caps. 141

The enacted statutes and laws for the prevention of these offenses are not much effective.With
the advent of globalization, the socio-economic offenses in corporate governance had come up
as a considerable setback in a society. Corporation has played a crucial role in availing goods
and amenities to the society, for the development of the economy, and for resolving the issue
of employment to the maximum number of population. But when this inalienable part of human
life gets encountered with fraud or any type of socio-economic offense then not only the
corporation but the employee and society also becomes the victim of these crimes.

The most arduous part of these offenses which are committed against society at large in the
corporate industry is to point out the actual offender, as it becomes difficult to locate the
offender among managers or directors of the corporation or occupational agents employed in
the corporation. As a consequence, society had to bear the repercussions of socio-economic
offenses in corporate governance executed by the working staff, managers, negotiators, or any
shareholders, etc. Here comes the notion of “corporate veil” that by raising the veil it has to be
recognized that who has committed the crime. Who assisted in the completion of the plan, who

138
Stephen M. Rosoff, et al. Profit Without Honor: White-Collar Crime and the Looting of America 400
(1998) citing Smith, Adam, The Wealth of Nations, PF Collier (1902) 56-57 at 1776.
139
Ramsay, I, G. Stapledon, and J. Vernon, 'Political Donations by Australian Companies', Fed. L. Rev. 29:
117 (2001).
140
Scott, C., ‘Private Regulation of the Public Sector: A Neglected Facet of Contemporary Governance’, J.
Law Soc. 29: 56 (2002).
141
Ramirez, Mary Kreiner, “The Science Fiction of Corporate Criminal Liability: Containing the Machine
through the Corporate Death Penalty,” Ariz. L. Rev., 47:993-1002 (2005).

83
formulated the plan to and the main question why the plan has been formulated, what was the
motive behind the commission of the crime? What gain has been attained by the offender and
the loss of the society, these are the question which keeps the surveyor of socio-economic
offenses busy. The corporations are victimized with these socio-economic offenses because of
some faults on their part as well such absence of a transparent system about loans and
transactions, gains and losses, or risk involved in the management, etc. These unscrupulous
and irresponsible behavior on the part of corporations led to the enhancement of socio-
economic offenses and causing greater damage to society as well as the financial condition of
the country. For establishing a proper governance system it is significant to involve moral
values, moral values focused while governing the corporations, whistleblowing system, etc.
and for the proper enhancement of ethics in governance and to prevent socio-economic crimes
in the governance of the corporate sector there must be a proficient and efficient code of
conduct. The efficient code of conduct plays a crucial part in the whole of the corporate industry
if these written codes of conduct are complied with and executed by the professionals and the
top officials of the corporate industry in their organization to lessen the opportunities of any
unlawful way of doing business.

Even the relation between socio-economic crimes in corporate governance and white-collar
crime is significant to acknowledge, as elucidating white-collar crime is not an easy task. The
activities executed by individuals and enterprises and also offenses committed on the part of
the companies as well as against the organizations is a simple elucidation to comprehend the
notion of socio-economic crime in governing corporate sector lies within the scope of white-
collar crimes.

For the past few years, financial or white-collar, offenses have beguiled interest across the
world. Increasingly, we are exhorted to turn our attention from the problems of street crime to
those of socio-economic crime happening in the corporate industry. Socioeconomic crime in
the corporate domain includes a huge amount of money. It can bigot not only the economical
interests of citizens, but also their survival and their possessions; it can baffle significant state
rules and regulations, such as regulating pollution, encouraging competition, and the security
of consumers. These pressures are felt throughout the industrialized world. It is not surprising,
therefore, that corporate criminal liability has been discussed extensively by scholars who have
addressed the problem of economic crime. Now the question which will pop up in the reader's
mind is that how the corporate sector became the victim of socio-economic offenses. To make
this concept clear the researcher has discussed the brief history of how the socio-economic

84
offenses started affecting corporate governance, which will assist readers in understanding the
uneasy relation between corporate governance and socio-economic offenses.

HISTORY OF SOCIO-ECONOMIC CRIME IN CORPORATE WORLD

The corporate industry which came in to the form of organizations was founded in the 14th
century and it was formulated and accorded only by the King or by legislation brought by the
parliament. The King attempted to come up with the ideas and it promoted organizations to
become legally certified. 142 In 16th and 17th centuries, these corporations developed as
hospitals, later on into universities and many other associations which were modified under the
domain of the corporate world. At the end of this epoch, the corporate industry was developing
as a joint-stock company. This joint-stock enterprise was most utilized in the enhancement of
new industries. In the former stage, corporations were formulated as a not-for-profit but later
in the 17th the corporation motive got turned and they became profit maniac. In the end of the
17th, inculcated companies were formulated on a wide scale, but maximum companies were
running for the sake of the investments made by the investors as well as for the ease of the
employee's advantage and most of them had a very short duration of survival.143Because the
investors became the victim of losses suffered in the business activities and they were indulged
in the dereliction of their obligations. However, the British parliament came up with special
acts and laws in the field of the corporate world. The fundamental rule of criminal liability
rotates round the Latin maxim Actus non facit sit reum, inconclusive mens sit rea. It can be
inferred that to pose liability on an individual it should be manifested that any act or omission
has been committed that was not permissible by law and has been executed by the guilty mind.
During the initial years 20th century, the court started convicting companies for various crimes
and liability started arising for the same. Even the courts want to make the company liable for
their liabilities, except rape, murder or some heinous crimes. So the crimes which started
prevailing in the corporate sector were affecting the society at large,and as it was committed in
the corporate sector it used to be economic nature which was ultimately affecting the whole
economy of the corporations, country and affects society at large. These crimes were then
denoted as socio-economic offences, the domain of these offences are quite wide and nowadays
socio-economic crimes are posing threat to corporations. This posed threat has triggered

142
Dharm Veer Singh, Corporate Criminal Liability: A Jurisprudential and Comparative Approach: Legal
Service, http://www.legalserviceindia.com/articles/cor_dr.htm (Last visited on April 05, 2021).
143
Geeta Narula, CORPORATE CRIMINAL LIABILITY IN INDIA: AN INFORMATION TECHNOLOGY
PERSPECTIVE, https://www.naavi.org/geeta_narula/corporate_criminal_liability_nov12.html (Last visited
on April 05, 2021).

85
scholars and researchers to establish the relationship between corporate governance and socio-
economic offences.

UNEASY RELATION BETWEEN SOCIO-ECONOMIC OFFENCE AND

CORPORATE GOVERNANCE

Corporate crime as mentioned above imposes a notable threat to the well-being of society.
Provided the omnipresence of corporations in an extensive range of pursuit in communities,
and the influence of their activities on the larger group of society than are influenced by the
action of an individual, the possibilities for both financial and physical paralysis engendered
by a corporation is huge. There is a considerable body of literature that accepts 'socio-economic
crimes incorporate sector' to be a significant social issue144, in spite of what some may assert
to be comparatively less media attention than offenses executed by individuals, at least in the
newspapers, scandal sheets and despite the absence of extensive experimental research into the
expense and prevalence of corporate delinquency.145 Before getting deeper into the topic it is
significant to mention the common relation which can be deciphered by studying the socio-
economic offence in corporate governance is that, the corporation is now considered as the
indispensable part of human life which depicts that any crime which will be committed or
executed in the corporate industry will certainly affect the society at large. This relation of the
corporation with humans triggered the need to consider the crimes committed at the corporate
level as socio-economic crimes. The deeper causes of this uneasy relation have been discussed
in detail. So long business association was a private affair; things were not very difficult to
control. However, with the advent of securities and stock exchanges, the scenario completely
changed. Now, a common man was involved as a shareholder with the largest corporations of
the country, having virtually no control over the management. This raised the level of securities
fraud in the market. New concepts like Corporatization, Demutualization and later
internationalization of stock exchanges further complicate the problem of corporate crime.

The debilitating of the controlling authority of the countries as an outcome of the trade
liberalization accord appeared likely to have a mutually beneficial relationship with the rate at
which their socio-economic power will be eradicated by the escalating power of the corporate
sector often capitalized. It appears that the socio-economic ability of these transnational

144
Block, M., “Optimal Penalties, Criminal Law and the Control of Corporate Behavior” B.U. L. Rev.
71:395 (1991).
145
New South Wales Law Reform Commission,“102nd Report on Sentencing: Corporate Offenders”
(June, 2003).

86
corporate associations is promoted solely by the fact of their transnational function. This is
partially an element of their area and impact across several administrations. Such associations
might, for illustration, be able to enclose themselves from other market coerce in one
jurisdiction by reckoning on the robustness of their market in another jurisdiction. The benefits
of the competition gained by transnationals as a consequence of their propensity to detach and
fragment their markets along domestic lines of the country146 are often attained at the cost of
things we claimed to care about, such as customers, working staff, the atmosphere, ethnic rules
and regulations, and so forth. These impacts can only be ushered as these corporate associations
become international and the opponent power of the countries diminishes. 147

Socio-economic crimes in this dominant sector i.e. corporate are not just corporeally or
economically damaging but they also rupture the ethical pillar of the society. The sub-cultural
and administrative horizons of the issue of associated capability within the state have mostly
enduring concealed incidents of the legal administration. It was noteworthy said that law,to be
just and integrity has to see devoid of flaw. It has to keep assurance to justice and it cannot stay
ossified and placed complacently.The legal administration should not be seen sitting ideally,
while those who defy it to go free and those who seek its protection lose hope. 148 Progressively,
people are believing, as evaluated by Salmon149 , “laws are like spiders’ webs: if some light or
powerless thing falls into them, it is caught, but a bigger one can break through and get away”.
Jonathan Swift, in his “Essay on the Faculties of the Mind," said in similar lines: “Laws are
like cobwebs, which may catch small flies, but let wasps and hornets breakthrough.” 150Large
corporations are like wasps and hornets in the cobweb of existing liability laws.

It should be remarkable that, along with the financial and human costs, there are crucial social
or ethical applications that drizzle from corporate delinquency. It is asserted that because some
offenses in the corporate sector infringed the public charitable, they formulate public mistrust
and bottom social morale, manufacturing large-scale social disorganization. 151 Although it may
be unfeasible to identify absolutely how many people are assassinated and wounded as a
consequence of these crimes, as Coleman notified, asserted that this type of crime is innocuous

146
Macmillan, F., “Copyright and Culture: A Perspective on Corporate Power,” Media and Arts Law
Review 3: 71 (1998)
147
Chayes, A., “The Modern Corporation and the Rule of Law” in E.S. Mason (ed.), The Corporation in
Modern Society, Cambridge: Harvard University Press (1959).
148
Jennison v. Backer, 1972 (1) All ER 1006.
149
Quoted by Diogenes Laertius in Lives of the Philosophers.
150
Zahira Habibullah Sheikh and Anr. v. State of Gujarat and Ors., AIR 2006 SC 1367
151
Gruner, R., Corporate Crime and Sentencing, 2nd ed., Business Laws Inc, Chesterland, Ohio (1997).

87
or nonchalant cannot be taken solemnly. 152 Because of different issues of scale, corporations
often possess a substantial loss to a wide variety of populations. The best example is The
Bhopal Tragedy in India which posed a substantial loss to society. The gravity of harm resulting
from this newer form of criminality should not be underestimated and the necessity of effective
handling and controlling of these crimes deserve due recognition and needs more emphasis.
These crimes have not only a tendency to corrupt the entire social fabric but also undermine
and badly influence the health and material prosperity of the whole society and wreck its
economic structure and consequently even endanger the political stability and liberty of the
nation. It is therefore of utmost importance to consider allied questions of detection,
investigation, trial and prevention of these crimes. Even though these questions extend both to
legal and extra-legal spheres, they are very relevant and important for the current study.153To
accomplish the much-desired welfare of the society and its preservation and protection against
the abuses of the socio-economic crimes (includes corporate crimes) it has become essential to
deviate from the accepted notions of traditional criminal jurisprudence and to modify the
procedural and substantive criminal law. The whole concept and approach deserve to be
modified. The new socio-economic criminality is the handiwork of professional people and the
industrialists and businessmen, mostly these crimes are committed by the people working
inside the corporations and execute in the course of their occupation with the help of expert
scientific and technological know-how, and the old concepts do not admit of proper and
sufficient treatment in the background of traditional concepts and therefore some rethinking
has become essential in this behalf. This uneasy relation which has been established by the
researcher is manifesting all the deeper aspects and causes of this relation. But to make it more
elucidated the rationale for this relation has been discussed below which will show how things
got interwoven and the role of the judiciary in the same.

RATIONALE FOR THIS UNEASY RELATION

In the epoch of international capitalism, cybercash, e-business and swiftly relocated

manufacturing infrastructures, there evolve new structures and the noble chance for offenses
amidst a backdrop of uneven and deficient local, domestic and global regulations. If practical
aspects are looked upon then all financial standards and on many non-financial standards as
well, socio-economic crimes in the corporate sector can be proved to be more devastating to

152
Coleman, James W., The Criminal Elite: The Sociology of White Collar Crime New York: St. Martin’s
Press (1985).
153
Chandra, Mahesh, Socio-Economic Crimes, Bombay: N.M. Tripathi Pvt. Ltd. 1979.

88
 154
the community at large than so-called 'common' offenses. Yet attaining criminal
prosecutions against both company directors and companies has proved elusive. 155Why should
this be so?156

The problem lies in limited comprehension of the nature of corporate digression. The
sociologists have investigated the reason of these crimes in the corporate industry, but generally,
their endeavor does not go further than analysis. Left uncomprehended into something that has
either institutional or legal importance. Such is the fate of economic analysis also, where the
study is market-driven. This rationalizes the study of socio-economic crime in the corporate
industry with a socio-legal and legal context.

Sutherland's lapidary intitution resumed underpinning much of the analysis and investigation
in this domain. What has altered crucially since Sutherland's epoch, however, is society's
appreciation of the exigency and urgency of the problem. Intellectuals, political leaders,
policymakers, acknowledged directors, NGOs, action associations, the media and related
aspects of the public have become progressively conscious of the capability of business and
industry and their capability to impose damage– and often devastating harm– on society. In
transportation, advancement of technology, economic services, pharma sector, atmospheric
and waste industries, medication department, the food chain and in other aspects of the finance
there have been extensively published illustrations of important infringement of laws and
statues leading to substantial damage and injury (including deaths). In Britain, for example,
there is the Herald of Free Enterprise, Piper Alpha, the Marchioness, and the Bristol Royal
Infirmary have become significantly analogous with organizational collapses resulted in mass
demise while the Clapham, Southall, Paddington, Hatfield and Potters Bar slammed are all
well-documented rail 'disasters'. The rationale given for these disasters was, the attempt was
not made for convicting these offenses.

In the socio-economic offenses in the corporate sector, then, one discovers not only progressive
acknowledgment of the economics, human beings, and social and cultural expenses of
corporate misconduct but also developing recognition of the troubles connected with making

154
Understood in terms of those crimes recognized in the British Crimes Survey or the FBI's Uniform
Crime Reports– such as mugging, burglary, car theft, and aggravated assault; Maguire (1997) at 154.
155
Gobert, James and Maurice Punch, Rethinking Corporate Crime, Butterworths LexisNexis 2003
156
Ibid.

89
companies liable for their wrongs.157 Understanding the root cause process should be evaluated
from the beginning.

The initial step for comprehending the root cause that first, corporations get indulged into
offenses that are not permitted; secondly offense should be punishable; and thirdly, it is
important to combat offenses rather than to punish the same. Socioeconomic crimes in the
corporate sector, wholly– from monitoring infringement to corruption, to cheating– influence
some or the other members of the society. The infringements concerning environmental, work
welfare, and protection related monitoring jeopardize every citizen, working staff, and
shareholders, corruption and price-fixing manipulate businesses activities and our government,
undermine growing democracies and inclined the level playing field opposing honest
businesses look for competing integrally on the grounds of price and qualitative presentation.
Each member of the society holds a stake in this growing problem, and everyone holds an
interest in combating socio-economic offenses in corporate governance. 158

It is strange and astonishing, provided the substantial loss that socio-economic offense does in
corporate governance and harms to employees, market structure, government policies,
environmental structure, and the general public,that the arena has captivated the similar
resolving schemes of academic interest as other more standard aspects of harm that corporate
crime can Criminology, Sociology, Socio-legal studies, and law. But some crucial
developments has altered the scenario. One of the developments among all is the
acknowledgment of classified offence that can be called corporate brutality. 159 Starting with
the Ford Pinto case in the US, when faulty petrol tank was placed Pinto's cars led to devastating
eruption subsequently rear-end collisions happened and certainly the company was prosecuted
for homicide, there have been progressive attainment of the fact that might be and asserted that
they should be made liable for the criminal act. 160

In the UK the topic of corporate brutality has been seen into the limelight by a series of what
at first was deemed tragic 'accidents', including the Piper Alpha explosion, the Clapham train
crash, and Herald of Free Enterprises. A further dimension of the socio-economic offenses in

157
Supra note 167.
158
Remarks of: James K. Robinson, Assistant Attorney General Criminal Division U.S. Department of
Justice to the Sponsoring Ethics Officer Association Scottsdale,
https://www.mcspotlight.org/media/press/frfi_jun97.html (last visited on April 10, 2021).
159
Rusesell Mokhiber, Corporate Crime and Violence: Big Business Power and the Abuse of the Public
Trust, (Random House, Inc., 1988).
160
Punch’s Hierarchy of Concepts, Punch (2000).

90
corporate sector problem was revealed by the reckoning frauds in the Enron, Arthur Andersen
and WorldCom scandals that were extensively announced in the summer of 2002. These cases
demonstrated the formerly barely plausible extent of harm to the economic and financial
interests that could be wrought by fraud committed in the corporate world. In these
circumstances, the savings for survival and annuity of thousands of decent working staff gets
devastated by attempts to hide the actual economy of the companies indulged. There is an
outflow of political denunciation and the swift introduction of new legislation on the cases. 161

Multinationals have played a crucial part in globalization. The nations and occasionally sub-
regional regions contended against each another for the foundation of MNC amenities, and the
ensuing taxation, profession, and financial activity. To participate, national and territorial
political districts offer stimulants to MNCs such as tax ruptures, promises of governmental
easement or enhanced armature, or lax environmental and labor principles. This operation of
becoming more alluring to foreign investment can be featured as a race to the bottom, a push
towards the greater for corporate organization, or both. The question is how far this freedom is
justified and whether these corporate hubs are capable of mis-utilizing the same. The ability
now flourished by corporations is both huge and unpredicted in human chronicles. It missed a
lot to juxtaposed companies like Exxon Mobil, Microsoft, or AIG to a horse or a cart that was
handled as a deodand under primitive English law. 162 The affluence of the Fortune 500
companies of corporate governance is one way of measuring the capability of the corporate
sector. In 2008, salaries from the top ten assets-producing companies in the U.S. were a lot
more than $2.1 trillion; the advantages from the ten commercial U.S. companies were more
than $176 billion.163 Companies also wielded power more directly through their efforts which
were undergoing to combat lobbying. Exxon Mobil since 1998 has spent over $120 million on
soliciting activities, including $29 million in 2009. 164

The UCC165 has exhausted approximately $477 million since 1998, more than two times of the
amount of any other company or association. 166 The other industrial association like , like the

161
supra note 167.
162
Beale, Sara Sun, “A Response to the Critics of Corporate Criminal Liability”, Am. Crim. L. Rev., Vol
46:1481 (2009).
163
Fortune 1000, http://money.cnn.com/magazines/fortune/ fortune500/2009/full_list/(last visited April.
5, 2021).
164
Top Spenders: Lobbying, http://www.opensecrets.org/lobby/top.php? indexType_s (last visited Oct. 5,
2009).
165
US CHAMBER OF COMMERCE
166
Id.

91
PRMA167, spent around $100 million dollars since last decade for preventing lobbying on part
of different companies.168 Thus,contemporary companies not only exert unrivaled power, but
they in the manner that it usually causes serious damage to both the employees of the company
and society as a whole. 169 Robinson proposes that "corporations should not be treated leniently
because of their artificial nature, nor should they be subject to harsher treatment." Corporate
prosecutions should be observed as an important instrument in eliminating white-collar crime.
The impact of criminal conviction even on one or more companies is an efficient weapon for
socio-economic offenses. Whether these law cannot be broken is not a daily basis business
resolution- companies must know that rigid punishments and detrimental publicity will haunt
them for years.170 According to Mr. Robinson171, the impediment of a criminal conviction can
be very convincing in three areas:

❏ Firstly,the act is permeating in a corporate sector, even one conviction of company may
promote the other enterprises evoked reformative action;

❏ Secondly, where the action is ubiquitous in a specific company, the conviction of that
company, along with its officers and directors who are also liable, may assist alterations of the
corporate culture; and

❏ Thirdly, where the offenses cause a considerable peril to society, any conviction that
compels others to think twice has an obvious advantage.

The standards put forward eight elements that focused on the particular nature of the companies.
Some of these elements are:- the prevalent misconduct within the corporations;- the inclusion
of directors for managing the company,- the chronicles of corporate sector, if any, of prior
infringement;- the companies suitability and discretionary revelation of misconduct and its
eagerness to collaborate with the state's inquiry; and- the extent and suitability of a company
acquiescence program. Many elements under this domain were intelligible. The competitive
behaviour manifested by the senior director of the corporation is a clear depiction that the
misconduct was not the consequence of an employee going off on a "frolic" but rather presented
policies of the corporate governance. Likewise, past infringements by the companies and

167
Pharmaceutical Research and Manufacturers of America
168
Id.
169
Beale, Sara Sun, “A Response to the Critics of Corporate Criminal Liability”, American Criminal Law
Review, Vol 46:1481 (2009).
170
Gobert, James and Maurice Punch, Rethinking Corporate Crime, Butterworths LexisNexis 2003.
171
Id.

92
dereliction to inculcate schemes/laws to combat noble infringements exemplified an absence
of corporate will to abide by the legal administration. The problem of socio-economic offense
in corporate governance i.e. why top businessmen were against the working staff for
committing offenses has been a neglected domain by criminologists who have instead favoured
to focus on offenses perpetrated by the less capable members of the society. Focus is vindicated
on the hypothesis (which are often few and far between) and theorists who attempted to provide
the rationale for the same, but not to rationalize, this form of offence. The earliest theorist who
did the detailed study, and tried to elucidate socio-economic crime in the corporate world was
Edwin Sutherland, who performed his investigative work in 1920s and '30's in America.
Sutherland's most popular theory was 'differential association' i.e. if individuals are uncovered
with more components that make them criminal then elements that deterred them from
criminality they will become criminal. The corporation has became an inalienable part of
human activities in society, and the consequence of their conduct effect a larger group of the
society that are influenced by personal conduct, it manifests that the financial and substantial
damages done by corporations wrongdoing are considerable and cannot be neglected. It can be
easily grasped by illustration, in the arena of workplace security, details from New South Wales
Work Cover Authority disclose that there are about 139 recorded catastrophes happened in
corporations in New South Wales in economical in 2000-2001. But the most shocking thing
was that this figure was the lowest of all the from 1987-1988 to 2000-2001 when the total
number of demise caused in corporations was 2,209.In the economic year 2000-2001,there
were around 39,395 professional damages, 25.8% of which (10,300) were recorded as
perpetual affliction cases. The entire expense of occupational damages which came as a
resultant in that year was $804 million, which was increment from $304 million in 1991-
1992.172 In India, we do not have such reports published and circulated among the interested
class of citizens. It is very difficult to procure data on the crimes committed by corporate
officials, more so of nature as mentioned above. Earlier research in the US depicted that the
public viewed socio-economic offenses in corporate governance with mediocrity or
equivocation, and less seriously than most forms of traditional offenses. Provided that
perceptible absence of civic concern and ethical denunciation of these offenses , it was asserted
that necessities for regulation of offenses should endure focus on traditional offenses rather
than socio-economic offenses in corporate governance. The contemporary overseas research
depicts that a majority of the public see socio-economic offenses as a serious issue, and deserve

172
Supra note 157 .

93
rigorous retribution as compares to some traditional crimes. To be very specific, some
academicians has shown in their research that socio-economic offenses in the corporate world
sometimes led to severe consequences such as death,or irreparable financial injury,which
paralyzes the whole economy is more serious crime as compared to the one causing loss to
companies. The general public examines the seriousness of the crime by comparing the
consequences of both traditional and socio-economic offenses. They not only contemplated
socio-economic offenses in corporate sector with substantial loss is far more severe than the
one effects economy,and they also rate the offenses committed in the corporate sector and
causing the substantial loss is at par with traditional crimes. The repercussion of an evaluation
hauled in Brisbane are compatible with those attained in the foreign countries' evaluation. The
Brisbane assessment established that socio-economic offenses in corporate governance, in
general, are contemplated grave issues, and that the classification of the offenses according to
the degree of severity relies on their repercussions on the victims. Crimes that intimidate or
include substantial damage to sufferer were evaluated as a considerable injury such as, retailing
stale food, production/retailing medicines which cause damage to health of the society, causing
the demise of an employee by ignoring the reformation machinery, and manufacturing/selling
automobiles which are menacing were ranked among the most serious of socio-economic
offences in corporate governance. This growing public concern justifies a detailed study of the
topic of corporate crimes in view of increasing corporate power. Socio-economic offenses in
the corporate sector mutilated shareholders, working staff, and the stock markets that fund the
necessities of the organizations or firms in existence and encourage noble businesses. The
current disclosures of deceptive activities executed in corporate governance and other offenses
have enlarged the exigency to examine and sentence criminal activities managed by individuals
positioned at higher designation in the corporate sector– and related employees– who have
exploited their designations to enhanced themselves while rupturing the faith of investors,
employees, economical organizations, and the capital marketplace. 173 The prosecution for
fraud committed by corporate officials and concerned delinquency have exhibited that criminal
misconduct has pervaded the highest standard of the different crucial public held companies,
agent firms, accounting and auditing business, and others. These offenders damaged workers
who devoted their whole life to formulating the corporations that recruited them. They injured
investing companies and beneficiaries, who had secured their future financially when they

173
Wray, Christopher, Prosecuting Corporate Crimes,
http://usinfo.state.gov/journals/ites/0205/ijee/ijee0205.htm (last visited on August 14, 2006).

94
placed their trust in the promises done by the companies' development and honesty. These
disclosures of a corporation's sub-culture of deceitfulness and imposition in various significant
corporations have intimidated to erode the public's reliance in corporations, the economy of the
country along with impacting all the markets. They also have boosted the necessity for a
recommenced prominence on efficient corporate governance. 174 The recent upsurge conviction
for corporate offense mainly focused on various criminal misconduct, including fabrication of
literature on corporate and reports, dissemination of deception economical reports to the
general public and to monitor authorities, formulation of "off-the-books" description an
alliance to hide fraudulent activity, exploitation of corporate designations for the individual
benefit at the cost of the companies, and insider trading. Often, concerned impositions are
brought for clogged and negotiating accounts and examination concerned to misconduct or
wrongdoing, demolition or changes of records made in the corporate sector, mendacity before
selection board and examining jurisdiction, and concerning criminal misconduct. The courts
emerged to have a specific shortsighted view of the extensive social and pragmatic implications
of corporate liability– the decisions in the senior appellate courts have paid attention upon
drawing resemblance between the corporate organization and human actors and their actions
and state of mind. Acknowledgment might need to be given to the collaborative ethicality and
though that may settled in a board of directors, distinguishable from and possibly hostility to
that of any one of the individuals themselves. 175 A restricted liability of a corporation is the
ideal vehicle for offenses. An enterprise can venom the whole pool or reservoir or can wipe off
the town, or transform socio-economic offenses in the corporate sector the hallowed lands of
indigenous individuals to radioactive dessert. Even in the worst scenarios, the accountability is
restricted to gallant injuries not more than the revenue of the corporations. And, any formulated
analyst will respond to the question of how to administer revenues during liabilities.
Corporations generally have other robust federations on their part- the law, the lawmakers, and
the law-enforcement agencies. The courts found the situation difficult for prosecuting
corporations. The corporations' prosecution is witnessed to arose from the criminal
misconducts of those who administer or regulate it. 176 "Since the company is a legal abstraction
without a real mind of its own, it is those who in fact control and determine the management
of the company, who are held vicariously liable for commission of statutory offenses. The

174
Id.
175
Power, Helen and Brian Dowrick, “Issues in Corporate Crime: An Introduction”. Senior Lecturers,
University of Glamorgan, Web. J.C.L.I., (1998).
176
Jayaraman, Nityanand, Corporate Crime Condoned, available at:
http://www.combatlaw.org./author.php?author_id=206 (last visited on August 20, 2006).

95
directors of the company are, therefore, rightly called upon to answer the charge, being the
directing mind of the company," clarified the Apex Court in the Shriram Oleum Gas Leak
case.177 Sooner than ingenious delve the possibility of criminal accountability for corporations,
the corporations' managing directors were the only ones holding the liability. "The corporation
has been above the law by the simple device of not being squarely in it," stated New Delhi-
based legal researcher Usha Ramanathan. In a 2:1 resolution on September 16, 1994, given by
the Apex Court 178 held that a corporation cannot be convicted with offenses that carry
compulsory conviction of incarceration and some amount of money to be paid as fine. Because
an enterprise cannot be punished, the Apex Court gave the rationale that it can only be
convicted with offenses holding a punishment of fine even if serious offenses are executed.
Ramanathan wrote that the observation of the two judges "can be seen by some as a failure of
legal imagination. If imprisonment means drawing a convicted offender into a pre-set confined
space as a prison, it is arguable that an offending corporation cannot be imprisoned. But the
constituents of imprisonment include detention, restriction of certain liberties, and, more
recently, it has been held to be about productive work while in prison the wages for which
would go to repair the victims' lives. These are certainly capable of being imposed on a
corporation. The notion of imprisonment needs to be re-visited. So too do other possibilities of
the sentencing of a convicted corporation." 179 The aforesaid proposition of Ms. Ramanathan
has probably been considered by the Hon’ble Apex Court in its decision in Standard Chartered
Bank and others etc. vs. Directorate of Enforcement and others etc. 180, where it has ordered
that there can be no exemption to companies from conviction solely because it concerns the
crimes for which punitive punishment is compulsory, and in such cases instead of
imprisonment fine can be imposed. By this decision of the Apex Court, overrules its earlier
decision in Velliappa. This is a significant departure from the principle that a corporation
cannot be arraigned for offenses for which punishment of incarceration is there because the
company cannot be put behind the bars. However, two judges (Shri. B.N. Srikrishna, J., and N.
Santosh Hegde, J.) dissented from the majority holding that "it is not open to the Court to read
the words 'imprisonment and fine' as 'imprisonment or fine', such a construction is
impermissible. Firstly, it virtually amounts to the rewriting of Sec. 56 of FERA. The court
would be reading the section as applicable to different situations with different meanings. If

177
M.C. Mehta vs. Union of India, AIR 1987 SC 1086. (India)
178
Asst Commr, Assessment II, Bangalore & Ors v. Velliappa Textiles Ltd & Ors, AIR 2004 SC 86 (India).
179
Ecologist Asia (December 2003)
180
AIR 2005 SC 2622

96
the offender is a corporate entity, then only a fine is imposable; if the offender is a natural
person, he shall be visited with both the mandatory term of imprisonment and fine. The exercise
would then become one of putting a fluctuating or varying interpretation on the statute
depending upon the circumstances. That is not permissible for the court, either on principle or
on precedent." Thus, there is a bound conflict in this area in the opinion of the judiciary. Let
the majority view prevail, but the minority view always leaves a portion of food for thought
for reconsideration of the issue in a different set of lights. The latest clarification on the law of
corporate prosecution has been done in the case of Iridium v. Motorola case181 in which the
Apex Court has recognized that companies are accountable even for offenses that require the
guilty mind. Though the case is a landmark on the capability of corporations to have a guilty
mind, writers have asserted that its pronouncement on the other horizon must be attained in
quantitative conditions only as feasible recommendations for adding specific judicial
recognition. 182 Further, if the corporate sector has been put through criminal law, then an
relevant conviction rule is a precondition. This cannot be dispossessed from the substantial
assertion. From a punitive point of view, it is recently attained that distinct offenses do not
apply to corporations. There have been visionary approaches to penalized sanctions in this area
but the restriction are obvious. James Gobert, a senior lecturer at the University of Glamorgan
contemplates corporations as the exemplary and logical actor– who acts or reacts when its
financial situation compel to do so. . After evaluating the latest authority, Gobert pinpointed
the exigency for legal administration to intervene to prevent socio-economic offenses in
corporate survival.The applicable provisions state fine as the measure for combating these
offences but only a fine will not suffice the desired result.So, it is a matter of significance to
recognize the type of offences and have some provisions for punishing the same, but before
punishing there should be formulated standards for corporations on violation of those standards
corporations will be held liable.

The rationale is, in the question, as to why we are so enthusiastic to prosecute juveniles as
adults, and even does so them, because they are accountable for their actions, but so not willing
to solicit a higher level of principles of individual accountability for executives whose
profession is to operate a company? After 30 years of 'tough on crime' and compulsory
convicting schemes (even for 5 grams of opium), why do we still not have any proper set of

181
Iridium India Telecom Ltd. v. Motorola Incorporated & Ors., AIR 2011 SC 20.
182
Naniwadekar, Mihir & V. Umakanth, Corporate Criminal Liability, and Securities Offerings:
Rationalizing the Iridium-Motorola Case, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1801628
(last visited March 27, 2021).

97
laws to convict crucial economical offenses? Mahesh Chandra puts it as follows: "In view of
the growing consciousness about the overall welfare of the community over the individual's
liberty and protection, and in view of the complexities of the new criminality, and also in view
of the fraudulent and deceitful nature of the socio-economic crimes, it has become necessary
to strike a mean in the safeguards to the guilty person on the one hand and the interests of the
aggrieved person and the society on the other hand". 183 To accomplish the much-desired
welfare of the society and its preservation and protection against the abuses of the socio-
economic crimes (includes corporate crimes) it has become essential to deviate from the
accepted notions of traditional criminal jurisprudence and to modify the procedural and
substantive criminal law. The whole concept and approach deserve to be modified.

The new socio-economic criminality is the handiwork of professional people and the
industrialists and the businessmen, all belonging to the upper strata of society and it is executed
in the duration of their employment with the help of expert scientific and technological know-
how, and the old concepts do not admit of proper and sufficient treatment in the background of
traditional concepts and therefore some rethinking has become essential in this behalf. 184

The above discussion provides a strong rationale to undertake the present research. The
omnipresence of corporation's activities in society covers the extensive domain of, and the
consequence of their activities can be seen on much greater population of the society than are
influenced by personal conduct, means that the financial and substantial damages done by
corporate wrongs are considerable and cannot be neglected. India has recently seen a spurt of
scams in the last few years, post-Satyam. The prominent ones include the 2G Spectrum debacle,
Coalgate scam, Commonwealth scam, and others. In all these scams, it is alleged that the public
has been put to loss to the tune of several thousand crores of rupees. Though these scams
involved some corrupt govt. officials at the center, the instigators, and beneficiaries included
the corporates who have been instrumental in perpetuating these scams. That’s the reason that
the opinion of Beale makes sense, i.e. 185“Imposing criminal liability on corporations makes
sense, because corporations are not, fundamentally, fictional entities. Rather, they are very real
and enormously powerful actors whose conduct often causes very significant harm both to
individuals and to society as a whole.”

183
supra note 165.
184
Ibid
185
Beale, Sara Sun, “A Response to the Critics of Corporate Criminal Liability”, 46 Am. Crim. L. Rev,
(2009).

98
 CHAPTER 6: CONCLUSION AND SUGGESTIONS

Finally, after discussing extensively the uneasy relation between socio-economic offences in
corporate governance and suggestions, it can be argued that managing with such offenses and
offenders is not an easy task, collaborating with each other can only assist in throwing these
pests from the society. To combat these offenses from the corporate world,what we have in our
hand is the criminal branch of law which can be proved to be a deterrent to these offenses. 186
In his second Fireside Chat, May 1933 Roosevelt declared that “government ought to have the
right and will have the right to prevent unfair practice by industry”. 187 The offenses exist in
societies as these offense pay to offenders. Strict actions should be adopted, including
imprisonment for CEOs and other senior officials of the corporations. The offenders and their
organizations should ponder with full caution whether they found it morally admissible to
receive monetary gains that may have been partially been attained by offenses that are
damaging to the general public. Apart from punitive sanctions, other punishments can be
constructively applicable against the companies. The one route to regulate their capability and
to lessen the damage by regulating their misconduct through efficient measures. The criminal
branch of law is supposed to bring corporations to confront criminal sentencing for misconduct
by making society conscious of their offenses and accurately frightening them from executing
offenses against corporations. Gilbert and Russell advert to the damage that trans border
offenses imposed on underdeveloped nations, and in their seminal works, "Globalization of
Criminal Justice in the Corporate Context" they clamour for global regulation of socio-
economic offenses in the corporate sector as an issue of international justice. Undoubtedly the
only instrument we have in our hand to combat these offenses is convicting corporation under
criminal law, especially trans-border criminality should be adopted to tackle such issues
internationally.

However, for this to occur, various countries specifically underdeveloped nations are required
to have awareness of socio-economic offenses and, most significantly, there should be
awareness regarding the efficacy of the laws to regulate such discrepancies.188 If any offense
has led to the destruction of human life then it will be considered as offense against humanity.
If hundreds or thousands of people are killed because of negligent behaviour or it is self-

186
Gottschalk, Petter, "White-collar crime: detection, prevention, and strategy in business enterprises",
Universal publishers, 2010.
187
Henry n. Pontell and Gilbert Geis (eds.), International handbook of white-collar crime and corporate
crime Springer US.
188
Ibid.

99
induced by the corporation for making a profit,it will make no difference in the approach of
recognizing the misconduct. The controlling agencies are to be invested with the capability of
enforcing to combat socio-economic offenses in the corporate sector. These offenses are in
existence for decades and will likely exist in the future as well if no strict action will be taken.
Nevertheless, adopting noble methodology for combating it might be able to restrict the extent
to which socio-economic offenses influence society and reduce the possibility that decent men
and women will become a victim. Judges are supposed to be truthful and well known with the
advancement and procedures of the corporate sector. Lawyers are also supposed to act with
honesty and fight for the truth and justice and not only for material gains. Socio-economic
crimes in the corporate world have now become a very serious offense, which has prodigious
effects and consequences on the financial condition and social protection at both the national
level and global level. Hence, it is obligation posed on State to come up with efficacious and
suitable criminal liability upon an individual who is described under a person in criminal law
along with its leading individuals who are the psyche and the intellect of such corporate
developments and are the individuals regulating the business of the corporations. Since socio-
economic crime is generally an economic offenses, the legal provisions concerning economic
offenses are required to be malleable and should be updated according to the contemporary
state.

After having great research it can conclusively be stated that socio-economic offenses are not
distinct from other offenses, hence explaining the need for appropriate prosecutions. Offenders
must confront their punishments whether through penalties or incarceration without utilizing
the elementary way out. While most states neglect these essentials and let corporations get
away with such offenses, effects are visible and inevitable. For instance, the substantial
aggregate of the environment nowadays is polluted as a result of organizational activities. The
ones who are paying for these crimes are consumers who purchase products and amenities at
high expenses. Shareholders and working staff also suffer when it comes to paying for these
offenses. It is, therefore, essential for states and organizations to come up with policies that
discourage socio-economic crimes from indispensable parts of human life i.e.corporations.
They should include harsh punishments to bring the drive at rest by convicting even the most
sturdy offenders. The avarice is the most general driving vigour of socio-economic offenses
and institutions are supposed to combat this by the internal atmosphere congenial for
employees and working staff. The main purpose behind all these illegitimate work is
economical gain, high profitability,but the organizations cannot use illegal means to satisfy

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their desire for money. The money can also be gained by using legitimate means. Corporations
are responsible for maintaining the legit sources of money and should also provide some
incentives and some monitoring measures should be there to encourage employees and to keep
a check on the employees respectively.

The economics behind criminal sanctions states that the probability of crimes is contingent
upon the chances of being caught and the severity of the punishment. 189 With time, socio-
economic offenses in the corporate sector are becoming increasingly sophisticated and complex,
thus difficult to point out. Moreover, as the activities take place with the shield of the veil, the
directors are not scared to take dishonest decisions to serve their motives. In such cases, if the
cost of being caught is limited to monetary penalties, it might not be enough deterrence for
wealthy companies.

There is thus, a need to raise the fines to a level in which the corporations collapse or to impose
strict individual sanctions. Ways and means should be found (if possible, even with the help of
artificial intelligence) for better detection of such crimes as it would deter the individuals hiding
behind the corporate mask from using the corporations for fulfilling malicious personal motives.
This will further boost confidence in the system and better relations between shareholders and
the Board of Directors. The legislature is the only instrument that can assure a healthy
environment by encouraging and nourishing corporate governance and can formulate a more
organized rule book for corporations to comply with. The significance of corporate governance
is underestimated in India.

Corporate governance is supposed to assure the collective well-being of all quarters — be it

the directors on board, stockholders, and other consumers. Transparent management is a
weapon for assuring a robust relationship between the administrator who takes chief decisions
and shareholders associated with the particular company. Thus healthy governance assures the
entitlements of shareholders and prominent respect is given to the society due to which these
corporations exist. Further proper governance system assures invariability of stock prices of
corporations and retains the goodwill of the corporate entity. Therefore it can be expressed that
the corporations following good governance, will not be the victim of socio-economic offenses.

189
Angira Singhvi, ‘Corporate Crime and Sentencing in India: Required Amendments in Law’, 1 IJCJS
(2006).

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Given the social consequences of mismanagement in corporations, the idea of corporate
democracy should be promoted and even small shareholders should take more interest in the
meetings and be constantly involved in the operations of a company.

The legislature should streamline and consolidated a compact corporate governance code,
rather than the regulations scattered in different and often disjointed legislations. Mandatory
compliance and adequate punishment for failure for adherence to corporate governance norms
would give authenticity to such a code. As mentioned previously, the punishment must
accompany a form of stigmatizing or labeling of the company, as for the big corporations today,
their image is the hallmark of their existence.

In simple words, it can be stated that socio-economic crimes in corporate governance are the
most nefarious activity in society. Loopholes in the legislative approach encouraged socio-
economic in the society. These offenses refer to the offenses executed by the companies or the
employee conducting works on the part of the companies will be held accountable. The
punishment for these offenses mentioned in legal system is not much efficacious and there is
an exigency for alterations. It influences very badly the capital markets. Nowadays it has
become a terror for the society. Even individuals acting on the part of the companies, the notion
of vicarious liability inconsistent, the offenses are supposed to be punished rigorously,and both
the employee and corporation should be held liable.

SUGGESTIONS

The researcher after stating all the concepts in a detailed manner put forth some suggestions
which would help in combating socio-economic offenses from corporate governance. To
combat these offenses from corporate governance there should be an effective scheme that
solely deals with these offenses in corporations. The researcher firstly divided the ground level
suggestions into three parts:

❖ Firstly the implementation of conventional criminal law to circumscribe the damaging

corporate actions.

❖ Secondly, compulsorily ethical knowledge should be inculcated in the curriculum from high
school till college-level education. This is the most significant step for various reasons. As
before joining any profession or corporation these individuals gets proper education in schools
and colleges.So, if like every other subject business ethics will be included in curriculum of
the schools and colleges then when these young adults will join corporation there will no

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chance for unethical behaviour. Another purpose is that elementary knowledge in ethics is
crucial because of the behaviour that more than half of the population of the society bears
regarding money. Society has to act as educators and will have to teach business ethics to these
young adults so that when they enter into the corporate world,the problem of socio-economic
offenses do not arise

❖ Thirdly, using publicity to its full extent as a penalty against those who get indulged in socio-
economic offenses in corporations. This remedy will fulfill its purpose because of the
escalating responsibility that is accompanied by your own face on the television set or
newspaper. None of the individuals who want to have cynical taboo gets attached with their
personality and their prestige or reputation gets affected. An incidental impact on companies
managing director whose eyes get stuck on the news depicts that he cares about his reputation
and attempting to keep everything updated. This vigilant activity of the managing director will
proved to be beneficial for society as his vigilance will assist him in acknowledging the plan
of committing any crime before its execution.The publicity stunt should be imposed as a
sanction, and even the government has the authority to compel the co to remunerate for all the
expenses which have been occurred in publicity throughout the sentencing duration.

Some suggestions have been stated by the researcher which should be followed at an advanced
level to tackle socio-economic offenses from corporate governance. These are: Firstly there
should be a code of ethics that has been settled for corporations must be authenticated. The
ethical codes are conventional affirmations of what are the expectation of corporations from
their staff. To promote moral behavior, top management needs to eradicate chances for
unethical behavior and formulate policies and functioning procedures. With all these notions
and methodical approach, some recommendations should be taken into consideration. These
are:

❖ The companies which constitute managing directors on board has a judicial obligation of
faith and credence, which requires some definite liability, lucidity, and autonomy which should
be assured by corporate governance.

❖ The senior managing directors should follow ethical practices while attending any deal and
also present annual reports mentioning all the details which ought to be known to stockholders,

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capitalists etc. Some recommendations for moral resolutions are as follows 190 ❏ Top
management behaviour should be altered.

❏ There should be properly formulated ethical codes which will improve the decision-making
process.

❏ Communication with fellow beings and other colleagues

❏ Regulating arrangement.

❖ This is significant to conduct a zero-tolerance vantage point towards hush money, corruption,
and all other crime which are economic nature and affects society at large.

❖ Protection from political intimidation and occupational protection can assure a huge number
of population eagerly wants to volunteer details and will increase transparency in the Indian
corporate sector.191The exigency here is to bring alterations in the judicial arrangement for a
case concerning the corporate sector. These cases, usually include cases of greater loss to
investors, which demands fast-tracked courts to solve the case quickly so that offenders can
face severe punishments for their acts immediately.

❖ Proper governance in corporate sector is a conventional arrangement of responsibility and

regulation of moral and social resolutions and the utilization of assets. Following are the
elements of Good governance192

❏ Consent aligned

❏ Responsible

❏ Transparency193

❏ Compassionate

❏ Productive and efficacious

190
C.S.V. Murthy, Business Ethics And Corporate Governance, (Himalaya Publishing House, January
2011).
191
Aparajita Pande, Corporate Fraud in https://sevenpillarsinstitute.org/corporate-fraud-india-case-
studies-sahara-saradha/.(last visited on April 15, 2021).
192
ICSI and Taxmann Publication: Corporate Governance (2015).
193
Supra note 201.

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❏ Compliance with formulated law.

❖ The individuals before investing in the company were apprehensive about the ethical
practices, social responsibility, and prestige of the company in which they investing. Nowadays
with the evolving technology, these information are easily accessible, and these investors are
quite aware of the ethical practices of the company as companies following ethics in business
strategy provides establishment for proficiency, productivity, and huge gains. 194

❖ Consumer contentment is a crucial element for the proper governance of the corporate sector.
There should be frequent purchases by the consumers, and the most important part of this seller-
purchaser relationship is mutual respect. The company's name should elicit trust and esteem
among consumers for persisting success of the company. It is believed that when a company
adopts ethical business then and believes in ethical practices along with a profit-making mind
then mishaps or any crisis tolerated by the consumers is a minor aberration. 195 As it is known
that no plan/schemes can be called absolutely infallible in its endeavor to regulate socio-
economic offenses in the corporate industry, but by making substantial changes in the criminal
law branch there will a foundation upon which future resolution can be formulated.

194
Renu Nainawat and Ravi Meena, ‘Corporate Governance and Business Ethics, 3 GJMBS 1085-1090,
(2013).
195
Amit Kumar, Business Ethics: Nature and Scope,
https://amitiitism.wordpress.com/2015/03/25/business-ethics-nature-and-scope-college-assgn-01/
(last visited on April 12, 2021).

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