White Collar Crimes (WCC) Arbitration & Indian law. 9, Sarayu, 11 th Road, Chembur (East), Mumbai:

Transcription

1 White Collar Crimes (WCC) Arbitration & Indian law 9, Sarayu, 11 th Road, Chembur (East), Mumbai:

2 Definition of WCC 2

3 WCC - Definition The term white-collar crime was coined in the 1930 s by Edwin Sutherland who defined it as crime committed by a person of respectability and high social status in the course of his occupation. 3

4 WCC A definition Law Commission of India 47 th Report on Trial & Punishment of Socio-Economic Offences, 1972: A crime committed in the course of one s occupation by a member of the upper class of society. Diffused costs (to society) and concentrated benefits (to perpetrators). 4

5 WCC Key Features Motive of the criminal avarice (not lust or passion) Background of criminal (non-emotional) Victim usually the State or section of public Mode of crime fraud not force Usually involves fraud as well as corruption 5

6 Key concepts akin to WCC Economic Offence V. R. Krishna Iyer, J. economic offences often are subtle murders practised on the community or sabotage of the national economy. Fraud Elaborated below Corruption PC Act,

7 About Fraud Section 17 of Indian Contract Act Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto of his agent, or to induce him to enter into the contract: (1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true ; (2) the active concealment of a fact by one having knowledge or belief of the fact; (3) a promise made without any intention of performing it; (4) any other act fitted to deceive ; (5) any such act or omission as the law specially declares to be fraudulent. 7

8 About Fraud Fraud as defined in Section 17 of the Indian Contract Act is for the purpose of a contract and in so far as the operation of the Contract Act is concerned. In the event of a fraud, the contract becomes voidable. The party suffering from the fraud may terminate the contract on his option. The court may also compensate him if he suffers from any damage before terminating the contract. Fraud as such, is not a criminal offence insofar as the counter-party contractual remedy is concerned. 8

9 About Fraud Fraud is considered a criminal offence only when it involves impersonation, criminal breach of trust or criminal conspiracy, or forgery, or falsification or destruction of documents for wrongful gain, or embezzlement of fund. 9

10 IPC and Fraud Section 25 defines the expression fraudulently a person is said to do a thing fraudulently if he does that with intent to defraud but not otherwise. The expression fraudulently occurs in Sections 206, 207, 208, 242, 246, 247, 252, 253, 261, 262, 263 and Sections 421 to 424. Sections 24 and 23 define expressions dishonestly and wrongful gain and wrongful loss. Wrongful gain is gain by unlawful means of property which the person gaining is not legally entitled. Wrongful loss is the loss by unlawful means of property to which the person losing it is legally entitled. Whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person, is said to do that thing dishonestly. 10

11 IPC and Fraud Indian Penal Code recognizes the following acts as fraud: a. Impersonation b. Counterfeiting c. Wrong weighing and measurement d. Misappropriation e. Criminal breach of trust f. Cheating g. Dishonest dealing in property h. Mischief i. Forgery j. Falsification k. Possessing stolen property l. Concealment 11

12 Center for Good Governance Table of Crimes/Categories Crime White Collar Crime Economic Offence Fraud Corruption Tax evasion Money Laundering Bank / Insurance / Chit Fund Fraud Credit Card fraud Bribery of Public servants Theft of cultural object Smuggling / Illegal Foreign Trade Stock Market manipulations Racketeering Travel (Passport) Documents Computer Crime Computer Software Piracy / Theft of Intellectual property Embezzlement / defalcation / Misappropriation of Money Forgery Drug Trafficking Counterfeiting False Identity Abuse of Office Theft of Stores & Stationery 12

13 I.T. Act 2000 The said Act also amends the related provisions in the Indian Penal Code, the Indian Evidence Act, 1872, the Bankers' Books Evidence Act, 1891 and the Reserve Bank of India Act, The IT Act recognizes offences related to fraud such as tampering with computer source documents, hacking computer systems, creating, publishing, or otherwise making available digital signature for any fraudulent purpose. 13

14 DP of State Policy The State shall, in particular, strive to minimise the inequalities in income, and endeavour to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations. 39. The State shall, in particular, direct its policy towards securing (a) that the citizens, men and women equally, have the right to an adequate means of livelihood; (b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good; (c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment; The provisions contained in this Part shall not be enforceable by any court, but the principles therein laid down are nevertheless fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws. 14

15 Agencies to Deal with WCC PAC CAG CVC CBI Chief Secretary of a State State Police through CID, EOW, ACB State Vigilance Commissions DG (Vigilance & Enforcement) Lokayukta & Upa Lokayukta 15

16 About the process of Criminal Law About the IPC, Cr. PC & The Evidence Act Complaint Cognizable/Non-Cognizable Offences FIR Arrest Anticipatory Bail/Regular Bail Charge Sheet Trial Review, Revision and Appeals against Magistrate Orders 16

17 Courts of Criminal Justice JM(FC)s, Sessions Court, HCs, Special Appointed Courts, and SC of India Economic Matters (evasion, non- payments) entertained/tried by Tribunals or Special Courts such as SAT/CESTAT/ITAT - any link with ordinary criminal law process? Double Jeopardy? Consumer Court/s, Competition Commission? 17

18 ICAI AAS4/SA240 The Auditor's Responsibility to Consider Fraud and Error in an Audit of Financial Statements Consider Fraud -?! 18

19 WCC & Practicing Professionals Satyam/E & Y : CA/Corporate House/s/Politicians Adarsh Land/Building : IAS/Politicians Telecom - 2G : IAS/Politicians/Corporate Houses Hassan Ali/Stashed Funds : Politicians/ Corporate Houses Andersen/Enron/Dabhol : CA/Corporate Houses/Politicians 19

20 ABOUT WCC ANY FURTHER QUERIES? 20

21 Arbitrations - A Quick Run-Through Certain Aspects of Arbitration Domestic/International Arbitration Reference to Arbitration Submission to Arbitration Number of Arbitrators Rules of Conduct Terms of Reference Sn 9 and Sn 11 Interim Relief by the HCs 21

22 Of Arbitrations Domestic & International Both parties incorporated in India TDM Infrastructure (P) Ltd. v. UE Development India (P) Ltd held that irrespective of where the 'central management and control is exercised' by a company, companies incorporated in India, cannot choose foreign law as the governing law of their arbitration. The nationality of companies incorporated in India being Indian, the intention of the legislature is that Indian nationals should not be permitted to derogate from Indian law as it would be against public policy. The Court was of the view that "international commercial arbitration" meant an arbitration between parties where at least one of it is a body corporate incorporated in a country other than India. Where both companies are incorporated in India (and thereby had Indian nationalities), then the arbitration between them cannot be said to be an international commercial arbitration (even though the central management and control of the company may be exercised from a country other than India). 22

23 Arbitrations International Arbitration -Under SIAC, LCIA or any other association whether abroad or in India Costs, Time, Governing Law Of Arbitral Awards, Binding Nature Grounds for Setting aside domestic (RenuSagarVs GE, ONGC Vs Saw Pipes) and international arbitral awards (Bhatia International Vs Bulk Trading & Venture global Engineering Vs Satyam) in India 23

24 A N Y F U R T H E R Q U E R I E S? T H A N K Y O U Ganesh Iyer, Advocate 9, Sarayu, 11 th Road, Chembur (East), Mumbai: , Ganesh@Iyerschambers.com 24