-Adv Shweta Sharma
Meaning
My earliest recollection of a White-Collar crime is that of the Securities Scam committed by Harshad Mehta of over Rs. 1000 Crores, which came to light in the year 1992. Harshad Mehta or the “Big Bull”, as he was popularly called spent 7-8 years of his early life doing some small-scale odd jobs when he finally landed a job as a sales person in an insurance company, where he became interested in the share trading. He then joined a brokerage firm as a clerk or jobber and learnt the tricks of the trade from his Guru Pranjivandas broker. He took full advantage of loop holes in the Indian banking system and an opaque system of trading for banks using fake bank receipts issued by two lesser known banks. He convinced banks to transfer huge amount of money in his personal account which he then pumped into the stock market to drive the prices of shares up to dizzying heights, which he then sold off after locking a huge profit. He was charged with over 70 criminal cases mostly relating to bribery, cheating, forgery, criminal conspiracy and falsification of accounts.
Then came year 2003 and the Stamp Paper scam broke out. Abdul Kareem Telghi, the mastermind of the scam, was being referred to as the next Harshad Mehta. Telghi, who started out as a vegetable and fruit vendor in the railways but went out to become a mastermind of organized crime. He was in-fact arrested in year 1991 on the charge of cheating and was imprisoned. There he became associated with a master forger and learnt new tricks of forgery and cheating. After bribing his way out of prison and acquiring a license of stamp vendor, he became associated with some officials of revenue department and stamp registry at Nashik. The machines at Nashik stamp printing press were declared junk at his instance which he then installed to forge the stamp papers and carried out a scam worth Rs 20,000 Crores. Abdul Karim Telghi and 4 others were sentenced to 5 years RI after they pleaded guilty on charges under section of 120-B of Indian Penal Code (IPC) pertaining to criminal conspiracy and under sections 258 (Sale and circulation of fake stamps), 260 (possession of fake stamps) and 420 (cheating) of IPC, with fine of Rs 500 each.
Recently, in 2018 the Mehul Choksi – Nirav Modi Scam came to light after the complaint made by Punjab National Bank, that the duo had defrauded the bank of Rs. 28000 Crores. Nirav Modi who belongs to an affluent family dealing in diamond business for generations, received his education in Belgium. After returning to India in 1989, he studied all aspects of diamond business and founded his company Firestone in year 1999 a distributor of Rio Pinto’s Argyle Pink diamond in India. By the year 2005 he had 17 stores across India and by 2015 he had expanded his business globally. Nirav Modi also mis-utilized the Letter of Understanding from the Bank to make hefty payments to oversees clients. He is a fugitive wanted by India on the charges of cheating and misrepresentation and by the Interpol also in a case of cheating outside of Indian territory. Nirav Modi wanted to achieve in 5 years which otherwise would have taken a good 15-20 years of time. The ED had registered a money laundering case against Nirav Modi and others on February 15, 2018 under the provisions of Prevention of Money Laundering Act. The CBI registered an FIR under sections 120-B r/w 420 of IPC, 1860 read with Section 13(2) read with 13(1)(d) of PC Act, 1988.
These three cases are examples of what are known as White Collar offenses. White Collar offense was defined by sociologist Edwin Sutherland in 1939 as "a crime committed by a person of respectability and high social status in the course of their occupation". White collar crime was named so as it was supposed to be committed by the businessmen and public officials, or people who are in respectable position in the society who generally wore white formal shirts as their work wear as opposed to the people lower in rank and position wearing blue shirts to work. The white-collar crimes such as a stock broker skimming off the top of an investor’s profit, or a banking scam, require a particular level of education or skill and access to resources to commit such crimes, which access was not possible for a socially or professional low-ranking person. As per Sutherland, the white-collar criminality, like other systematic criminality is learnt. The theory of “differential association” is applied to white-collar crimes, i.e., learning the ways of crimes through the people they are associating with on a regular basis. The above three examples of businessmen committing Securities Scam, Stamp Paper Scam, Banking Scam or the scams committed by public officials such as Commonwealth scam, coal-gate scam, 2G Spectrum scam etc., illustrate how the theory of differential association is aptly applicable to the accused person in each of the cases. Hirschi and Gottfredson gave a general theory that the “white-collar criminals are motivated by the same forces that drive other criminals, i.e., self-interest, pursuit of pleasure and avoidance of pain. White Collar crimes are non-violent, financially motivated crimes. The actus reus in itself is not an abhorred act (see in contradiction to the actus reus constituting the offence of Homacide), but when coupled with mens rea, it constitutes such an act which is declared as an offence by the Law. They could be Corporate crimes, professional or occupational crimes, environmental crimes, educational crimes, etc., and there are many enactments in India today to curtail these crimes, eg., Income Tax Act, Prevention of Corruption Act, Prevention of money laundering Act, Companies Act, and so on.
The IPC perspective:
Thought Sutherland gave the first definitive definition of the term White-collar crime in the year 1939, these crimes are a part of our society and system for as long the society and system exists. The Indian Penal Code, 1860 (IPC for short) also enumerates certain offences which fall in the category of white-collar crimes or socio-economic crimes, as they are commonly referred to. IPC which is the very first codified criminal substantive Act, deals with offences of corruption and bribery by Public servants in Chapter IX, offences related to corruptions in electoral process in chapter IXA, offences related to counterfeiting of coins and government stamps in chapter XII (Sections 230 to 263), offences related to weights and measures in chapter XIII (Sections 264 to 267), offences related to misappropriation of public property and criminal breach of trust in chapter XVII (Sections 403 to 409), cheating (Section 415 to 420), offenses related to documents and forgery in chapter XVIII (Section 463 to 489) and offenses related to counterfeiting currency etc., (Sections 489A to 489D).
Cheating and Forgery as White-Collar Crimes:
Section 415 to 420 of IPC deal with the offence of cheating. Sec 415 defines the offence of cheating. To constitute the offence of cheating, there must be firstly, deception on part of the accused which is fraudulent or dishonest and secondly, as a result of this deception, there must be inducement of some person. This inducement must lead to either deliver any property, or to consent to retain some property, or cause the other person to do or omit to do something which he must not have done but for such deception and inducement. Thirdly, such fraudulent and dishonest deception and inducement caused thereby should have caused damage to the victim in mind, body, reputation or property. There are various illustrations appended to the section so as to make it clear. Sec 416 defines cheating my personation, i.e., cheating by pretending to be some other person. This other person being impersonated may be real or imaginary person. Sec 417 provides punishment for cheating which may extend to one year, or with fine or both. The offence is non-cognizable, bailable, triable by any magistrate and compoundable by the person cheated. Sec 418 defines cheating with a knowledge that wrongful loss would ensue to a person, whose interest the offender is bound to protect. Punishment for this form of cheating is given in Sec 419 to be for a term which may extend to 3 years and it may be compounded by the person cheating but with the permission of the Court. Sec 420provides for the aggravated for of cheating, which states that if any person cheats and upon such cheating dishonestly induces some other person to deliver any property to any person, or to make, alter or destroy the whole or any part of the valuable security, or any thing which is signed and sealed and is capable of being converted into valuable security, he may be punished with a term which may extend upto 7 years and fine.
The three essentials of both Sections 415 and 420 are deception, inducement and the resulting harm to the victim of offence. But Section 420 is said to be aggravated form of cheating and provides for a greater punishment and a compulsory fine as the severity of offence is greater in case of Section 420, i.e., to say that the degree of mens rea is greater in case of Section 420. Professor H.S. Gaur has explained the difference in his book by an example the crux of which is as follows: If A deceives B and thereby induces him to lend some money to A, with the knowledge that he is exposing B to a danger of loss of this money, A is liable under Section 415. However, if A deceives B with an intention to cause him wrongful loss and thereby induces him to handover some money or property to A, he is liable to be tried under Section 420 of IPC. The Supreme Court in “Hari Sao vs State of Bengal AIR 1970 Cri LJ 849” has elaborated the nuanced difference between Sections 415 and 420 of IPC. In this case the accused had booked an entire coach of the freight train and dishonestly misrepresented to the station master to believe that 251 bags of chilies are being loaded on the coach and are to be sent to Calcutta and thereby induced him to sign the railway receipts qua the same. The bags were loaded and the coach was sealed and made ready for dispatch by the accused themselves. A day later when some seals were found broken, the railway authorities checked the carriage and found only 197 bags filled with chaff (bhusa). The prosecution filed charges against the accused persons under Section 420 read with Sec 120b of IPC, stating that the accused persons had deceived the station master to believe that 251 bags of chilies were loaded onto the carriage and had the intention to convert the railway receipts to make a claim for the same by converting the railway receipts as valuable securities and thereby causing loss to the railways. The Supreme Court negated the claim of prosecution and held that the railway receipts cannot be held to be valuable securities as they merely state that the number of bags is “stated to be” 251 and are not a proof that the 251 bags were actually loaded onto the carriage. They are merely for the purpose of calculating freight charges and do not create any interest in favour of the accused persons to recover or claim damages for 251 bags of chilies from the Railways and as such there was no chance of any harm being caused to the Railways. The offence was held not falling under Section 420 of IPC, as there was only fraudulent deception and inducement of the station master to counter sign the railway receipt with the contents which were known to be not true to the accused persons for which they received a SLIM of Rs. 5500 from some other person. Thus, as there was no chance of wrongful harm being caused to the railways, the accused persons could not be said to have formed the intention to do so. A greater degree of intention to cause wrongful loss being a sine qua non of offence under Section 420, the offence was not made out.
Section 463 and Section 464 of IPC essentially define what actually constitutes the offence of forgery and are to be read together to fully understand the meaning of forgery under IPC. The essentials of Forgery as per Section 463 and 464 of IPC are as follows:
1. The making of a false document or a part of it,
2. Such making should be with an intent to:
a. Cause damage or injury to:
(i) The public; or
(ii) to any person; or
b. support any claim or title; or
c. cause any person to part with property; or
d. enter into any express or implied contract; or
e. commit fraud or that fraud may be committed.
Forgery thus means making of false document or a part of it. Such a making must be either with an intent to cause damage or injury to any person or public at large; or to support any claim or title, or cause any person to part with any property or to cause any person to enter into a contract with an intention to commit fraud or that fraud be committed. The punishment for forgery may extend to a term of two years or fine or both. Intension to cause damage or injury is one of the scenario covered under Sec 463 (please refer to para 2a above) and it is not necessary to be proved in every case. If other 4 scenarios are met then there is no need to prove the intention to cause damage on part of the accused. Conversely, if intention of the accused to cause damage or injury is pleaded by the prosecution, it would be covered under one of the five scenarios under Sec 463, in other 4 enumerated scenarios, intention to cause damage and injury is not necessary. The offense of forgery would be complete in all the other scenarios if the document or a part of it is made dishonestly or fraudulently in the manner and purpose as envisaged under Sec 464 of IPC and it is immaterial if the damage or injury actually ensued or not.
Supreme Court in “Sushil Suri vs CBI AIR 2011 SC 1713” refused to quash the FIR against the directors of Morepen Company and two other on the charges of Cheating, forgery, etc., as they had obtained loan from bank on the basis of certain fabricated pay orders of machinery to be installed at their Solan plant and had diverted the loan money to some fictitious accounts to be utilized for purpose other than the one claimed for. The contention of the accused persons was that the entire loan amount stood paid to the bank and there was no loss to the bank so the charges of forgery are not made out. Supreme Court while rejecting the contention of the accused persons and held that the loan claim of the accused persons was based on fabricated pay orders and there by the accused not only duped the PSB bank but also availed depreciation on the machinery that was never availed or used by them causing loss to the ex-chequer, a serious economic offence against the society.
Sec 467 deals with aggravated form of forgery. Its essentials are:
1. To forge a document or a part of it with a dishonest intention or an intention to defraud as envisaged under Sec 463 and 464 and such a document must be or purport to be:
a. a valuable security,
b. or Will,
c. or an authority to adopt a son; or
2. to give authority to any person to receive valuable security or principal, interest or dividends on a valuable security; or
3. to receive or deliver any money, movable property
a. or valuable security; or
b. purports to be an acquittance, receipt, or an acknowledge of payment.
Although the section does not use terms fraudulently and dishonestly, it is implied as the term forgery is used in the section, which requires the criminal intent to be established along with all the previously mentioned ingredients to prove the offence under section 467 of IPC. Now, it is very interesting to note that the forgery under section 467 of IPC is of the most severe kind and the punishment has been described for a term which may extend from 10 years to life imprisonment. The reason for severe punishment is that the section deals with forgery of valuable securities, payment and acknowledgement of money, interest, principal, dividend etc. The forgery of commercial documents related to banks and other financial institutions such as insurance, stocks, etc., or that of entire business process may be covered under the ambit of this section as valuable securities. “Valuable securities” are those documents which create or purport to create inextinguishable rights in favour of any person. Thus, keeping in view of the valuable nature of documents forged the section provides for very stringent punishment.
In the case of “Dr. Vimla vs Delhi Administration AIR 1963 SC 1572” the accused was charged under Sec 467 and 468 of IPC as she had filed for motor accident claim in her name while she had bought the car in the name of her minor daughter. The Supreme Court rejected the prosecution case by holding that neither any undue advantage was received by the accused nor any wrongful loss was caused to the insurer as the daughter was minor and would have applied for compensation in the same manner. It explained that “the expression defraud involves two elements, deceit and injury to the person deceived. The injury is something other than economic loss, i.e., deprivation of property, whether movable or immovable, or of money, and it would include any harm whatever caused to a person in body, mind, reputation or such others. In short, it is a non-economic or non-pecuniary loss. A benefit or advantage to the deceiver will almost always cause loss or detriment to the deceived. Even if in those rare cases where there is benefit or advantage to the deceiver, but no corresponding loss to the deceived, the second condition is satisfied.” The intention to defraud encompasses the wrongful loss to one or wrongful gain to another. Thus, an unjust or undue advantage or benefit to a person always leads to an injury to the other, however, if there is no unjust or undue benefit to a person who has forged a document and also no resulting injury to the person deceived, the offense of forgery as under Sec 467 and 468 is not made out.
In the end:
Recently, in the month of March 2020, the fake degree scam of Manav Bharti University broke out at Solan, wherein the degree certificates were allegedly being granted by the University for the courses which were not sanctioned by any authority. As a degree creates rights in favour of the students it is squarely covered under the definition of a valuable security and prima facie charges under Sec 467, 468 (Forgery for the purpose of cheating) of IPC may be made out along with independent charges under Sec 420 IPC and other Acts. It would be interesting to see which path does the investigation take and what charges are finally filed in the final report by the prosecution under Section 173 CrPC.
