Can Legal Persons be held liable for Conspiracy?

The author in this article discusses whether legal persons can be held liable for conspiracy as a criminal offence under IPC. The author further discusses the various case laws and judgments for better understanding.

Introduction

Any crime, to begin with, encompasses two essential elements – Mens Rea (guilty intention) and actus reus (guilty act).  Earlier, law viewed legal persons or corporations, companies etc as incapable of having a mens rea. But this position of the court has now evolved through the judgement in the case of Iridium[1] in which the court observed that the mens rea is the alter ego of the company, i.e. person or group ofpersons who manage and guide the company and theses group of people are imputed to the company. Hence, the Supreme Court has established that corporations are capable of having intention because they are legal persons.

Criminal conspiracy has been defined under Section 120(A) of the Indian Penal Code and various essentials of this offence have been laid down by the court through judgments.

The common law courts have also discussed the concept of criminal liability of legal persons at length and have also established precedents on the offence of criminal conspiracy committed by a company or corporation.

This article will essentially understand and analyse, who is a legal person, to begin with. Secondly, it will dwell on the question of ‘Corporate criminal liability’, and lastly, it will analyse what a criminal conspiracy and what is the liability, if any, of the legal person in the conspiracy is.

Who is a legal person?

Section 3 (4) of the General Clauses Act 1897[2] and section 11 of the Indian Penal Code 1860[3]defines “person” as “Person shall include any company or association or body of individuals, whether incorporated or not;”

Salmond [4]has defined a “person” as ‘any being to whom the law regards as capable of rights or duties Any being that is so capable, is a person whether human being or not and nothing that is no so capable is a person even though he be a man’.

Jurisprudence srecognisestwo kinds of persons – natural and legal.

‘Natural’ persons are the living human beings but not all natural persons are legal persons. For example before the abolition of slavery ‘slaves’ were not legal persons as the law did not recognise their rights and duties.

Legal persons mean beings and things – mass of land, companies, institutes etc. which are recognised by law and have certain rights and duties.

The legal person has 2 essential ingredients –

  1. The Corpus
  2. The Animus

The corpus is the ‘body’ in and the animus is the ‘will’ or the ‘personality’ which is attributed on the corpus. 

A legal or juristic person comes into being when the law recognises an institute, land, company etc and attributes a human character onto it i.e. the corpus and the animus. It includes personification of the entity which can be done by the sovereign power or a mere rule prescribed by the government.

Salmond said that ‘a legal person is any subject matter other than a human being to which the law attributes personality. This extension for good and sufficient reasons of the concept of personality beyond the class of human .beings is one of the most noteworthy feats of the legal imagination.’

The English law recognises the following as legal persons –

  1. Corporations
  2. Institutions such as trade unions
  3. The estate of funds

In the case, Som Prakash Rekhi vs Union of India[5] the Supreme court stated that “a legal person is an entity other than a living being to which the law attributes personality. It basically means that a legal person is fictitious or a myth but a legal ‘person’ other than human beings.”

In Shiromani GurudwaraPrabandak Committee vsSomnath Das[6] the court stated that “It has been well established that the concept of legal or juristic person is inevitable to the jurisprudence of law. It can be anything – living, non-living, object, inanimate. It can also be a religious entity or any such institution which may require the law to recognise it. With an aim to serve the needs of the society, a juristic person is attributed tocertain rights and responsibilities just like a normal person. The legal person is recognised like any other person but acts only through a designated person whose acts are previewed within the ambit of the law.”

Corporations and criminal liability

It has been a well-established fact that corporations can be held liable for an offence committed by them, and a fine can be imposed upon them. Therefore, there is no controversy when the punishment for offence prescribes fine or provides a discretion of imposing fine of imprisoning the person. But there was a debate on the issue whether the corporations couldbe held liable for the offences which have imprisonment as a necessary punishment.

In Assistant Commissioner, Assessment-ll, Banglore & Ors. v. Velliappa Textiles Ltd &Anr[7] (2003) the court stated that “ since acorporation is an artificial person and an artificial person cannot be physically imprisoned, hence, the provisions with necessary imprisonment cannot apply to them”.

But the court in Standard Charted Bank v. Directorate of Enforcement[8] (2005) overruled the Vellipa textiles judgment by taking the view that “corporations cannot be protected merely on the ground that they cannot form the requisite ‘mens rea’ or that the punishment of the offence provides for mandatory imprisonment.”

Hence, the court clearly established that if a corporation commits an offence, by virtue of being a legal person it is capable of forming the guilty intention and therefore, would not be excused on the basis that the punishment of the offence includes imprisonment.

This view of the court was reiterated by the Supreme Court in the case, Iridium India Telecom Ltd against Motorola Incorporated[9] held that “a corporation or company can no longer claim immunity from criminal prosecution on the grounds that it is incapable of possessing the necessary mens rea (i.e., ‘guilty mind’) to commit a criminal offence, or that the punishment prescribed for such an offence includes imprisonment. In this case, the court essentially stated that corporate bodies couldbe prosecuted for conspiracy under the Indian Penal Code.

Thus, the established position of the courts on the issue of corporate criminal liability is that –

  1. In the offences including ‘mens rea’ as an essential element, the persons (the alter ego of the company) acting on behalf of the company are made liable along with the company is sufficient guilty intention on the part of such people is proved.
  2.  In other offences,  the statutes itself provide for application of the principle of vicarious liability.

After the court settled this position, a new question came up – whether the officials of the company be held liable for the offences of the company.

This question was taken into consideration in the case of Sunil Bharti Mittal v. Central Bureau of Investigation[10] (2015). The court stated that “ by relying upon the Iridium judgment, in order to hold the company liable for the offences of its alter ego or the people who led the company ‘principle of attribution’ is applied but the reverse scenario to make the company liable cannot be used.”

Principle of attribution

“The doctrine of attribution implies that the criminal intent of the “alter ego” of the company / body corporate, i.e., the person or group of person that guide the business of the company, would be imputed to the corporation. Mens rea is attributed to the company on the basis of the alter ego of the company.”[11]

Recently, due to rising cases of scrutiny and prosecution by government and authorities through the principle of attribution, the presumption is that since the alter ego or the intention of the company is formed by the people who lead it, the position and status of that person will play the essential role in determining whether his acts can be attributed upon the company.

The judgment laid down by the Supreme court in the Sunil Mittal case of 2015 makes it clear that the in case of a criminal offence of the director and manager of the company, principle of attribution will come into play.

What is Criminal Conspiracy?

Section 120(A)of the Indian Penal Code defines conspiracy as “When two or more persons agree to do, or cause to be done, (1) an illegal act, or (2) an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy: Provided that no agreement except an agreement to commit an offence shall amount to a criminal conspiracy unless some act besides the agreement is done by one or more parties to such agreement in pursuance thereof.”

In the case of Rajiv Kumar v. The state of UP[12] the court laid down the essential ingredients of conspiracy in section 120 as –

  1. Agreement between two or more parties.
  2. Agreement should be about doing or causing to be done
  3.  An illegal act
  4. An act which is not illegal in itself but is done by illegal means.

This agreement between the conspirators need not be explicitly stated, it can be implicit or expressed by actions.

Corporations and Conspiracy

Over aperiod of time, it has been noted that corporations generally commit ‘conspiracy’ for three main purposes – 1. To defraud the government and other authorities (example – tax evasion). 2. To defraud the investors and shareholders (example- falsifying profit margins, sales figure etc.). 3. To defraud the public (example- unethical production practices, adulterated products, compromising safety standards).

The conspiracy by the corporations can be convicted along with other offences that occurred as a result of the conspiracy or could have foreseeably resulted from the conspiracy.

These instance of a conspiracy by a company or corporation help us in understanding that a legal person can/may commit the offence of conspiracy and hence, should be made liable of the same.

Case laws

In some common law judgments, the courts have clearly stated that a corporation can be held liable of a criminal conspiracy because it is a ‘legal person’ and hence capable of having ‘mens rea’ or the guilty intention which is an essential element of a crime.

In Regina v. ICR Haulage Ltd[13] it was held that “a company can be held liable for conspiracy.” In this case both the managing director and the Haulage Company were held liable of conspiracy to defraud.

In Jetivia SA and another v. Bilta (UK) Ltd and others[14]  the court said that “A company has its own separate legal personality and interests. Duties are owed to it by those officers who constitute its directing mind and will, similarly to the way in which they are owed by other more ordinary employees or agents. All the shareholders of a solvent company may in certain circumstances be able to authorise what might otherwise be misconduct towards the company.”

Hence, common law courts have clearly established that since a company/corporation/institution is capable of forming mens rea and can be held liable for other offences, on the same lines, it can be held liable to the offence if conspiracy.

Result and Conclusion

Various judgments of the Supreme Court as discussed above, have established that a legal person can be held liable for a criminal offence, even those whohave imprisonment as a mandatory punishment.

Conspiracy is a criminal offence as laid down in the Indian Penal Code. Therefore, the first basic essentials of a crime i.e. Mens Rea and Actus Reus need to be fulfilled. The courts have clearly stated that a legal person is capable of having a guilty intention. The act towards the commission of the offence is actus reus and hence, the essentials of crime is met with. The courts have said that the principle of attribution is applied here.

Moreover, various Common Law judgments have also crystallised the facts the legal persons can be made liable for the offence of conspiracy. Various instances where a company can be liable for conspiracy have also been discussed in detail.

Hence, it narrows down to the point that by the application of judgments of the Supreme Court to the penal provision of ‘conspiracy’ and the judgments laid down by the Common law courts, a legal person can be made liable of the offence of conspiracy.

Also read Role of Auditor in Companies: An Interesting area of study


[1]Iridium India Telecom Ltd against Motorola Incorporated,(2011) 1 SCC 74.

[2] General Clauses Act, 1897, § 3, cl. 4.

[3] Indian Penal Code, 1860, § 11.

[4]Eric Posner, Juristic Personality, Shodhganga, (Jan. 29, 2013, 10.04 a.m.), https://shodhganga.inflibnet.ac.in/bitstream/10603/71969/4/04_chapter%202.pdf.

[5]Som Prakash Rekhi vs Union of India, 1981 SCR (2) 11.

[6]Shiromani GurudwaraPrabandak Committee vs. Somnath Das, AIR 1936 PC 93.

[7]Assistant Commissioner, Assessment-ll, Banglore&Ors. Vs. Velliappa Textiles Ltd &Anr, (2003)11 SCC 405.

[8]Standard Charted Bank v. Directorate of Enforcement,(2005) 4 SCC 50.

[9]Iridium India Telecom Ltd against Motorola Incorporated,(2011) 1 SCC 74.

[10]Sunil Bharti Mittal v. Central Bureau of Investigation, (2015) 4 SCC 609.

[11]SurabhiKhattar,Criminal Liability of Corporate officials in India, Cyrilamarchand Blogs, (April 19, 2017, 03.10 p.m),https://corporate.cyrilamarchandblogs.com/2017/04/criminal-liability-corporate-officials-india/

[12] Rajiv Kumar vs. The state of UP, (2017) 8 SCC 791.

[13] Regina vs. ICR Haulage Ltd, [1944] KB 551.

[14] Jetivia SA and another V Bilta (UK) ltd and others, [2015] UKSC 23.