This article was written by Aayushi Swaroop and further updated by Jyotika Saroha. The article broadly covers the concept of white collar crimes in India. It extensively covers the meaning, historical evolution, and theories given by different scholars on white-collar crimes and critiques of various definitions. It further provides reasons for the effects of white collar crimes and their types, and highlights major scandals that have shaken the Indian economy. 

Introduction

“The practitioners of evil, hoarders, the profiteers, the black marketeers, and speculators are the worst enemies of our society. They have to be dealt with sternly. However well placed, important and influential they may be, if we acquiesce in wrongdoing, people will lose faith in us.”                                                          

           Dr. S. Radhakrishnan 

As we are aware that due to the increase in industrialisation and growth in society, crime has also changed, and white-collar crime is one of them. It is a generally seen that people think of crimes like murder, rape, and robbery can only be committed against society and they can only be done by poor or middle-class people, but it is incorrect. White-collar crime can be committed by any person irrespective of their economic background. But it is often connected with people who are rich and are sitting in high positions. Those who are from poor or middle-class backgrounds can also be involved in such crimes. Let’s say, an ordinary middle-class doctor is found guilty of a kidney racket, which is a white-collar crime in the medical field. 

The concept of white collar crime is an emerging concept and has covered various aspects within its ambit. The present article seeks to examine the development of white collar crime throughout the decades and its continuous emergence in the Indian legal system. Further, it deals with various opinions given by different personalities about the prevalence of such crimes in society.

• Firstly, it is a crime;
• Secondly, that is committed by an important person of the company;
• Thirdly, a person who enjoys a high social status in the company;
• Fourthly, that he has committed it in the course of his profession or occupation;
• Fifthly, there may be a violation of trust.

Before Edwin H. Sutherland talked about this phenomenon, the concept that businessmen who are known to be virtuous could be a potent danger to society as they commit such crimes in thunderveil of their reputation was stated by E.A. Ross.

If we look into the opinions given by Edwin Sutherland, he stated that white collar crime could harm society more than other offences because of the financial losses that the public would incur. If we look into the evolution of white collar crimes, it can be traced back to the 15th century in the UK and later in the US at the time of the Civil Waring that time, the large companies were permitted to take over, which resulted in the implementation of antitrust laws. The purpose of implementing such a law was to protect consumers and to ensure a fair and competitive market. In today’s time, with the rapid increase in technology and emergence of artificial intelligence, possibilities have become that even white-collar crimes can be discovered easily. In the field of corporations, white collar crimes are known to be non-violent crimes which are committed by businessmen and government officials.  

Definition of white collar crimes

Apart from Edwin H. Sutherland, various criminologists and sociologists gave the definitions to the term ‘white collar crime’. Following are some of them:

1. Marshall Clinard stated that “it is a violation of law that is being committed by persons, especially businessmen, politicians or persons in connection with their profession.”
2. Paul Tappan has provided that “It is a special kind of professional criminality in which the crime is committed by the person of high social strata, like businessmen or clerks, in connection with their occupation.” 
3. Sir Walter Reckless stated that “it represents the crimes or offences of the businessmen who are in the upper position to decide the policies of business.”
4. Frank Hartung provided that “the crime committed by a firm or by the agents of a firm in the course of their business.”

In all these definitions, one element that is the same is that they all talk about the social status of an individual. In definitions, the factors of high social status have stressed the factor of high social status and the position of an individual. People, including Marshall Clinard, Paul Tappan and Sir Walter Reckless, have talked about the social status in their definitions, while Frank Hartung talked about the individuals working in a firm or company who can commit these crimes. While holding interviews of white collar criminals, the Harvard Business School professor, Eugene Soltes, stated that the criminals do not think about the results of the crimes committed by them and the impact upon the victims. 

White collar crimes in India

Crimes like Corruption, fraud, and bribery are some of the most common white collar crimes in India as well as all over the world. As per the report published by the Business Standard in 2016 titled ‘The changing dynamics of white collar crime in India’ provided that from 2006 to 2016, the Central Bureau of Investigation (CBI) found a total of 6,533 cases of corruption, from which 517 cases were registered in 2014 and 2015.

As per the data presented, around 4,000 crores rupees of trading was carried out by using fake PAN cards. In Maharashtra, there is a rapid increase in the number of online cases, wherein 999 cases were registered. The report also provides that around 3.2 million people incurred a loss because of the theft of the card details from the YES Bank ATMs, which were administered by Hitachi Payment Services. 

Also, due to the development in commerce and technology, there is an unprecedented growth which,h itself, is one of the types of white collar crimes, known as cybercrime. These crimes are increasing because the risk of being caught or apprehended is not high. highwe look at India’s rank on Transparency International’s corruption perception index (CPI), it has improved over the years. In 2014, India was at 85th, which subsequently declined to 76th position in 2015 because of several measures taken in ortove white collar crimes. As per the report of The Economic Times published in 2018, India was in 78th position, which is an improvement of three points from 2017, out of the list of 180 countries. On the other hand, if we look at the data of the Corruption Perception Index (CPI) of the year 2023, India ranks at 93rd position. 

As we know, India is a developing country and white collar crimes are considered to be one of the main reasons for its underdevelopment, which has led to poverty, poor health, etc. This rapid increase in whine collar crimes in India is a great threat to nonot only economy but overall growth of the country. Crimes like these need immediate interference by the government, not only to make stringent rules or laws but also to ensure that they are implemented properly. During the recent time periodanuary 2024 and April 2024, 4,599 fraud cases involving Rs. 1,203.06 crores were registered with the Indian Cyber Crime Coordination Centre.

Evolution of White Collar Crimes in India

During ancient times

The white collar crime is not a new phenomenon and has existed since the time when the human population emerged. It is not a modern concept as it was prevalent in ancient times too. It could be right to say that these types of crime are not generally visible like other crimes such as theft, murder, robbery, drug trafficking, etc. Some crimes have disappeared with time however, some have evolved in a new manner with the evolution of society.

The growth of white collar crimes can be seen in the ancient and medieval scripts of India. During the Vedic times, Manu stated that the age of dharma had been replaced with the ‘adharma’ as crimes, including theft, fraudulent activities, were increasing. 

Brahaspati stated that in the earlier times, men were disciplined and not involved in bad acts; however, now bad intentions and malice have replaced them.

Crime of bribery 

If we look at the concept of bribery, it is not new, and the reference to this bribery can be seen in the Indian sacred books. Yajnavalkya stated that “the king should give rewards to his honest officers and kill those who are dishonest”. Narada had also stated that if a man is offering something out of fear, anger, lust, grief, in jest or by mistake or when he is in an intoxicated state, through a fraudulent act by a minor, it is considered to be a crime of bribery. 

Food Adulteration

The references to adulteration can be seen in Hinthe du Dharmashastra, where the sale of non-edible food was not allowed. As per Yajnavalkya, an individual who sells dog meat should be fined. He also pointed out that the person committing offences, like adulteration, is likely to get punishment and their hands, ears, and nose must be mutilated. Kautilya also talked about the same punishment that needs to be given to such individuals.

Counterfeit coins

In the Indian economy, the coins were used as a medium of exchange. The coins were used to be in silver, gold and copper, and they were under the control of state authorities. Kautilya talked about the rule which provided that if an individual counterfeits coins, then he would be punished. He used the word “Nanaka” for counterfeit coins; the persons who made them are known as “Kutarupa Kara”.

Manu talked about the imposition of heavy fines upon the medical professionals whose treatment is not good. Also, the removal of a foetus was a serious crime in ancient India. 

During the modern period

With the rapid increase in development post-independence there has been a division between two classes:

• Industrialist capitalist class and;
• Modern class

Due to the increase in business and industrialisation, workers have migrated from rural areas to urban areas. The competition in business activities has started increasing, and due to this, the criminal activities are taking control over the business sector, which eventually gives rise to new forms of white collar crimes.

In India aft, er the First World War (1914–1919), id industrialisation led to the division of two classes. The first class is the capitalist who owns the major means of production, and bourgeois institution, and the proletariat, or the working class. The extreme business circumstances with the growing economy resulted in the social departure of the proletariat class.

Due to the high competition and the greed to dominate the market resulted in various criminal minds. The emergence of white collar crimes started growing during this era. 

Reasons for the growth of white collar crimes in India

Greed 

The factors like greed, competition and a lack of proper laws to prevent such crimes are the reasons behind the emergence of white collar crimes in India. Machiavelli has also stated that men are greedy by nature. He said that a man can forget his father’s death easily, but cannot forget the assets that he lost with his inheritance. The statement is right in the context of committing a white collar crime. It is like, why would a man who is rich and has great social status commit such crimes? It could be because of his greed to earn more.

Easy, swift and prolonged effect

As there has been an increase in technology, business, and political pressure, the criminals have also looked for new methods to commit crimes. The use of technology has made it easy to cause harm or loss to an individual. The crimes, such as those involving large sums of money, other than murder, robbery and theft, are more targeted by criminals.

Competition

The term survival of the fittest was coined by Herbert Spencer, which implies that competition will always be there between the species. The one who can adapt himself to the circumstances prevalent at a particular time could only survive. Now, in the fast-growing world, the one who can tolerate every circumstance can only live, and sometimes these circumstances also give rise to crimes. People have started opting for illegal means to survive in society, and this phenomenon has grown so much over the years. Generally, such crimes are committed by people who work at a place where either they are poorly paid or are not treated in the right manner. To have a decent life and to earn profits, people opt for activities which are immoral and unethical. They do this to curb their poverty and to earn money. Such acts are done out of greed and have no limits. The criminal organisations are also multiplying their acts and advancing in their methods due to the increased competition.

Lack of stringent laws

The laws are not strict, hence, crime becomes a reason for the increased crime. Since most of these crimes are facilitated by the internet and digital methods of transfer payments, laws seem reluctant to pursue these cases as investigating and tracking becomes a diffcomplicated. Why it becomes difficult to track it is because they are usually committed in the privacy of a home or office, thereby providing no eyewitnesses. 

Modern technology

Modern technology and ease of business are one of its expectations; i a sense, it also applies to white-collar crimes, which have allowed them to reach out to a larger number of people and commit large-scale crimes under the veil of respectability so that they are not being noticed by the law. People have lost a large amount of their money and savings through scams like the credit card scam. Moreover, the pandemic opened up a new market for them by exploiting the medical field. It has indirectly created a black market for COVID-19 medications such as “Remdesivir,” and over a hundred cases were lodged against the illegal sales and use of this medicine, and in most cases, the doctors and hospital staff were involved. 

Lack of awareness

The nature of white collar crimes is different from the conventional nature of crimes. Most people are not aware of it and fail to understand that they are the worst victims of crime. People who are victims of these crimes fail to comprehend the notion of the crime and understand the exact offence that has been committed and whom to approach or lodge a complaint against. Most of the time, it involves a large corporation, and there may be little or no evidence to essentially produce a criminal. In certain crimes, such as scams or fraud, people may not even realise that they have fallen victim to a crime, such as a bank fraud, where yearly there are over a thousand cases registered. 

In a scam, such as a double-dip scam, the victim may fall prey again because the information of the victim is stored and passed on to another scammer. Especially in metropolitan cities, these cases are rising, but due to a lack of awareness, people become victims of such crimes. Wider outreach and government awareness campaigns are needed to help people understand the severity of these crimes and the loopholes these criminals use an,d may help reduce the rate of white-collar crimes in the future. 

Survival and necessity

People also commit white collar crimes to meet their own needs and the needs of their family. However, most of the white collar criminals are already rich, but due to the factor of greed in their minds, they want to earn more, and this later becomes a necessity.

The reasons behind white collar criminals going unpunished are:

• Legislators and the people implementing the laws belong to the same class to which these occupational criminals belong.
• The police put less effort into the investigation as they find the process exhausting and hard, and often these baffling searches fail to promise favourable results. 
• Due to the less strict nature of laws, most of the time, the perpetrators go unpunished.
• The judiciary has always been criticised for its delayed judgjudgmentmetimes, it happens that by the time the court delivers the judgement, the accused has already expired. This makes criminals feel free to commit crimes. While white collar crimes are increasing at a faster rate, the judiciary must increase its pace of delivering judgements.

Chronological background

The case of Anonymous vs. The Sheriff of London YB. Pasch. 13 Edw. IV, f. 9., pl. 5 (1473). Popularly known as the Carrier’s Case, it was the first case of white collar crimes that was documented in the year 1473 in England. In this particular case, the agent was entrusted with the responsibility of the principal to transport wood from one place to another. The agent was found guilty of stealing some of this wood. The English Court, after this case, adopted the doctrine of ‘breaking the bulk,’ which means that the bailee who was given possession of goods tried to break it open and misappropriate the contents. 

However, the growth of industrial capitalism has taken criminality to the next level. The bourgeois institution commits such crimes out of greed and misery to attain more than they already have. In 1890 in America, the Sherman Antitrust Act was passed, which made monopolistic practices illegal. The penalties imposed on offenders of white collar crimes in Great Britain and the adoption of competition or antitrust laws by other countries were not as sweeping as the Sherman Antitrust Act, 1890.

In the late 18th and early 19th centuries, a group of journalists raised the sentiments into a mass movement seeking reforms. By 1914, Congress was seen making great efforts in strengthening the sentiments laid down by the Sherman Antitrust Act. This Act proved to be more stringent in comparison to the Sherman Act in dealing with the monopolistic illegal practices. 

In 1939, for the first time, Edwin Sutherland, an American sociologist, while addressing the American Sociological Society, defined white collar crimes. He described it as crimes committed by a person of high social status and respectability who commits such crimes during their occupation. While addressing the American Sociological Society, he tried to shatter the traditional image of criminals and highlighted that crimes can be committed by people of high social strata.

In his work, he vehemently challenged the traditional image of criminals. He described that the white collar criminals are affluent men and belong to a well-respected community. He also stated that the old approach towards criminals was biased and partly incorrect. However, before H. Sutherland, E.A. Ross, W.A. Bonger, and Steffens also highlighted the crimes committed by persons of high social status.

Differential association theory by Sutherland

The differential association theory was propounded by Edwin H. Sutherland, which he provided that an individual learns the values and attitudes of criminal behaviour by way of interaction. The main focus of this theory is on how an individual becomes a criminal. This theory focuses on the process of socialisation, how the people of certain criminal behaviours socialise with each other. In layman’s terms, he thought that a person learns the final behaviour from others by way of interaction and through the process of socialisation. The theory of differential association is a popular concept in the principles of criminology. Sutherland has also provided certain elements to understand the differential association theory. 

In his theory of differential association, Sutherland also pointed out that to be considered a criminal, only acts and the intention to commit such crimes are not enough, and there should be some necessary skills to commit such acts. Those skills could be technical, social and econeconomicr instance, hacking a computer to launder money.

Criticism of Sutherland’s theory

The views of Sutherland were heavily criticised by a few criminologists. They stated that his thoughts on the concept of white collar crimes create a lot of confusion and have various ambiguities. At one time, he stressed the crimes committed by persons of high social status, and on the other hand, he stated the crimes that are committed by persons in the course of their occupation.

Scholars like Paul Tappan, Sheldon Glueck, and JeffJeffreyrence heavily criticised the theory of differential association propounded by Edwin H. Sutherland. Paul Tappan opined that Sutherland did not take into consideration the psychological and biological factors of crime. On the other hand, Jeffrey pointed out that in the differential association theory, Sutherland did not talk about the origin of criminality, and before knowing its origin, crime cannot be learnt from anyone. Sheldon Glueck stated that the postulate given by Sutherland that all criminal behaviours are learnt is incorrect, so some of them are present naturally in the individual.

Coleman and Moynihan pointed out that Edwin Sutherland’s definition had certain ambiguous terms, like:

• It has not laid down any criteria for who these persons of responsibility and status would be.
• Also, “person of high social status” is not clear. It is perplexing, as the meaning of the phrase in law could be different from its general definition.
• Sutherland’s definition did not consider the socio-economic condition of the person. It only showed the dependency of white collar crimes on their type and the circumstances in which they were committed.
• Mens rea, i.e., guilty mind and actus reus, i.e., wrongful conduct, are two essential elements to constitute a crime. However, Sutherland’s definition implies that, according to him, white collar crimes do not necessarily require mens rea. 

Morris’s comments: In 1934, Albert Morris stated that the illegal activities in which people of high social status are involved during their occupation must be brought within the category of crime under which their illegal activity falls. He also asserted that it should be made punishable.

E.H. Sutherland’s demarcation

Sutherland again came up with his theory and clarified that the crimes that would be committed by people belonging to high socio-economic groups during the r occupation would be termed white collar crimes. And further said that the traditional crimes would be denoted as ‘blue collar crime’.

So he drewdistinguishedween white collar crimes, i.e., corruption, bribery, fraud, and blue-collar crimes, i.e., traditional crimes like robbery, theft, etc. After this, criminology in the year 1941 finally recognised the concept of ‘white collar crimes’.

Fraud triangle theory

The student of Edwin H. Sutherland, namely Donald R. Cressey, while pursuing his PhD in the subject of criminology, decided to write his dissertation on embezzlers. He interviewed 200 individuals, and during that time, his research was known as the “Fraud Triangle.” The fraud triangle represents the elements that lead to an increase in fraud. According to the fraud triangle, there is a triangle in which the first leg/edge of the triangle represents pressure or motive, the second leg represents opportunity, and the third leg represents rationalisation. 

Pressure or motive

It is one of the most important elements of the fraud triangle, which could motivate a person to commit fraud and likely increase the risk of committing fraud. The pressure can come from financial, personal or any other problems. 

Opportunity

For a crime to be committed without the fear of getting caught, there should be an opportunity to commit such a crime. 

Rationalisation

It means to justify an act after committing it and to think of yourself as a trusted and honest person. It can be said to be another part of the motivation for crime. It is giving a moral excuse after committing the fraud. 

Fraud diamond theory

The Fraud Diamond theory was propounded by David T. Wolfe and Dan R. Hermanson, wherein it was stated that pressure, opportunity and rationalisation can go with each other; ever, without the capability to commit such fraud, they are of no use. In the fraud diamond theory, the fourth element of fraud was added, which is popularly known as the fraud diamond theory. It was stated that without the necessary skill, the accused or the perpetrators can’t commit fraud. 

Nature of white collar crimes

White collar crimes, as defined by various scholars, are the crimes committed by persons of high social strata and respectability. They commit such crimes under the veil of reputation, which involves conspiracy to commit crimes. White collar crimes differ from traditional crimes in terms of the origin, procedure of trial and punishment. According to some scholars, the nature of white collar crimes is civil, while some say that it is criminal in statutes that deal with white collar crimes are administrative in d the discretion as to whether penal action is to be taken against the person vests in the competent authority.   

The difference between white collar crime and blue-collar crime

The term blue collar crime came into existence in the early 20th century. The term was then used to refer to Americans who performed manual labour. They often preferred clothes of a darker shade so that stains are less visible. Some used to wear clothes with a blue collar. These worked for a low wage on an hourly basis. Blue-collar crimes are the conventional form of crimes committed by an individual or a group of persons, such as robbery, murder, theft, drug trafficking, etc. These types of crimes are more violent and physical; they have been prevalent for centuries and are not new to businesses, professions and industries. 

The difference between ‘blue collar crimes’, which are crimes of a general nature, and ‘white collar crimes’, was laid down by the Supreme Court of India in the case of State of Gujarat vs. Mohanlal Jitamalji Porwal and Anr (1987). Justice Thakker elucidated that one person can murder another person in the heat of the moment, but causing financial loss or committing economic offences requires planning. It involves calculations and strategy-making in a personal capacity. The following are the characteristics of white collar crimes that differentiate them from other crimes:

Meaning

Blue-collar crimes refer to people who work physically, using their hands, whereas white-collar crimes refer to knowledgeable workers who use their knowledge to commit crimes. Blue-collar crimes are the traditional crimes that involve theft, murder, robbery, etc. They are serious in areas where white-collar crimes are considered to be a modern phenomenon. However, it has existed before, but it is less reported, and people are less aware of it. They are generally less serious in taking bribes or giving bribes, corruption; however, they can have a large impact on the economy of the country if committed on a large scale.

New vs. traditional 

Where blue-collar crimes refer to traditional crimes that have been committed for ages, the concept of white-collar crimes has recently developed. It represents a new category of crime. 

Mens rea

To constitute a crime, elements of mens rea and actus reus are a must. Where mens rea is an essential element of blue collar crimes, its involvement in white collar crimes is not necessary. 

Independent of social and personal conditions

White collar crimes have no relattowitoalthoughhe the social conditions, like poverty, or personal conditions of the offender, although it matters in the conventional nature of crimes.

Direct access to the targets

Since the offenders who commit white collar crimes are people in a higher position in a company, they have easy, direct and valid access to their targets. The case is different from collar crimes. For example, if ‘A’ decides to commit theft in the house of ‘B’, then ‘A’ will first have to break the door or make a passage of entrance to get inside B’s house and thereafter commit theft. So, before committing theft, ‘A’ will first have to get access to B’s house. Whereas in white collar crimes, it is being done in a secret manner and by using various tactics so that one can have direct access to their target by using one’s higher position and power.

Veiled offenders

In the case of white collar crimes, one does not have to come face-to-face with the victim, and so their identity remains veiled, for example, adulteration in food items or misbranding of food. Whereas in blue-collar crimes, one has to come face-to-face to inflict injury upon others, for example, robbery, theft, murder, etc. 

Involvement of politicians

In many instances of white-collar crimes, it has been found that the offenders have strong connections with politicians, and sometimes politicians are also involved in taking bribes while committing the crime, thus making it difficult for the victims to take action against such offenders.

Greater harm

The harm caused by white collar crimes is much more difficult to bear than that inflicted by blue-collar crimes. Also, the harm caused by white collar crimes could cause great harm, not only to the public but to other institutions and organisations as well.

Effects of white collar crime

Effect on the company

White collar crimes cause huge losses to companies. In order to recover the loss, these companies eventually raise the cost of their product, which decreases the number of customers for that product. This works according to the law of demand, which states that, other things being equal, when the price of a commodity rises, its demand would fall, and when the price lowers, its demand would increase.

In short, the price of the commodity is inversely proportional to its demand. Since the company is at a loss, the salaries of the employees are reduced. Sometimes the company cuts down the jobs of several employees. The investors of that company and its employees find it difficult to repay their loans, so it becomes hard for people to get their credits.

For instance, as per the report of Economic Times, in 2019, a US-based IT company, namely, Cognizant, ended up paying 178 crore rupees in total for the charges imposed on it under the Foreign Corrupt Practices Act by the Securities and Exchange Commission. The company had given bribes to an Indian government official from Tamil Nadu to permit the building of a 2.7 million square feet campus in Chennai. Apart from the loss in paying a 2 million dollar amount of bribe, the company also had to bear extra charges of 25 million dollars to get free from the charges. 

Effect on the employees

White collar crimes endanger employees. They become conscious of their working conditions, whether they are safe or not. They start doubting if they are safe and if they can still be given their trust by the company.

Effect on customers

The most important concern of the customers is whether the products that they are using are safe or not. This doubt arises to see the rate at which white collar crimes have been increasing.

Effect on society

White collar crimes are harmful to society, for those people who should be cited as moral examples and who must behave responsibly are the ones committing such crimes. The society thus becomes polluted.

As per the reports in Times of India, the former director of Andhra Bank and the directors of a Gujarat-based pharma company, Sterling Biotech, were arrested for their involvement in a Rs 5000 crore fraud case. They withdraw money from the bank accounts of several benami companies. This major scam caused widespread fear among the public.

As per the newspaper report published by Hindustan Times, in 2018, the Punjab National Bank (PNB) found that fraudulent transactions of the value 11,346 crore rupees had been taking place in its Mumbai branch. “The staff there used to fake a LoU (letter of understanding) for the buyer’s credit to the company of Nirav Modi and Gitanjali Group,” as published in the Business World. 

Loss of confidence

Stock fraud or trading scandals, such as those that occurred in the U.S. in the 1980s, make people lose faith in the stock market. As per the newspaper report of the Los Angeles Times, Barry Minkow, a young entrepreneur who owned a carpet cleaning business, built a million-dollar corporation in the 1980s. But he was able to achieve this only through forgery and theft.

He managed to create more than 10,000 counterfeiting documents and sales receipts without coming to someone’s noticing. His company, although created through fraud, was able to make a market capitalization of 200 million dollars and lease 4 million dollars of land. Later, he was sentenced to 25 years of imprisonment. 

The U.S. company Eron, the seventh largest energy trading company, which was based on revenue, went bust when the forgery caused them to write off hundreds of millions of debt from their book. The investors thought that the performance of the company was really good and stable. But later on, it was found that the incredible numbers on revenue records were fictitious. The famous Enron scandal changed American business as it was the biggest scam in the history of America, resulting in huge losses to the stock market and financial fraud.

Effect on offenders

The authorities have shown no consensus on the definition of white collar crimes. Accurate statistics on white-collar crimes are often not available, but this is not the sole reason preventing the government from taking preventive action. Also, though these crimes are on the rise, they are generally not reported.

Basically, these crimes are not discoverable easily as they are being committed by the individuals behind the veil of their reputation and respectability. It means that the offenders commit these crimes while sitting in a closed room or in their personal space using their computers, and nobody can know about what they are doing on their computers.

This makes it difficult to track the offenders. All these loopholes become an incentive for the offenders to fearlessly commit such crimes because the punishment is also short-term, unlike in blue-collar crimes. Offenders are mostly seen roaming freely, which poses a danger to society.

Effects on the temperament of the affected person

The target of the offenders is generally elderly people with little access to liquid assets, and their cognitive ability is less than that of younger people. So they become an easy target for the offenders. Victims of such crimes often undergo depression and are seen to have suicidal tendencies because sometimes the loss incurred is unbearable. 

As per the report of Business Today, the renowned startup founder Vijay Shekhar Sharma, who founded the widely used app for transactions, namely Paytm, became a victim of blackmail by his secretary, Sonia Dhawan. She, along with others, stole his personal data and sensitive business plans to extort money from him. Sharma received regular calls stating that his personal information would be revealed to the public if he didn’t give the required amount to them. The situation places Sharma under significant pressure.

Commission reports on white collar crime in India 

Various committees were formed to look into white collar crimes and set up rules and regulations to prevent them and ultimately eliminate them.

Report on the Commission on the Prevention of Corruption, 1964

In 1962, the then Minister of Home Affairs, Shri Lal Bahadur Shastri, appointed K. Santhanam to preside over the anti-corruption committee. The Santhanam committee was appointed to prevent and check upon the malicious acts of government officials in the system. The said committee, namely the Santhanam Committee, submitted its report in the year 1964. It is considered an important report in the anti-corruption movement. The Santhanam Committee was the first body to recognise the intensity of the crimes committed by the people of high social standards, which was acknowledged by the 29th report of the Law Commission released in 1972. The Santhanam Committee, in its report on the Prevention of Corruption, has talked about the reasons behind the prevalence of white collar crimes in India.

The technological advancement and development in scientific temperament have been assigned as the major reasons behind the growth of white collar crimes. These large numbers with advanced dispositions are being regulated by only a handful of elites who form the monopoly. The need of this technologically and scientifically advanced era is to make these masses adhere to the rules laid down by the elites to conduct them. Those who fail to do so end up becoming the offenders of white collar crimes. 

On the recommendations of the Committee on Prevention of Corruption, headed by Shri K. Santhanam, the Central Vigilance Commission was created in 1964. The Central Vigilance Commission is now the apex institution for vigilance, independent of any executive authority. The primary function of this commission is to address the issues of corruption in government offices and to monitor all vigilance under the Central Government. This organisation also seeks advice in planning, executing and reviewing its vigilance work. 

The role that the Central Vigilance Commission plays is:

1. To supervise the work of the Delhi Special Police Establishment in corruption cases broadly, however, not limited to the Prevention of Corruption Act, 1988.
2. To direct the Delhi Special Police Establishment in discharging the responsibility given to them under Section 4(1) of the Delhi Special Police Establishment Act, 1946.

The committee showed its concern regarding the great damage that these crimes can cause to public morals. The case of white collar crimes is so complex, and since people are not much aware of it, it is only experts can recognise such crimes and protect themselves from becoming victims of them.  

Report on the commission of inquiry on the administration of Dalmia Jain Companies, 1963

In the 1930s, the Dalmia Group, run by brothers Ramkrishna Dalmia and Jaidayal Dalmia, merged with the Sahu Jain Family to form the Dalmia-Jain Group. This business was ultimately split between the two families and again between the two brothers in 1948. On the allegations of corruption against the group, the Vivian Bose Commission of Inquiry into the affairs of the Dalmia-Jain group of companies was set up in 1963.

The committee said that because of the group’s collection of black money, undisclosed assets and undetermined income tax liabilities, the dissolution or split had become so complicated that it could not be officially said that the group had split. The Commission, headed by Justice S.R. Tendulkar and, after his death, by Justice Vivian Bose, sentenced Ramkrishna Dalmia on charges of tax evasion, perjury and criminal misappropriation of funds in 1962.

Report on L.I.C. Mundhra affairs

It was in the 1950s when Haridas Mundhra, a stock speculator, was arrested and imprisoned in the case of the first big financial scandal of the newly independent India. At that time, Jawaharlal Nehru was the Prime Minister of India. His daughter Indira Nehru was married to Feroze Gandhi, who was also a Member of Parliament. Feroze Gandhi was the driving force behind the anti-corruption movement, which led to the imprisonment of Ramkrishna Dalmia; however, his imprisonment was mainly due to financial issues.

Feroz Gandhi was a Member of Parliament and investigated the scandal, but he did not have the executive power to directly question the Life Insurance Corporation. Ultimately, a committee was set up, which was headed by the retired judge of the Bombay High Court, Justice M.C. Chagla, and concluded that Mundhra be sent to jail on the grounds of as many as 124 prosecutions against him and 113 of them resulting in convictions.

The Das Commission Report, 1964

In the case of R.P. Kapoor vs. Pratap Singh Kairon (1965), Pratap Singh Kairon, who was the Chief Minister of Punjab, was accused of using wealth to boost his high status and also of using his family at public expense.  The Commission exempted him on the ground that a father could not be held liable for the actions of his grown-up children. The Commission clarified that a son cannot be stopped from carrying out a business of his choice, except that the son cannot use his father’s political position and power to exploit others. The petition was therefore dismissed by the court.

Report of an administrative commission

The Administrative Reforms Commission’s 4th report titled “Ethics in Governance” made amendments and included new provisions to reduce the number of white collar crimes in India. 

1. The report introduced a new provision stating that partial funding by the state is allowed in elections; however not given specifically in the report. It was done to avoid illegitimate and unnecessary expenditures by political parties.
2. It suggested an amendment to Section 8 of the Representation of the People Act, 1951, keeping people facing charges in cases of grave or heinous crimes and corruption out of participating in elections. 
3. The report on the election of the Chief Election Commissioner and other Election Commissioners decided to form a collegium to select them. The collegium would consist of the Prime Minister of India, the Speaker of Lok Sabha, the Law Minister and the Deputy Chairman of the Rajya Sabha as its members. This would prevent the wrongful exercise of power and prevent manipulation by the authorities enjoying dominance.
4. It was proposed that an office of “Ethics Commissioner” be formed by each House of Parliament. This office of the Ethics Commissioner would be regulated by the Speaker or the Chairman to follow the code of ethics, to advise the body whenever required, and to maintain records of the office. 
5. Most importantly, the Commission asked the government to recognise “collusive bribery” as a special offence. The Commission advanced that Section 7 of the Prevention of Corruption Act, 1988, needs an amendment for the inclusion of “collusive bribery” as an offence. This would prevent the public servants from performing such acts, which would lead to a loss to the public. 
6. The Commission also recommended immediate measures for the implementation of the Benami Transactions (Prohibition) Act, 1988.
7. The Commission has also protected whistleblowers on the grounds of confidentiality. It has also made the acts of harassment and retaliation against them a punishable offence.
8. The Commission said that the media should have a code of conduct and self-regulating mechanism to avert wrongful actions, and the government should be allowed to disclose the cases of corruption to the media to help them fight against corruption in the country. 
9. The Commission made an important decision stating that the head of the office should be given the responsibility to take proactive vigilance on corruption. 

Other provisions were presented by the Commission before the government, thereby assisting the government in its fight against corruption and other malpractices by people in higher positions of authority. 

Law commission 47th report

In 1971, the Sixth Law Commission was set up under the chairmanship of Hon’ble Justice Prahlad B. Gajendragadkar. A total of six reports were submitted by the commission. On 28 February 1972, a report titled “The Trial and Punishment of Social and Economic Offences” was submitted, which was the 47th report of the Sixth Law Commission. In its 47th report, the Law Commission said that since a corporation does not have a physical body, no pain can be inflicted upon it as a punishment. A corporation does not have a mind that can be accused of guilty intent, and therefore, new penalties should be created to punish them for their illegal and wrongful acts.

The Commission found that the real penalty for the corporation would be to experience a curtailment in its reputation. And that they are called a disgrace. The commission said that not only the directors or managers should be punished, but the corporation as well. The people should be able to link the offence with the name of the corporation also. 

The Commission recommended the inclusion of the following provisions in the Indian Penal Code, 1860:

1. In every one of those cases where the offence has been committed by the corporation and the punishment includes imprisonment or fine and imprisonment, the court will have the power to impose on these offenders a fine only.
2. In every one of those cases where the offender is the corporation and the punishment for his offence can be either imprisonment or any other punishment other than fine, then in that case, the court shall have the power to impose on such offenders a fine only. 
3. In this Section, “corporation” should mean an incorporated company or other body corporate. It would also include firms and other associations of individuals.

The Commission also recommended the establishment of special courts that can have expertise over the said matter to deal with the cases effectively. It was also suggested that simplified procedures while handling the cases should be adopted so that the cases are disposed of expeditiously. Further, the Court stated that the punishment for social and economic offences should be increased to create a deterrent effect upon the criminals. 

Like the above-mentioned provisions, the Commission in its report has mentioned the punishment the offender corporation or company would be subjected to.

Types of  white collar crime in India

The ambit of white collar crimes is varied. Some of the white collar crimes that have been reported in India are:

Blackmail

Section 503 of the Indian Penal Code, 1860 (Section 351 BNS, 2023) defines blackmailing or criminal intimidation as making a demand for money or any other consideration by imposition of threat to cause physical injury, or to cause damage to one’s property, or to accuse one of a crime, or to expose somebody’s secret. The threat can be induced in the following ways:

1. By revealing a detail of the person that may be related to their business or any other information that the offenders know, if revealed, will cause great embarrassment or financial loss to the victim. For example, if A, the Managing Director of the company XYZ, knows that B, a female employee of the same company, was bearing the child of somebody other than her husband. A asked B to commit forgery on the account papers so that he could embezzle 20 lakh rupees from the company without anybody knowing about it. If she does not commit to this, he will reveal her secret, which could cause great embarrassment to her as well as to her family. 
2. By revealing personal details of the victim that are sensitive enough to cause financial loss to him. For example, if X knows that the property Y owns has been fraudulently taken over from Y’s parents by deceitfully taking their signatures on the will. X, who is a senior manager of a law firm, asks Y, a junior employee of the same company, to take out the file containing the personal details of the chief secretary of the company from the storehouse of the company. When Y refuses to do so, X threatens to reveal her secret of forgery to the police. X is said to be blackmailing Y. 
3. By doing acts that could falsely accuse the other person of a crime, thereby affecting their life in many ways. For example, when X, an officer at the senior most post, asks her secretary to marry his son, else he would falsely accuse her of embezzlement of 10 lakh rupees from the company, which has been done by X. This is blackmail as a white collar crime.
4. By revealing a report that shows that person’s involvement in a crime. For example, M, the lawyer of N, and an old enemy of his, which N has no idea about, in a murder case, asks him to pay him double the amount else he would give the court the recordings in which M has confessed that he had murdered the person and how he has committed the same. This is blackmailing. 

When does blackmailing become a white collar crime?

For blackmailing to be considered under the ambit of white collar crime, it should be committed by or show an involvement by someone enjoying a higher social status in an occupation. It becomes a white collar crime when the accused obtains or acquires money from the victim by using force or by threatening him. In blackmailing, there is an involvement of the element of threat and causing harm to that person or another person related to them.

Credit card fraud

These frauds are committed when one person commits fraud using the credit card of another person to obtain goods of value, he is said to have committed credit card fraud against the other person. For example, in 2003 in Mumbai, Amit Tiwari, a 21-year-old engineering student, was arrested for using different names. He had many bank accounts with different clients, all of whom falsely managed to defraud a Mumbai-based credit card company, CC Avenue, of around 9 lakh rupees.

This case brought to the notice of the authorities that credit card fraud has not been recognised by the Information Technology Act, 2000. The loophole in the law has caused a great loss to the company. 

As per the report released by the Economic Times, it was found that over 900 cases of credit/debit cards and internet banking have been registered during the period of April to September 2018. All these cases involved an amount of 1 lakh rupees or above. Minister of State for Electronics and IT (2018), S.S. Ahluwalia, informed that the Reserve Bank of India had registered a total of 921 cases of credit/debit card fraud by September 30, 2018. 

In 2017, a Metropolitan Magistrate became a victim of credit/debit card fraud where the victim received two messages for two transactions done from his debit card, not in India but abroad. The victim claimed that those transactions did not have his consent, and a complaint of cheating under Section 420 of the Indian Penal Code 1860 (Section 318(4) of BNS, 2023) was filed. 

In recent times, during COVID-19, there were a lot of attempts being made in order to increase credit card fraud. According to Fidelity National Information Services (FIS), there was a 35 per cent increase in credit card fraud in the month of April. As per the report of Federal Trade Commission data, a total of 5.8 billion dollars have been lost by consumers in the year 2021 due to such frauds.

Currency scams

These scams involve fake or deceptive schemes through which investment in foreign currencies takes place to take money from individuals. According to a report, “Trend and Progress of Banking in India” released by the Reserve Bank of India and published by the Financial Express in January 2019, it was reported that the banks lost 41,168 crore rupees in the financial year of 2018, reflecting a 72% increase from 2017. 

The reason behind the increase in such scams is the fraud against currency schemes. The report cited that fraud has turned out to be a major concern, with a 90% rise in such cases in the credit portfolio of banks, with the major chunk of fraud being concentrated in off-balance sheet operations, foreign exchange transactions, deposit accounts and cybersecurity. At the end of March 2024, a new Reserve Bank of India’s report showed that there is a steady increase in the digital payment fraud of Rs. 1,457 crores.

Common types of currency scams in India

Scams involving advance payment of fees 

In these cases, the victims are asked to make an advance payment of the sum. They would be promised to receive just double what they had invested. But once the money has been given, no trace of the offenders can be found. In these cases, the scammers target those people who have already lost a large amount somewhere. An appeal is made to their sentiment that the amount they are investing would be doubled, and they would be able to recover the loss caused by the last transaction done by them.

The commission of this type of fraud originated from Nigeria. The first case of “Nigeria 419” in India was registered in August 2003, when Piyush Kankaria, a Howrah-Kolkata-based businessman, filed a multi-million fraud case under Section 420 of the Indian Penal Code, 1860 (Section 318(4) of BNS, 2023) read with Section 75(2) of the Information Technology Act, 2002. Section 75(2) of the said Act provides that it shall apply to the offences that have been committed outside India by any person that involves a computer network that is located in India. For instance, an individual, namely Piyush, out of financial crisis, had become a victim of this fraud where he had to claim 7.5 million dollars from an account in return for 3 million dollars, for which Piyush had already advanced a mobile handset as a gift.

Scams in the boiler room 

A boiler room refers to an office that is frequently changed, that is, a temporary office that is not stable and shifts regularly. In these cases, the scammer creates a website that contains false information. The address given on the website would be a temporary one, the toll-free number would be invalid, though all will appear legitimate on the screen. By the time one realises that they have been defrauded, the scammer moves on to another similar scam at some other place. 

In 2019 itself, a person by the name of Rohit Soni, from Rajasthan, who was a B.Com. graduate created a fake Amazon website similar to the original website. He made a profit out of it by providing the customers with a link that gave access to an app named “4Fun”, and for every download for which he received a sum of 6 rupees.

Recently, there have been various types of internet fraud in common variations, including a fake phone call from a tech support employee to tell you that there is an issue with your computer. These fake tech support employees hack one’s computer by saying that there is a virus in your computer and it needs to be solved as soon as possible. During this time, they hack the computer and steal all the personal data of the person. Thus, it implies that white collar crimes can do heavy damage to a company, to an individual, etc. and can take away the trust of people from public institutions.

Exempt securities scam

Exempt securities scam refers to the sale of securities by a company without filing a prospectus. This offence targets wealthy individuals who are persuaded to invest in fraudulent businesses. The offenders pitch a fraudulent investment as “exempt” securities. A fake promise is made to the victim that the business will go public. These scams involve a great risk and make you lose all your investments. 

Scams in the foreign exchange market

In the foreign exchange market, investors buy and sell currencies depending on the exchange rate. These markets are often dominated by large and developed banks that have plentiful resources at hand. The staff in such organisations are well-skilled and trained in using the advanced technology, and therefore it becomes difficult to beat these professionals.

In the foreign exchange market, it is not new to see people becoming prey to the illegal or fraudulent schemes known as forex schemes. Since these schemes are often carried out online from another country, the chance of losing your money is high, as one is likely to buy services from those firms that are not legitimately set up and can market their services ultra vires. It is easy to fake things online. Such scams result in different outcomes which the money one invests might get stolen, and one might lose everything that he had invested.

As per the report published by the Times of India in 2017, the Central Bureau of Investigation has held a total of 13 private companies responsible for sending unknown foreign remittances, which hold the value of 2,253 crore rupees under bogus imports of goods during 2015-2016. 

Similarly, in 2015, the Bank of Baroda was alleged to have been involved in a forex scam worth Rs 6,172 crore. This money was sent from India to Hong Kong for importing cashew nuts, pulses and rice. However, at a later stage, it was found that nothing was imported, and instead, all this money went into 59 different bank accounts of several companies. 

Similarly, in 2015-16, the directors of a Mumbai-based company called M/s Stelkon Infratel Pvt. Ltd., Manish Prakash Shyamdasani and Mungaram Hakmaram Dewasi, were held liable for their indulgence in large-scale illegal foreign remittances under fraudulent imports of goods in 2015-16. 

Offshore investing scams

These scams induce a person to send their money “offshore” to some other country so that they get more money in return than they have invested. These scams mostly aim to exempt a person from paying taxes. But the ultimate result of it is that people end up paying money in back taxes and penalties. The major risk involved in these scams is that the victims in cases of foreign investment are not able to seek remedy from the civil court, and thus, one is not able to recover the invested money.

To look into such a scam, a Joint Parliamentary Committee was set up, which found Parekh guilty of circular trading of money and rigging the prices of 10 companies from 1995 to 2001 on a false pretext. 

Scam against the pension of a retired person

When a person becomes old, they usually open their retirement accounts, where they can keep their savings for the period after retirement from services. Usually, money from these accounts can be withdrawn only after the attainment of a certain age, and only a certain sum of money can be withdrawn in a year, and also some tax is imposed on the money withdrawn. 

Some companies make fake accounts so that they can ask the person to invest in their bank, where they would be able to keep their savings safely. The makers of the company ask the person to buy the shares of the company from their savings, which would be repaid by granting a 60–70% loan from the invested money, and the rest would be kept by the bank as a fee. These promises turn out to be fake, and the investment made is worthless. There is a high possibility of losing one’s retirement savings in totality to such scams. 

In 2009, India Today published a report on pension scams in India. In a report, it was revealed that in Uttar Pradesh, the money that was supposed to be used for giving pensions to 60-year-old people who were below the poverty line (BPL) was being used for different purposes. The said amount of money was given to the younger people to earn 300 rupees per month.

The scheme was meant for the older people from the lower strata of society. Instead, the money was given to the young people by showing fake BPL cards and false age certificates. This helped each beneficiary of the scheme to earn 3,600 rupees annually, half of which was given as a commission to the official who helped the very person in forging the documents. 

Double dip scam

The person who has already been a victim of a scam is likely to become a victim again, and when it happens, it is called a double-dip scam. The offender in the first instance can store the information of the victims and pass it on to other such offenders, thereby assisting them in making money fraudulently.   

The case might also be that the first offender calls you again and you spill out your grudge from the first fraud that you have become a victim of. The scammer then offers to recover your money in return for a small fee. One would again lose one’s money in this way. 

Unveiling the double dip scam taking place within political parties, India Today published a report when politicians were found to have converted black money into white money for 40% commission. The political parties were found double-dipping as brokers for undeclared wealth. There, politicians used to do the business of converting black money into white money near their offices in Ghaziabad, Noida and Delhi. 

Such types of situations where politicians indulge in wrong practices have been very common. The politicians enjoy powerful positions that come with various powers, they tend to manipulate things and make illegal profits, which are the money supposed to be used for public welfare. And ultimately, it is the common people who suffer the most. 

Scam by building a relationship

In such cases, the offender targets a group of people, organisations or communities. The offender in these cases is somebody close to the victim. He builds a relationship of trust with the victim or becomes a member of the same religious community against whom he has committed fraud. After making a relationship of trust, he misuses the faith that people have placed in him, he gains profit by cheating those people. These scams are also called affinity scams.

Ponzi scam

A Ponzi scam is a type of affinity scam where the scammer would, through emails and advertisements, offer one to earn huge profits by sitting in the comfort of their living room, only by investing a certain amount of money. Ponzi scams are to be differentiated from the pyramid scams, however, Ponzi scams share the same characteristics as pyramid scams, as they both involve investors who take advantage of people by promising them extra returns in exchange for money. They also provide exciting and interesting offers; for instance, early birds would be able to make more profits. After investing their money in such schemes, people end up having nothing in their hands as the scammer runs away with the money, leaving behind no clue of their existence to track them.

Cases of the Ponzi scheme:

In November 2018, Gaylen Rust of Utah was accused by the government of running a Ponzi scheme and generating huge wealth. He accounts for 25–40% per year, which is about 47 to 200 million dollars. It was found that more than 200 people had become victims of this scheme.  

In the same year when Gaylen Rust was found guilty, in September, a person by the name of Claud R. Rick Koerber, from Utah itself, was found guilty of running a Ponzi scheme. Under this, the investors in the property had suffered a loss of $100 million. In 2017, Michael Scronic from New York was charged with civil and criminal charges, causing a loss of 22 million dollars to the investors.

Saradha group scam: It is one of the major scandals that happened in the history of India due to the collapse of a Ponzi scheme started by the Saradha group. According to the report of The Indian Express, the prime accused in the said scandal was Sudipto Sen, director and chairman of the Saradha group. The West Bengal-based Saradha group collected around 200-300 billion rupees from the investors, which later collapsed in the year 2013. The Central Government ordered the investigating agencies to start the investigation into this scam. Many state political leaders came into the limelight who were involved in this scam. Political leaders and Members of Parliament like Kunal Ghosh, Srinjoy Bose, the former DGP of West Bengal, and other leaders of the Trinamool Congress were arrested. 

Due to the huge losses to investors and social and political ramifications, the Mamta Banerjee-led government formed a committee under the chairmanship of Justice Shyamlal Sen to investigate the said scam. FIR was also filed against Sudipto Sen and Kunal Ghosh, and an investigation was also taken up into other Ponzi schemes as well. The Justice Shyamal Sen committee, in its recommendations, asked the State Government of West Bengal to sell the Saradha Group’s assets and distribute the money amongst investors who were being deceived. 

There were many public interest litigations filed before the Supreme Court, wherein it transferred all the investigations to the Central Bureau of Investigation (CBI). Lastly, convictions were made in 2014 in which Sudipto Sen was convicted under various provisions of employment law. He was convicted of 3 years in jail by the trial court. 

Pump and dump scam

A company that owns a large amount of low-priced stock, which is an illegitimate business, will find potential investors and persuade them to invest in their stock. As more people would invest, the price of the stock would increase, and when it reached its peak, the scammers would sell all the shares, earn profit and run away, taking with them all your money.

It was in 2015 when Rakesh Jhunjhunwala was said to have raised his wealth by purchasing 2,50,000 odd shares, because of which his shares of the Surana Solar experienced an 18% rise, but after the pump and dump scam was discovered, the prices plummeted. That is how a loophole in the system was also discovered.

Such scams reveal that there is no proper system to check the authenticity of the information being supplied. By taking advantage of such a loophole, Surana Solar made name-making deals easily with the investors, causing them great losses. 

Scams by way of sending spam emails

Often, the scammer sends spam mail, making fake offers and promises. In the year 2017, a record of 7.5 million cases of spam mail was discovered. Once you reply to such emails, you get caught in the trap, as these emails are fraudulent. Most of these emails are regarding microcap stocks, which are highly risky investments compared to other stocks. 

The customers of the ICICI Bank became victims of such a scam where a certain group of people, represented themselves to be an official of the bank. They asked for sensitive information about the bank account and defrauded them. The fraud was discovered by the manager of the bank when a few of the customers who had received such spam mail filed a complaint. 

Act of embezzlement 

The term embezzlement refers to when a person who has been entrusted with money or property to use it for their use and benefit starts using it in any manner other than what it has been given for illegally. The act of embezzlement can be characterised as a criminal breach of trust, which has been defined in Section 405 of the Indian Penal Code, 1860 (Section 316 of BNS, 2023).

It defines criminal breach of trust as an act where a person who has been entrusted with property misappropriates it or falsely converts it to his use or disposes of it without any law allowing him to do so. Embezzlement is a misappropriation of someone’s property where a person has the intent to cause loss to the other person, and criminal misappropriation is an offence under Section 403 of the Indian Penal Code, 1860 (Section 314 of BNS, 2023).

The essential elements that constitute the crime of embezzlement are as follows:

1. The two parties must share a fiduciary relationship, that is, a relationship based on trust.
2. The defendant must receive a certain amount of money or assets by making wrongful use of this relationship.
3. The defendant, while embezzling an asset or money, should act like he is the owner of that good or that he owns the money that he is giving to another person.
4. There should be an intention to deceive on the part of the offender. 

Some examples of embezzlement and the respective sector in which they are committed as a white collar crime are:

1. In the banking sector, the bank employees, who are people directly dealing with the customers, give them access to the funds of the bank for work.
2. The clerks or the cashiers in stores give the customers or any person access to the money kept in the store. Money refers to the money that the bank keeps with it to meet everyday requirements for cash.
3. It is often found that the company provides a car to its senior employees for official work. But these cars are often used for purposes other than official duties, which amount to embezzlement.
4. The big companies, to make their employees technologically advanced, provide them with electronic gadgets, which are either sold in the market for a certain amount of money or used for a purpose other different from what the company has assigned.

Fraud with insurance companies

It happens that people use false documents to obtain insurance from the insurance company. For instance, an individual can fake the price of her property by raising its value on the forged documents and obtain insurance for that amount. They make the papers in such a way that it seems legitimate, and insurance companies get defrauded.

The case can also be that the consumer deliberately staged an accident, theft, injury or any other damage that comes under an insurance policy, and they sometimes exaggerate the damage caused. They usually provide false documents, applications or information to claim insurance. Insurance fraud can be committed by an insurance company, agent or consumer where they deliberately deceive the other person for illegitimate financial gain. 

Two officials of the Life Insurance Corporation of India were arrested for falsely extracting 3 crore rupees as death claims from the company. The scam was not detected until 2018. The officials forged documents; they manipulated around 190 insurance policies with the account numbers of their acquaintances in place of the real nominee. Though the original policyholders were alive, they could not realise the fraud that had been perpetrated against them. 

Relevant legal provisions under the Indian Penal Code, 1860

• Section 205  (Section 242 of BNS, 2023) deals with false personation in a suit or a proceeding. 
• Section 420 (Section 318 of BNS, 2023) deals with cheating and inducing someone to deliver property with dishonest intentions.
• Section 464 (Section 335 of BNS, 2023) talks about making false documents. 

Kick-back fraud 

A kickback fraud is one in which one person bribes another with something of value to convince the other to take a favourable decision. For example, a contractor, to get approval for building a complex, bribes the government official with a promise to give a small part of the land to him. In another example, a biomedical company offers a doctor to advertise its products by advising them to their patients, and in return, the company would provide him with free travel for the next 5 years.

Abhishek Verma, the youngest billionaire at the age of 28 in 1997, known as the “Lord of War”, was the middleman and arrested for his involvement in the Scorpene submarine deal case, the AgustaWestland VVIP helicopter bribery scandal, and the Navy War Room leak case. An amount of 1,100 crore rupees was paid to the decision-makers of the government by Thales, a French-based aerospace company. He was accused of having received kickbacks for a total sum of 200 million dollars. 

Racketeering

It refers to a wrongful act or criminal act of a person where he indulges in illegal business with a profit motive. It is a fraudulent act by which people illegally earn profits by deceiving others through unlawful schemes. 

The number of cases of racketeering has experienced a rise in recent times. A kidney racket case was revealed in 2019, where a businessman from Gujarat, Brijkishore Jaiswal, was about to undergo an illegal kidney transplant, which happened in Hiranandani Hospital in Powai. When the wrongful practice was revealed, the CEO of the hospital, Sujit Chatterjee and five other people were arrested. Recently, the Madras High Court on May 9, 2024, rejected the anticipatory bail application of two individuals who were alleged to have received money from a lawyer in false contexts of providing a job in the judiciary. 

The advocate, namely, J. Vasanthi, filed a complaint against two individuals for taking money of 48.97 lakh rupees on false pretences that there is a vacancy for 16 persons in the courts. It was stated that this case is related to job racketeering, and a further probe into it has started. This crime has been committed in the name of the judicial system of the country. The Madras High Court ordered the police officials to submit a periodical report regarding the investigation. 

Fraud in the buying and purchasing of securities

When the broker of a company wrongfully shows the inflated price of stocks in order to make people invest in his stock, it is called securities fraud. In 2019, Anilesh Ahija, known to the public as Neil, CEO and Chief Investment Officer of Premium Point Investments LP (PPI), was arrested on charges of securities fraud. It is an investment firm that manages hedges, and Jeremy Shor is a former PPI trader.

They collectively participated in a scheme to inflate the net asset value for hedge funds by more than USD 100 million. They started manipulating the funds by raising the value of the securities and thereafter obtained inflated quotes for the PPI, which helped them raise USD 100 million. This real value was kept hidden and got the people into the trap by showing the inflated value of the securities of the PPI.

Fraud over calls

Commonly known as telemarketing fraud, these frauds are made over the phone. In these types of frauds, a person is approached to make an investment for building a charitable organisation, in which the bank account details are being asked to obtain a certain amount for charitable purposes. The amount received is then used for any other purpose other than the one it was taken for. 

Paul Witt, a supervisory data analyst at the Federal Trade Commission, provided information for its consumers, stating that, according to a report on the number of cases of fraud, it has been found that people have lost 1.48 billion in 2018, which shows a rise of 38% from what was in 2017.

In one instance, during the period of 2017-2020, an individual, namely, Zaheen Malvi, was living in Chicago and allegedly involved in a call centre scam. He assisted the Indian call centres to illegally extort money from the citizens of the United States. He used to visit the stores to extort money through depleting gift cards, which were transferred by the people through phone calls.

Bank fraud

Bank fraud is a criminal act where a person, by illegal means, withdraws either money or assets from the bank. Fraud can also occur when a person falsely represents himself to be a bank or financial institution and withdraws money or assets from the people. 

Therefore, we conclude that bank fraud can be committed in two ways:

1. By using illegal means to withdraw money or assets from the bank or any financial institution.
2. By falsely representing oneself to be a bank or any financial institution, the person extracts money or assets from people.

Bank frauds are punishable in India under the various provisions of the Indian Penal Code, 1860, including:

1. i) Section 403 (Section 314 of BNS, 2023), which deals with criminal misappropriation of property, 
2. ii) Section 405 (Section 315 of BNS, 2023), which deals with criminal breach of trust, 

iii) Section 415 (Section 318(1) of BNS, 2023), which deals with cheating, 

1. iv) Section 463 (Section 336(1) of BNS, 2023) deals with forgery, and 
2. v) Section 489A (Section 178 of BNS, 2023) deals with counterfeiting of currency and the crime of fraud in banks. 

Types of bank fraud

Imitating a financial institution

It happens when one person falsely represents himself to be a financial institution, either by establishing a fake bank or a company or by creating a fake website. This is being done for the purpose of attracting people and making them invest in that bank or company. This is said to be a bank fraud.

In 2020, three people were arrested by the Tamil Nadu police for setting up a fake State Bank of India branch at Panruti, Cuddalore district of Tamil Nadu. The main accused in this case was the son of a former employee of SBI who carried forged documents, computer systems and other things with himself to run a fake branch of SBI. The issue came to notice when a customer enquired about the SBI branch of Panruti. After that, the case was booked against the trio under Section 473 (Now Section 341 of BNS, 2023), Section 469 (Now Section 336 of BNS, 2023), Section 484 (Now Section 347 of BNS, 2023) and Section 109  (Now Section 49 of BNS, 2023) of the Indian Penal Code, 1860.

Defrauding using cheques

Offenders in this case obtain a job whereby they could have access to the company’s post offices, mailboxes, corporate payrolls, etc. Once they gain access, they steal the cheques and thereafter deposit them in a fake account created by them.

The timesnownews.com had published a news article asking people to beware of fake emails being sent to them in the name of the RBI (Reserve Bank of India) lottery. The email contained the logo of RBI along with the address of its head office in Delhi. Although the RBI had circulated a warning message against such information. The fake email ID took many innocent citizens into its grip.

Falsely getting loans approved. ed

Sometimes the person who is applying for a loan fakes information on the loan application and provides wrong documents to show himself as eligible for the loan. An individual can also wrongfully claim to be bankrupt after obtaining a loan from the bank. This would also amount to bank fraud. Anuj Pandey was arrested by the M.P. Nagar police for producing false documents and obtaining loans from the bank.

Online banking scams

People often become victims of online banking scams wherein a person may create a fake website representing itself as a financial institution or a bank and advertise in such a way that it lures people to invest in that bank. It includes fake contest schemes nowadays, overpayment messages, fake cheques, etc.

Three persons from West Bengal and Odisha were alleged to have created a fake website named “Rail Vikas Nigam Limited”. The website made a fake representation to people regarding job opportunities. The accused who were arrested were Narayan Patra and Govind Sinha. The victims complained that any information regarding the workings of the company, its achievements, and other advertisements was being reported on the official website, but no recruitments were taking place.  

There has been an unprecedented rise in the number of bank fraud cases, as reported by livemint.com. According to a report by the Reserve Bank of India (RBI), a total of 5,916 cases of bank fraud have been reported in 2017-18 involving a sum of 41,167.03 crores. This included high-profile fraud cases like that of Nirav Modi and Vijay Mallya.

Bribery 

Bribery is a white collar crime where a person asks for money, a favour, or something of value to get the other person’s work done. For example, if an electoral officer asks a person to offer him wine, and only then will he be allowed to give a vote, it would amount to bribery.

The punishment for bribery has been provided under Section 171E (Section 173 of BNS, 2023) of the Indian Penal Code, 1860, which says that any person who commits such an offence would be imprisoned for a term which may extend to 1 year or with a fine or both. Also, Section 13 of the Prevention of Corruption Act, 1988, has penalised acts constituting an offence under this head being engaged in by public officials. 

P.V. Narsimha Rao vs. State (1998)

In the case of P.V. Narsimha vs. State (1998), the issues that came up before the Supreme Court were concerning immunity given to the lawmakers under Article 105(2) and Article 194(2) of the Indian Constitution in the cases of bribery. It was to be ascertained whether the lawmakers can claim immunity based on these provisions. 

The Supreme Court, in its landmark judgment with a majority of 3:2, held that the members of Parliament are immune from any kind of proceedings against them in respect of their vote. The Court stated that the language of these provisions must be construed in a literal manner and widened the scope of Article 105(2) and Article 194(2) of the Indian Constitution. P.V. Narsimha Rao was acquitted of all the charges levelled against him in the bribery case, and due to the nonavailability of sufficient evidence, he was acquitted. 

Types of bribery

Where a public official offers or accepts a bribe

If any public official demands or exchanges something in return for performing his duty, which he is bound to perform within the power of his office, then he would be held liable for bribery under the Prevention of Corruption (Amendment) Act, 1988. If a person attempts to bribe a public officer for his advantage or benefit or to get his work done, then that person, along with the public official, will be held liable.

Where a witness bribes or is bribed

When any witness demands, exchanges, or receives bribery in any form to give false testimony or to bring in a fake witness in court, then they would be held liable under the crime of bribery.

Where a foreign official bribes or is bribed

It is illegal to bribe a foreign government official with money or a gift. Government officials often indulge in this type of white collar crime to maintain important business contacts. 

Bribing bank officials

It is illegal to bribe a bank official, director, manager, etc. with either meals, entertainment, or any other way, either for employment or a hike in salaries. 

Where a sporting official bribes or is bribed

A sporting official may ask for a bribe to fix a match. In this case, both the person offering the bribe and the one accepting it will be held liable for the crime. 

Bribing in an industry 

The act of bribing is often related to industries like the health industry, pension plans, etc. For instance, one pension provider bribes the broker of a company to convince that company to accept its pension offer and not offers made by other pension providers.

Cybercrime

As the use of computers and the internet is increasing, so is the crime related to them. The crimes that involve the use of computers coupled with the use of the internet are called cybercrime. It is where the computer is used as the object of the crime or as a tool to commit an offence. It is a form of white collar crime through which the perpetrators exploit the technology. The only legislation that deals with the offences related to cybercrime is the Information Technology Act, 2000. The exact definition of cybercrime hasn’t been provided in any of the acts or laws, as it is not possible to define such a nature of crime where computers and the internet are involved. Cybercrimes involve tampering with and accessing one’s data without his/her permission. The most common type of cybercrime prevalent these days is copyright piracy. In such kinds of fraud, people download or share the copyrighted data of an individual on the internet. 

Money laundering 

When a person, the launderer, converts his illegal money into legitimate money and thereby succeeds at hiding his illegally earned money, he is said to have committed the crime of money laundering. In India, “Hawala transaction” is the name given to the crime of money laundering. Money laundering has been defined under Section 3 of the Money Laundering Act, 2002. Hawala transactions are a traditional method of transferring money wherein an individual can transfer money from one place to another without moving it physically. The person who is transferring money uses the person, namely “hawaldar”, to the place where he needs to transfer his money to a particular person.

These money launderers do their job in such a manner that not even the investigating agencies can trace the real source of the money. This is how people who invest their black money in the capital market succeed at converting the black money into legitimate wealth. 

Enforcement Directorate vs. M. Gopal Reddy (2023)

Facts of the case: In the case of Enforcement Directorate vs. M. Gopal Reddy (2023), the ED approached the Supreme Court against the decision of the Telangana High Court for granting anticipatory bail to the respondent in a money laundering case under Section 3 read with Section 4 of the Prevention of Money Laundering Act, 2002. In the FIR, it was alleged that the respondent manipulated the bids of e-tenders from various companies. 

Held: The Supreme Court overturned the decision of the High Court and stated that the power given under Section 438 of the Code of Criminal Procedure (Section 397 of Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023) must be exercised cautiously. The Court stated that the provisions of Section 45 of the Prevention of Money Laundering Act, 2002, would apply to this case, and the bail granted to the respondent is not sustainable in the eyes of the law. 

Steps involved in money laundering are:

Investment

As the first step, the launderers invest their illegal money into the black market via agents or banks in the form of cash. This is done either through formal or informal agreements.

Manipulating the details

The second step is to hide the details of the real income of the launderer. In order to do so, the launderers often deposit their money in the form of bonds, stocks, etc., into  a foreign bank. They prefer to invest in those banks that do not reveal the identity or the details of the account holder. This helps in manipulating the information of the owner of the money and the details regarding the source of the money. 

Making what is illegal legal

In the final step, the black money introduced into the market is finally converted into legitimate money and introduced into the financial world.

Cases of money laundering in India

1. BCCI (Board of Control for Cricket in India) was alleged to have laundered 23 billion dollars by introducing itself into the market of arms and drug smuggling. 
2. In the case of Anosh Ekka vs. Central Bureau of Investigation (2011), Anosh Ekka was alleged to have been involved in money laundering as, after becoming the minister, he acquired a huge amount of movable and immovable assets in his name and the name of his family within a short span of 3 years. The Supreme Court held the accused liable for looting and laundering huge amounts of public wealth. He delayed the judgment and also manipulated the evidence against him. He was also accused of abusing the lawmaking process and contempt for the justice delivery system.
3. In Arun Kumar Mishra vs. Directorate of Enforcement (2015), five people created a fake account in the Punjab National Bank (PNB) and thereby collected money as personal gains and caused a huge loss to PNB. The money laundering case was not held in this case, as the offence did not fall under any provision of the Prevention of Corruption Act.  And under Article 20(1) of the Constitution of India, it has been said that ex-post facto laws have no effect. Under the said Article, it is a fundamental right not to be prosecuted by a law that did not exist at the time of commission of the offence. However, the court said that once money laundering has been fully established against the petitioner, the Enforcement Directorate can initiate a fresh proceeding against him under the law that is in force thereafter.

Tax evasion

Tax evasion is when a person deliberately falsifies their state of affairs for the authorities to levy a smaller amount of tax. This can either be done by an individual, a corporation or a trust. It is a false means of escaping government taxes. In simple terms, tax evasion is an offence that is used to evade tax liability. The offence of tax evasion is punishable under Chapter XXII of the Income-tax Act, 1961, which can impose a heavy amount of fine or even send you to jail.

Tax evasion and tax avoidance

Tax avoidance is to be differentiated from tax evasion, as tax avoidance is done by using legal methods to lessen the amount of tax, whereas tax evasion is completely illegal. Tax avoidance is transparent, whereas an individual uses legal methods like claiming deductions or showing false records, which is considered an unethical practice. 

Tax havens

Tax havens are countries that allow the residents of other countries to not pay taxes, and they generally have a stable economic system. This concept was developed after World War II in order to support nations that were weak in terms of economy and also to attract foreign investment. Nowadays, tax havens have become an important tool for the elite and rich people who put their money in tax havens in order to escape themselves from paying tax. 

Tax evasion = (amount of income that has to be reported) – (the actual amount reported)

Penalisation for tax evasion

Failure to file income tax returns

If a person fails to fulfil the requirement of filing the income tax returns as laid down under Section 139(1) of the Income Tax Act, 1961, then a fine of Rs 5,000 or more could be imposed.

For instance, an individual, namely Parbodh Anand sold his flat, which was registered in his own name. The purchaser of the flat gave the amount of money in the names of both Anand and his wife. Since the flat was registered only in Anand’s name,  therefore, the capital gains that his wife had became taxable, which they did not pay and therefore landed up receiving a tax notice. 

Not providing a PAN card or giving a fake one. 

If a person does not provide a PAN (Permanent Account Number) to their employer at the time of employment or provides a fake PAN number, then they would be subject to a penalty of Rs 10,000.

The Economic Times had published a report stating that four men were arrested for running six fake firms that were in a racket of GST evasion amounting to a total of 60 crore rupees. They were alleged to have used various fake documents, including a fake PAN (Permanent Account Number) card. These fake firms generated Rs 615 crore, which led to a huge loss to the general public.

Giving false information under Form 26AS

Under Section 203AA of the Income Tax Act, 1961, one is required to fill in Form 26AS. It is very important to look into the information that has been provided because any wrong information would lead to severe punishment. Similarly, one would be punished even if he/she provided wrong information regarding income, expenses or investment.

According to a report published by the Economic Times, it was discovered that around 15,000 crore rupees were exempted from tax by the employers concerning the medical bills. If an employee desires tax-exempt reimbursements, he is given Leave Travel Allowance and HRA by his employer. Those who have the bills or receipts of the tax-exempt reimbursements can only pay the sum. But those who didn’t have the bills or receipts tend to use fake documents to get reimbursements. 

Punishment for not paying self-assessment tax

If a person fails to pay, either the entire sum or a partial amount, self-assessment tax, then under Section 140A (1) of the Income Tax Act, 1961, they would be considered a defaulter. If not provided with a justified reason for the delay in payment, the assessing officer under Section 221(1) of the Income Tax Act, 1961, may impose a penalty.

In Galaxy Nirmaan Pvt. Ltd. vs. Acit, New Delhi (2017), the assessing officer had levied a penalty on the appellant in the case for non-payment of the self-assessment tax in the year 2010-11. A penalty of 1,09,71,691 rupees was imposed under Section 140A(3) of the Income Tax Act, 1961.  

Giving a wrong account of income to escape tax payment

Section 271(c) of the Income Tax Act, 1961 states that if a person fails to deduct the tax as required by Chapter XVII B or if he pays the whole or part of tax as required by Section 115O and proviso to Section 194B, then in that case the penalty shall levy upon him a sum equal to the amount of tax which he failed to deduct or pay. Section 271AAB lays down the different situations where the penalty would apply.

The article published on Livemint talks about a case where a resident of Haryana was arrested for running a racket where about 90 firms presented bogus invoices to evade taxes. The Directorate General of GST Intelligence (DGGSTI) found a total of 110 debit cards and blank cheque books linked to 173 bank accounts.

Keeping silent on the income tax notice

The assessing officer, under Section 142(1) or Section 143(2), can issue a notice, asking the person to either file the return of income or asking the person to give all the details in writing, in case the person has failed to comply with the notice given to him by the Income Tax Department. 

A Times of India report stated that “Mridula stood shivering outside the magistrate court in Mumbai, for he could have been given rigorous punishment for having defaulted on the notice given by the Income Tax Department for 30 days. The notice was for not having deposited TDS, which she had collected from the employee’s salary. Mridula has a content company wherein 6 full-time employees are dealing with freelancers. The notice of prosecution was sent to her on the ground that she failed to deduct the tax at source under Section 276B read with 278B of the Income Tax Act, 1961.

Cellular phone fraud

Cellular phone fraud refers to tampering, manipulating or making an unauthorised use of cellular phones or services. The offender in this case would make a fake account in your name and get access to your bank account details, credit card details, and make payments without your consent. The offender may even sell your cell phone to other criminals to use it in the commission of illegal acts. The perpetrators adopt various tactics to commit such fraud, which include autoclickers, wherein the person can use the automated methods and emulators, which are the software through which one can access the mobile apps on a desktop. 

The use of the IMEI number of a mobile phone without taking the permission of the person who owns it is punishable with imprisonment for a maximum term of three years as laid down in the Mobile Device Equipment Identification Number, Rules, 2017. This provision has been made in combination with Section 7 and Section 25 of the Indian Telegraph Act, 1885. Where Section 7 gives the DoT (Department of Telecom) the power to make rules for the conduct of telegraph and telecom services, Section 25 says that any person who causes damage to the telegraph lines, machines or any such equipment will be imprisoned for up to 3 years or fined or both. 

According to an article published in the Business Standard, social media frauds, where crooks use stolen identities and credit card details to obtain illegal gains, have increased by 43% in 2018. Using mobile applications, mostly WhatsApp, Facebook, and Instagram, to defraud people has seen a rise of 680% between 2015 and 2018.

This poses a threat to online social media users, and they need to be conscious and careful while using it. There is a need to take proper protection and caution of one’s account and credit card details while providing them online on a website.

Recently, the central government has started a 10-digit number series in order to help people distinguish between fake phone calls and legitimate phone calls. The Department of Telecom has also added the prefix 160 for these 10-digit numbers, wherein can be used by the government agencies for the purpose of communication with the customers. 

Computer fraud

When a computer is used to gain profits by defrauding people, it is called computer fraud. It is punishable under Section 43 of the Information Technology Act, 2000. It penalises the offender by asking him to pay compensation. It can be done via the internet, internet devices or internet services. The following activities amount to illegal use of computers: phishing, social engineering, DDoS, viruses, etc. According to the data provided by the Indian Cybercrime Coordination Centre, a total of 7,000 cyber complaints were being filed daily in May 2024. It was also revealed that people have lost around 1,750 crore rupees during the period of the first four months of 2024.

Various types of computer fraud are

• When mail becomes widely circulated, i.e. hoax mail, and thereafter is used by the crooks for illegal activities via computer.
• When a person tries to access or secure access to another’s computer, computer system or computer network without his/her permission.
• Where the computer is used to download, copy or extract any data or computer database or information from a computer, its system or its network. The information or data under this head includes that data as well, which is stored in the recycle bin folder.
• When a person tries to damage or cause disruption to a computer, the computer system or the computer network.
• Where a person tries to stop a person who has legal or authorised access to a computer from using a computer, computer system or computer network.
• Where a person assists another person in gaining access to another person to operate a computer, a computer system or a computer network.
• Manipulation or tampering of any computer, computer system or computer network, or charging another person for the services availed.
• Where a person diminishes the value of the data by tampering with or manipulating the computer, computer system or computer network.
• Where a person steals, conceals, destroys, alters or causes any person to steal, conceal, destroy or alter any computer source code used for a computer resource to cause damage.
• There can be computers in a company that can be accessed only by a few technical team members. If an employee who is not authorised to use it uses it for personal gain by illegal means, they would be said to have committed a crime.
• When a person, having complete knowledge of how the system of a computer works, tries to set patterns in a data set without being authorised to do so by introducing into the system any spyware or malware, he is said to have committed a white collar crime.
• The news of accounts getting hacked is very common. Hackers often hack accounts to gain access to personal information of the user and then use that information to commit an illegal act.
• It is no big deal for computer experts to introduce into the system any virus that would disrupt its working and cause loss of data to the user.

Counterfeiting

Counterfeiting is a criminal act defined under Section 28 of the Indian Penal Code, 1860 (Section 2(8) of BNS, 2023), where the imitation of something authentic takes place to steal, destroy or replace somebody’s original work. This facilitates gaining profits from illegal transactions and deceiving a person who believes that the representation made to him is true and the imitated work is of more value. 

The crime of counterfeiting is generally related to coins and currencies and is punishable under Section 489B of the Indian Penal Code, 1860 (Section 179 of BNS, 2023). In some cases, it also relates to imitating products like clothes, bags, shoes, watches, art, toys, etc. Counterfeit products carry fake logos and brand names, and in some products, harmful chemicals have also been found, leading to the death of the person using them. 

The cases of counterfeiting coins have experienced a serious rise in India. On 4th July 2019, three people were caught by the Special Task Force of Kolkata upon finding fake Indian rupees with them, whose total face value was rupees 6,50,000. As per the Times of India report, in Rajkot, two people were caught with 1,080 counterfeit currency notes having a face value of 21.60 lakh, as per the Times of India report.

Extortion 

Extortion is a crime under Section 383 of the Indian Penal Code, 1860 (Section 308 of BNS, 2023). When one party coerces another party for payment of money, property or services, he is said to have committed the crime of extortion. It is called a white collar crime because an officer may use his official right and make use of his higher position in the company to threaten another person to give money, transfer property, or provide services. It is not only present in the corporate environment but also prevalent in other contexts as well.

The important elements that constitute the crime of extortion as laid down in the case of People v. Fort (2019) are:

• There should be a communication of demands by one party to another.
• For the fulfilment of the demands, the other party or their family should be threatened to cause some injury.
• There should be an intent to extort money from the other party for some advantage. The other party should be threatened to do or not to do something.

In the case of Dhanajay Kumar Singh vs. State of Bihar (2007), the Supreme Court of India made a clear demarcation between the offences of theft and extortion. The Apex Court stated that in cases of theft, consent is not necessary, and the intention of a thief is always to steal the belongings of a person without the consent of the owner. On the other hand, in extortion, the consent is taken by fear and force, and the belongings or property of the person are taken away by force by putting him in fear of danger or hurt. 

For example, David Letterman, an American television host, was extorted for a sum of $2 million in case of involvement in sexual relationships with female employees. The suspect, Robert Halderman, was later caught and punished.

In another case, a famous actress and model, Cindy Crawford and her husband became victims of a $100,000 extortion case where their daughter’s picture, in which she was tied and gagged, was to be revealed in public if the couple did not adhere to the demands of the suspect.

Fake employment placement rackets

There have been many cases where a student or a person looking for a job has been deceived by offenders who claim to provide placement or jobs to them and later on run away with the money they have taken as an advance to provide them with employment. Section 66D of the Information Technology Act, 2000 states the penalties to be imposed on a person for cheating another person through personation using computer resources. 

For example, Ajay Kolla, the CEO of Wisdom Jobs, was arrested along with 13 other staff in January 2019 on the charge of false recruitment. Wisdom Jobs was an award-winning recruitment firm that was established in 2009. Since then, Ajay Kolla has duped around 1.04 million people, earning nearly 70 crore rupees out of fake placement promises, as reported by the Economic Times. 

Forgery 

According to Section 464 of the Indian Penal Code, 1860 (Section 334 of BNS, 2023), it is provided that a person is said to be making a false document or a false record if he does the following:

Firstly, if he fraudulently or dishonestly 

1. makes, signs, seals or executes a document or a part of that document,
2. makes or transfers any electronic record or any part of it, affixes any electronic signature or
3. makes any mark denoting the execution of the document.

If the said person does this to cause it to believe that such a document was made by the authority of a person by whom he knows that it was not made.

Secondly, if a person without any lawful authority fraudulently or dishonestly alters a document or any electronic record or a part of it and affixes it with his signature by himself or by any other person, irrespective of whether the person is living or dead at the time of alteration.

Thirdly, if any person fraudulently or dishonestly causes any other person who is of unsound mind or under intoxication and is not capable of understanding anything about the content of the document to affix their electronic signature or alter a document.

It is very common in the accounting section of the company where the clerks or the staff make false records and run away with the company’s money, thereby causing loss to the company.

For example, in 2019, Ravi Prakash, CEO of TV9 News Channel, was removed from his post on the charge of forgery. Based on the ABCPL press note, NDTV, in its report, said that Ravi Prakash, to misguide the registrar of companies, had forged the signature of the secretary of the company. It was also alleged that Ravi Prakash, moved by self-interest and bad intention, had filed false cases against the new directors. He convinced the third parties to file false cases against the company, thereby preventing the directors from carrying out their work.

White Collar Crime in other professions

White collar crime in the medical profession 

The problem of the relationship between the doctor and the patient had been recognised long back by the penologists. Manu said that the ones indulging in false practices, for example, where a doctor makes a false diagnosis report, a heavy fine would be levied on him. Removing an immature foetus was considered a heinous crime, and such a person was called to be subject to severe punishment. Nowadays, the practice of taking bribes from doctors for removing foetuses is very prevalent and has been strongly condemned in society. Various legislations deal with the medical termination of pregnancy, which is considered to be an illegal act, and a violation of this would cause penal consequences to the perpetrator.

There have been many cases where the medical practitioner has had no licence to practise the medical profession. The doctor treating the patient had turned out to be a fake doctor who had only deceived the patients by not treating them properly and running away with their money.

Examples of white collar crime in the medical profession could be issuing fake medical certificates, facilitating illegal abortions, or selling sample drugs and medicines directly to the patients or the pharmacists in India. Sometimes, the professionals in the medical field are seen advising criminals on how to escape the allegations using medical grounds.

In Karnataka, two doctors, K.H. Jnanendrappa and K.M. Channakeshava, were charged with making fake medical certifications for Abdul Karim Telgi, who was involved in a multi-crore stamp paper racket to help him get bail on the grounds of health issues in 2002 and 2004. They all have been charged under Section 7, Section 12, Section 13(1)(A) of the Prevention of Corruption Act, 1988, read with Section 120(B) of the Indian Penal Code, 1860 (Section 61 of BNS, 2023).  Therefore, on June 19, 2007, they were both held liable with 7 years imprisonment and a fine of 14 lakh rupees each under the Prevention of Corruption Act, 1988.

Vyapam scam

In the Vyapam scam, the MP Professional Examination Board was asked to examine various courses for recruitment to government jobs. The case concerning this scam was registered in the 1990s, but the FIR was filed in 2000. However, the scam was busted in 2013 when it was revealed that the government officials took bribes from middlemen and applicants to provide them with jobs. It was also revealed that the previous year’s meritorious graduates had impersonated the applicants and given exams on their behalf. 

All of this happened with the help of the board members who were given the duty to conduct such exams. The scam involved big politicians, government officials, medical students, etc. In 2015, the Apex Court of India transferred this matter to the Central Bureau of Investigation (CBI). Finally, in 2017, the Supreme Court in this case gave its judgment and cancelled the licence of 634 doctors by citing it to be immoral behaviour and unethical practices in the profession. 

The white collar crimes are highly prevalent in the medical profession, too, and the growth in such crimes is increasing day by day. The Parliament has introduced various legislation to prevent criminals from committing crimes like organ trafficking, drug trafficking, doctors taking bribes for practising prenatal techniques, etc.

Important legislation against medical scams

Drugs and Cosmetics Act, 1940

The Drugs and Cosmetics Act, 1940, provides for the regulation of the sale, manufacture and production of drugs and cosmetics within India. The Act has a provision given under Section 10A wherein it gives power to the central government to take necessary measures to stop the import of illegal goods or cosmetic products that are unsafe. 

Transplantation of Human Organs and Tissues Act, 1994

The Transplantation of Human Organs and Tissues Act 1994 was enacted to prevent the act of organ trafficking that has been done illegally to earn money. 

White collar crime in the legal profession

Legal practitioners often, for money or other services provided by their clients, present false evidence or fake witnesses in court. Legal practitioners with ministerial support are involved in wrongful practices and violate all their ethical standards for financial gain. Generally, there is a manipulation of evidence and faking witnesses by bringing in professional witnesses who give the case another turn. Because of this, many times the real accused is left free and the innocent is sent to bars. The Advocates Act, 1961, is a significant piece of legislation that provides for the rules and regulations for advocates in the country. It consists of provisions for misconduct if there is a violation of the provisions of this Act. 

D.K. Gandhi vs. M. Mathias (2007) 

Facts

In the case of D.K. Gandhi vs. M. Mathias (2007), a resident of Delhi filed a case against the wrong practices of his lawyer. Gandhi had hired the lawyer for a certain amount of money. The case was settled in the first hearing itself, and Gandhi was to receive the compensation amount. However, the lawyer refrained from giving the amount to his client, Mr. Gandhi, unless an extra sum of 5,000 rupees was paid to him. The matter went to the Delhi Consumer Disputes Redressal Commission by way of an appeal. The Delhi Commission held that the services rendered by a lawyer would not fall within the purview of Section 2(1)(o) of the Consumer Protection Act, 1986. The Delhi Commission stated that this is a unilateral contract, and the authority given by the client to the lawyer was only to represent him in the said matter. 

Revision petition before the National Consumer Disputes Redressal Commission

Later, the complainant, namely D.K. Gandhi, filed a revision petition before the National Consumer Disputes Redressal Commission. The National Commission referred to the case of Jacob Mathew vs. State of Punjab (2005), wherein the Supreme Court had said that, in the law of negligence, the professionals from different professions like legal, medical, or architecture, or any other would be held liable for negligence in practising their profession if either of the two given conditions are satisfied: 

• He did not have the required skill that was needed to be proficient in, and,
•  Even if he has the required skills to be professed, he did not exercise them. 

The National Commission gave the order in favour of the complaint and held that lawyers do come under the ambit of services rendered under the Consumer Protection Act, 1986. The matter was sent back to the Delhi Consumer Disputes Redressal Commission to decide the matter on merits. 

Appeal before the Supreme Court

However, aggrieved by the said order of the National Commission, a group of lawyers filed an appeal before the Supreme Court. The matter was not decided till 2024 and left for further clarification by the Apex Court. 

White collar crime in the engineering profession

Engineers, like mining engineers, are often found to be involved in malpractices like providing substandard work and materials and also not maintaining the records or maintaining bogus records. These types of scandals are often reported on news channels and cause huge losses to the company.

In April 2019, India Today reported that an assistant engineer named S.F. Kakulte was arrested for negligence because of which a bridge had collapsed. Along with Kakulte, four other engineers and the chief engineer of the Bombay Municipal Corporation were involved in the project. The structural auditor, Neeraj Desai, was also arrested for negligence in the report. He claimed that beams, pillars, and metal fixtures were audited, but the concrete slabs were not mentioned in the inventory given to him for the audit. As a result of all this negligence, six people had died and thirty-five were seriously injured.

White collar crime in education

Many private educational institutions involve themselves in false practices like using fictitious documents and fake details in order to obtain grants from the government to run their institutions. The teachers and staff are often seen to be working at very low wages lower than the signed amount. These false practices help the institution raise a high sum of illegal money.

It was in 2019 when the New India Express reported that a senior railway ticket checking staff member was arrested by the Central Crime Branch for leaking the question papers of the exams for the posts of constables and sub-inspectors in return for money. 

It was in 2013 when the Times of India published an article stating that the Gujarat Technological College had been appointing engineers for lectureships who were not even qualified with a B.Tech degree. Yogesh Patel, who was a lecturer of civil engineering at S.R. Patel Engineering College, which is affiliated with Gujarat Technological University, had not even cleared his bachelor’s degree.

He had failed in some subjects like applied mechanical and earthquake engineering. And he even went to check papers and also received remuneration for his work. An inquiry was conducted into how a person who is ineligible for the post of ad hoc, that is, temporary, lecturer was appointed for teaching purposes. 

Public Examinations (Prevention of Unfair Means) Act, 2024

On 21st June 2024, the Union government declared the implementation of the Public Examinations (Prevention of Unfair Means) Act, 2024, to prevent the use of unfair means in the public examinations. The Act was passed to ensure credibility during the public examinations and to combat the menace of cheating in such examinations. 

Causes of white collar crime in India

India is a country faced with various problems on a serious level, like that of starvation, illiteracy and health issues on a large scale. Moreover, India is the most populated country in the world, and the administration of the masses becomes a problem. Despite having stringent laws, the administration often fails in implementing them, as keeping control of such a large number of people becomes difficult. In such circumstances, white collar crimes will likely flourish. The various causes for the growth of white collar crimes in India are as follows:

1. The white collar crimes are committed by people who are financially secure and perform such illegal acts to satisfy their wants. These crimes are generally motivated by the greed of the people.
2. Poverty is considered a major cause of underdevelopment in India. Poverty causes financial and physical duress among a large portion of the population. Since people are so much in need of money, they are easily attracted by the false representations made to them. They forget to look into the veracity of the representations being made to them.
3. The gravity of white collar crimes is more intense than other traditional crimes. White collar crimes cause one great loss at all levels, i.e., financial, emotional, etc. Corporate mishaps, like false pharmaceutical tests, cost more lives than the crime of murder.
4. Due to the increase in use of technology, the faster growth rate of industries, businesses, and political pressure, the offenders have been introduced to newer, easier and swifter methods of committing such crimes.
5. With the rise of the internet and digital world, where big transactions take place within seconds and where reaching out to people from all over the world is a matter of a few minutes, criminals have an incentive to commit more crimes and hide anywhere in the world.
6. Our law enforcement agencies are also reluctant to deal with such crimes, as these cases are very complicated and tracing a suspect is difficult. The investigation in cases of white collar crimes is much more time-consuming as compared to traditional crimes.
7. Even when the offender of the white collar crime has been caught, the judiciary fails to punish them. The major reasons behind the failure to hold these criminals accountable for their wrongful acts are:

• The legislators and the ones implementing the laws belong to the same group or class to which the offender belongs and therefore often assist these criminals instead of taking actions against them.
• Due to the unwillingness of investigating officers to do their job, they are not able to connect the small evidence that they get. Despite making efforts, they don’t get major evidence in such cases, as everything is done online and tracing things or people becomes difficult.
• Due to the lack of stringent and effective laws on such types of crimes, offenders are left free. In many cases, due to loopholes in the law, it becomes favourable to the offenders.
• The existing laws do not provide stringent punishment that would prevent people from being involved in such crimes. The suspects do not have any incentive not to participate in these types of crimes.

It is disappointing to know that despite white collar crimes being prevalent in society and many people getting under its grip, no measures are being taken to prevent the commission of such crimes. The reason behind this is that white collar crimes are committed by influential people who enjoy higher social status.

White collar crime investigation

White collar crime investigation process

There has been a recent growth in the investigation process of white collar crimes in India. Due to the increase in anti-corruption marches, the companies are having an increase in periodic investigations. These internal investigations act as a watchdog against any unwanted activity. This further prevents the company from embarrassing raids. In India, there are no stringent rules or procedures that need to be followed while conducting these internal investigations relating to white collar crimes. 

According to the report published by NDTV, the CEO of ICICI Bank, Chanda Kochhar, was facing charges of fraud, and the bank resorted to an internal investigation by the Reserve Bank of India, the Securities and Exchange Board of India, and the Central Bureau of Investigation. To look into the matter, an independent committee was set up that was headed by a retired Supreme Court judge, Justice B.N. Srikrishna. As per another report of Hindustan Times, Chanda Kochhar was also alleged to be involved in a money laundering case of 1,875 crore rupees that she gave to the Videocon Group. The Enforcement Directorate filed a complaint against Chanda Kochhar and eight other corporates in 2020 for being involved in the money laundering case. In the First Information Report (FIR) of the Central Bureau of Investigation, it was alleged that ICICI Bank gave a loan of 1875 crore rupees to the Videocon group during 2009-2011. She and her husband Deepak were arrested by the Central Bureau of Investigation. However, in 2023, Chanda Kochhar was granted bail by the Bombay High Court in the said case.

White collar crime investigation techniques

There are a few basic techniques for the investigation of white collar crimes, and they are:

1. There should be an informant in the team who would give first-hand information about a white collar crime taking place or having taken place in a company. It should be done to keep the investigating officers updated with all that was, is or will be going on in the company. Unless and until the information goes to the police about the crime, no investigation shall commence. Therefore, informants play a crucial role.
2. Involvement of undercover agents is important as they help in tracing the evidence that is not prima facie evidence. They also help in giving information regarding people who go underground and then commit serious offences. Since tracking such people is not possible by the police officers, they appoint undercover agents who, without any hint to the accused, get all the details about him.
3. Police officers are often seen conducting physical surveillance and electronic surveillance through CCTVs or tracking call records. These surveillances help in tracking down even the smallest of evidence against the suspect. 
4. By way of interrogation, it becomes easy for the police officials to extract the information from the suspects that they would not have otherwise obtained.
5. Wiretapping, where the law permits it, helps in proving guilt by way of producing call records in court. In some cases, call records are sufficient evidence to hold a person guilty of an offence. 

Legislation dealing with white collar crime in India 

Several provisions exist for identifying white collar crime. The government, to ensure that the criminal committing white collar crime is not unpunished, has brought in the following legislation:

1. The Companies Act, 1960
2. The Income Tax Act, 1961
3. Indian Penal Code, 1860
4. The Commodities Act, 1955
5. The Prevention of Corruption Act, 1988
6. The Negotiable Instrument Act, 1881
7. The Prevention of Money Laundering Act, 2002
8. The Information Technology Act, 2005
9. The Imports and Exports (Control) Act, 1950
10. The Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992
11. The Central Vigilance Commission Act, 2003

Some important legislation and its flaws 

Fugitive Economic Offenders Act, 2018

The Fugitive Economic Offenders Act, 2018, was passed to streamline the process of dealing with offenders who seek asylum in countries outside India. It came into being to account for the damage done; their properties and assets are confiscated, but the problem lies with the fact that this legislation only deals with accountable money of at least 100 million. What about crimes committed by people for an amount of less than 100 crores? Are they not liable? Or is the government not willing to be strict enough for them? This seems to be a grey area because it neglects crimes that include smaller amounts of money, which could also allow them to evade law and order.

Prevention of Money-Laundering Act, 2005

The Prevention of Money Laundering Act, 2005, has helped curb money laundering domestically, and it has also been stretched further beyond borders to curb money laundering-related activities due to strict foreign exchange regulations. Similar to most white-collar crimes, this involves a large number of people. But with the rise of technology, it has simplified such tasks and turned out to be more complex and digital. Now, with the accessibility of the cryptocurrency platform, a new form of money laundering has emerged where criminals can move funds easily online across the entire world with just a click of a button. Due to the lack of relevant legislation, we cannot keep up with these technological advancements.

Prevention of Corruption (Amendment) Act 2018

The Prevention of Corruption Act was passed in 1988 to curb corruption in India, and with its recent changes in 2018, it has proven to be more effective. However, the cost has been making the trial a longer procedure and the requirement to procure a sanction to initiate a probe into a public servant. Furthermore, the burden of proof is now on the prosecution, and in some cases, where corruption is usually committed by higher officials, it acts as a shield for them.  The long procedure also would allow them to figure out loopholes, which makes it easier for such offenders to go unpunished in some cases.

Indian Penal Code, 1860

Although the Indian Penal Code, 1860, covers different aspects of crimes and offences, it does not fully cover white-collar crimes, which are vast. However, it covers crimes like forgery, corruption, bribery, counterfeiting, etc. For example, under Section 465 (Section 336(2) of BNS, 2023), punishment for forgery of documents shall be punished for a term of up to 2 years. This may be inadequate since in recent times, these can be said to be grievous, and our social and economic system has evolved to such an extent that the IPC is falling behind and may not be able to meet the current needs. Now, Bharatiya Nyay Sanhita 2023 has replaced the Indian Penal Code, 1860, which also provides for the same offences as have been provided under the IPC. 

Penalties for white collar crimes

Sentencing in white collar crime in India

Punishment for fraud

Section 447 of the Companies Act, 2013 provides punishment against the commission of fraud. It states that in case a person is found guilty of an offence of fraud, he would be imprisoned for a period not less than 6 months, which extends up to 10 years. And he will also be subject to a fine, which should not in any case be less than the amount involved in fraud and which may extend to three times the amount involved in the fraud. In case the fraud has been committed against the interest of the general public, then the term of imprisonment would not be less than 3 years.

Punishment for a false statement

Section 448 of the Companies Act, 2013 states that if a person deliberately makes a false statement, knowing it to be false, or deliberately omits any material fact, knowing it to be material, then he would be held liable for his wrongful act. This false statement can be made either through a return, report, certificate, financial statement, prospectus, statement or any other documents required for the purpose mentioned under this Act or any rules made under it. 

Punishment for furnishing false evidence

Section 449 of the Companies Act, 2013 provides for punishment for furnishing false evidence. It states that if any person gives false evidence in a court of law:

• Either upon an examination on oath or solemn affirmation; or
• When any company is about to dissolve or otherwise, in case of any matter arising under this Act, in any affidavit, deposition or solemn affirmation,
• He shall be punished with imprisonment and a fine. The imprisonment will not be less than 3 years and may extend to 7 years. The fine may extend to 10 lakh rupees.

Punishment when no specific punishment or penalty has been provided

Section 450 of the Companies Act, 2013 states that in case a punishment or penalty for a crime has been committed either by an officer of a company or by any other person who contravenes any of the provisions of this act. In that case, the person shall be punished with a fine, which may extend to 10 thousand rupees. In case the contravention continues, the person would be asked to pay a fine, which may extend to 1,000 rupees every day till the contravention continues. 

Implications of white collar crime in India

The rate at which white collar crimes are increasing has become a matter of concern globally. It has been found that the detriment that white collar crimes cause to society is much more than other forms of crime. Moreover, India is a developing nation, and so an unprecedented increase in white collar crime hampers its image, along with being a hazard to the growth of its economy.

Moreover, white collar crimes cause emotional trauma, not only to the victims of the crime but to society at large. When the victim is not able to bear the expenses of the white collar crime that he had evidence of, society starts losing faith in the authorities. If the authorities in higher positions, who have enormous powers, start wrongfully using them, then who else will the citizens trust? 

Also, as these crimes are flourishing all over the country, people don’t find themselves secure anywhere, neither in the physical world nor in the virtual world. Where people were introduced to the digital world to avoid tiring jobs like standing in the queue to deposit or withdraw money from the bank, and reduce other sorts of physical labour, it has not become the biggest platform for the commission of white collar crimes. Nowhere do the people find themselves safe.

Above all, despite several movements against the white collar crimes and instituting several rules and regulations via enactments, the government has not been able to do much for the victims of the white collar crime. The complicated nature of the method of committing such crimes makes it difficult for the authorities to find evidence. That is why many criminals move freely, and this has become the main reason for crime to flourish. The criminals don’t find any incentive to commit such crimes, which helps them make easy money.

Moreover, people sitting in a higher position who commit such crimes buy the media persons or threaten them to close their channel to stop the media coverage of their wrongful or illegal acts that they commit or have committed during their occupation.

Judicial pronouncements

SEBI vs. Burman Plantation and Others (2013)

In this case, Sebi vs. Burman Plantation and others (2013), the learned counsel on behalf of SEBI before the High Court of Allahabad claimed that the company is being wrongly accused, as the company was not in a position to pay its debts, including payments to its investors. When the advertisement by the company was put to question, the council said that the advertisement was given in 2003 while the order was passed in 2004, when the company was not in a position to pay back its debts.

Moreover, the sum of money which the investors were claiming was nowhere cited. The main claim of the counsel was that the legislature raised the punishment from 1 year to 10 years and also increased the fine, which may now extend to 25 crores by amending the laws under Section 24(1) of the SEBI Act. At last, Ravi Arora, the accused, was held liable.

Abhay Singh Chautala vs. CB.I. (2011)

There were two appellants in the present case of  Abhay Singh Chautala vs. C.B.I. (2011) against whom a charge sheet was filed for committing an offence under Section 13(1)(e) and 13(2) of the Prevention of Corruption Act, 1988 read with Section 109 of the Indian Penal Code, 1860 (Section 49 of BNS, 2023) in separate trials. It was alleged that both the accused had accumulated disproportionate wealth as per their income when they were members of the Legislative Assembly.

When the Central Bureau of Investigation (CBI) initiated its investigation, it was found that the father of the appellant had acquired huge properties, as was the case with the appellants. The High Court held that the appellant had provided a different office(s) of the accused than they were holding at that time. Thus, the sanction under Section 19 of the Prevention of Corruption Act, 1988, was held to be without any merit. 

Binod Kumar vs. State of Jharkhand & Others (2011)

In this case, Binod Kumar vs. State of Jharkhand & Others (2011) was filed against several ministers of the State of Jharkhand, along with the Chief Minister, for having possession of unaccounted money. The High Court had requested the Central Government to transfer the case from the Enforcement Directorate to the CBI by way of power given to it under Section 45 (1A) of the Prevention of Money Laundering Act, 2002.

It was alleged that the ministers had hefty amounts of money, and though no evidence was found to charge them with money laundering, a strict investigation was proposed. The ministers were said to be the owners of property not only in India but abroad as well. Therefore, the court asked for an investigation to determine whether this wealth was acquired by making use of the official position. It was to be clarified if a white crime had been committed under the Prevention of Corruption Act, 1988 and under the Indian Penal Code, 1860.

The CBI started its investigation under the Prevention of Corruption Act, 1988 and the Indian Penal Code, 1860, as the power to carry on investigation under the Prevention of Money Laundering Act was only with the Enforcement Directorate, which is of course subjected to the power given to the Central Government under Section 45 (1-A) of the Prevention of Money Laundering Act.

Measures to curb white collar crimes

The measures that can be adopted to prevent the commission of white collar crimes are:

1. The top investigating agencies of the country, like the Central Bureau of Investigation, the Enforcement Directorate, the Income-tax Department, the Directorate of Revenue Intelligence, and the Customs Department, need strengthening by way of implementing strong regulating policies. The Central Vigilance Commission should monitor the working of the officials sitting in top positions and also cross-check their work to ensure transparency in the system.
2. As the method of commission of such white collar crimes is advancing, so should the training of the investigating officials. It often happens that ageing officers are well experienced to understand the nature and techniques, but are not able to utilise the technology for tracking the suspect. This happens due to a lack of training. So, every investigating officer must be trained in such a manner that, no matter how complicated the case is, they would be able to easily resolve it.
3. To uproot the existence of such crimes, it is very important to include strict laws in the system. Less of a fine and a shorter period of imprisonment make it very casual for the offenders to commit such crimes. 
4. Fast-track courts and tribunals should be set in all parts of the country for the early disposal of these cases. The tribunal should be provided with the power to fine or imprison someone who has been found guilty. Such measures would lower the rates of occurrence of white collar crimes.
5. The electronic and print media should be utilised in the right way to spread awareness about white collar crimes. The general public needs to be aware of such crimes and that they are taking place everywhere, from small cafes to big multinational companies.  Also, they need to be aware of the remedies they could seek in case they become victims of such crimes.
6. Stringent laws a hefty fine, and long term imprisonment should be given to the offenders for committing such crimes. And for this to happen, the Indian Penal Code, 1860, should be amended and include provisions for white collar crimes. For example, the IPC could have a separate chapter dealing with white collar crimes.
7. The government may establish a separate body that would look into the matter of crimes and criminality prevailing in the country. The independent body could be named the National Crime Commission. Since their entire work would be related only to the crimes and would be an independent body, it could work more efficiently towards reducing criminality in the country.

Major Indian scandals on white collar crimes 

Bofors scandal (1986)

In 1986, the Indian Government, when Rajiv Gandhi was Prime Minister, decided to purchase a 155mm field Howitzer gun for the Army from a Swedish company, namely AB Bofors. The government led by Prime Minister Rajiv Gandhi was heavily criticised for making such a deal. Ottavio Quattrochi, a close friend of the Gandhi family, was the middleman in this deal. The deal was signed for Rs. 1,437 crores. An FIR was registered against certain individuals from India and from abroad who were alleged to be involved in criminal conspiracy, cheating and forgery in the said deal with Bofors. 

The charge sheet was also filed against Ottavio Quattrochi, the Hinduja brothers and other persons. Quattrochi left India and fled to a foreign country; other persons died during the time of the investigation. The Bofors scandal was a huge scam but resulted in disaster for the Indian economy. The case went on for a long time, but due to the lack of evidence and proof, it ended with nothing in hand. 

Harshad Mehta scam (1992)

Harshad Mehta, a stockbroker in the Bombay Stock Exchange, lived a lavish lifestyle with a 15,000 sq. feet apartment with a golf court. He used to buy large shares in the stock market, due to which he was known as the “big bull” of the stock market. Sucheta Dalal, a Times of India editor, exposed the illegal methods Mr. Mehta used in the stock market. This scam is considered to be a massive loss for the stock market that resulted in a severe market crash and a huge loss to the Indian economy.  Mr. Mehta used to get issued bank receipts from the banks without holding the securities, and he obtained funds from banks by using such fake bank receipts. 

Instead of using such money for security purposes, he transferred it to buy shares in the stock market. One instance of such is the stock of Associated Cement Company, wherein in a few months he diverted the stock price of the said company from Rs. 200 to Rs. 9000. The former governor of the Reserve Bank of India, namely, Sri Venkitaramanan, faced severe criticism for not having control over the banks and due to the economic loss to the country. 

Major politicians were directly implicated in connection with the scam. After this huge scam of Rs. 4000 crores, the stock market crashed immediately, resulting in a fall of 43%. Vijaya Bank’s chairman committed suicide as he knew that he would get arrested if people came to know about his involvement in the said scam. Many cases were filed against Harshad Mehta, but in 2002, he died. After the death of Harshad Mehta, the cases pending against him did not get finalised. 

Hawala scam (1991)

It was a political scandal wherein some politicians received payment from Hawala brokers, namely, the Jain brothers. A total sum of 65.47 crores was involved, of which 53.5 crores were illegally transferred from foreign countries by way of hawala channels. In this scam, many politicians were also implicated. Lal Krishan Advani, the famous politician, was also the main accused in the scandal; however, he and others were acquitted in 1997. The Court found that the records of Hawala could not be considered as evidence as they are not adequate and reliable. The Central Bureau of Investigation was widely criticised for prosecuting the political leaders without sufficient proof.  

Satyam scandal (2009)

The Satyam scandal was also one of the biggest scandals in India and involved a large amount of money of 7,800 crores, which later turned out to be around 12,320 crores. The management of Satyam Computers deceived the market by influencing the financial wealth of the company. The people involved in this scam were the founder of Satyam, namely, Ramalinga Raju, his brothers Suryanarayana Raju and Rama Raju, and the internal and external auditors of Price Waterhouse (PWC). 

There were a total of  8 people involved in this scam. The facts with respect to the company’s books and accounts were misrepresented, and it was not discovered for 7-8 years.  The financial statements of the company were only known to Ramalinga Raju and his 8 other colleagues. Around 7,000 fake invoices were generated in the computer-generated system, which never existed. 

The scam was discovered when Satyam Computers merged its business with a company, namely Mytas, in 2009, which was operated by Ramalinga Raju’s family members. He accepted the fact before the stakeholders that the accounts were manipulated by him, involving 7000 crore rupees. The World Bank stopped the company from carrying on its business due to the serious charges of bribery and data theft.  

The Indian government took a lesson from this biggest corporate fraud and abolished the old Companies Act, 1956. The Indian government came up with new legislation, namely the  Companies Act, 2013. The term corporate fraud was made a criminal offence in the new Act. The Securities and Exchange Board of India (Issue and listing of Municipal Debt Securities) Regulations, 2015 were also enacted to form criteria to report actual accounts and to detect fraud. An authority, namely, the Serious Fraud Investigation Office (SFIO), was also being constituted as per the provisions of the Companies Act, 2013. 

Stamp paper scam (2003)

Abdul Karim Telgi was a fruit seller on the trains in India; later, he went to Saudi Arabia for some time. He returned to India during the 1990s after 7 years and started counterfeiting by making fake passports and forged documents. Abdul Karim Telgi was accused in the stamp paper case in India, where he appointed 350 fake agents to spread the scam around 12 states. This business included selling stamp papers to banks, insurance companies, and those firms that dealt in stock brokerage. He was able to club around 200 billion rupees. The scam was discovered in 2000 when two individuals were interrogated at Cottonpet, Bengaluru, as they were carrying fake stamp papers with them. 

Meanwhile, Telgi absconded from the sport after the scam was discovered. The Financial Times report revealed that in the years 1990, 2002 and 2003, 12 cases were already registered against Abdul Karim Telgi. The case was filed against Telgi, and the Central Bureau of Investigation (CBI) also framed charges against him in 2004. He went to prison, but it was revealed that in 2017, he was still committing his illegal acts from jail. Two prison officials were also convicted by the High Court for giving Telgi access to mobile phones. In 2017, due to various organ failures, Abdul Karim Telgi died at the Bangalore hospital. 

Punjab National Bank Scam (2018)

This is one of the biggest scams that happened in India, wherein Nirav Modi and his uncle Mehul Choksi fraudulently syphoned off 14,000 crores from the state-owned bank, Punjab National Bank. This scam not only triggered the political upheaval in the country but also caused a significant loss to the Indian economy. The Punjab National Bank filed a complaint against Nirav Modi and against the companies in whose connivance he had committed such a big fraud. 

Vijay Mallya scam (2017)

There were allegations of money laundering against Vijay Mallya, wherein it was speculated that Vijay Mallya had transferred the loan money that he had taken from the banks to the tax havens. He had taken the help of shell companies that were located in countries including the United Kingdom, the United States, Ireland and France to launder the said loan money. Mallya fled from India after the said scam. 

An anti-corruption court in Mumbai, at the request of the Enforcement Directorate (ED), declared Mallya a fugitive economic offender (FEO). He was the first businessman to be declared a fugitive economic offender. Presently, he is living in the United Kingdom, where he is defending himself against the extradition proceedings by the Indian authorities. He has also filed for asylum in the United Kingdom after using all legal defences.  

Conclusion

White collar crimes have two surprising features: first, that they are non-violent crimes, though the criminals tend to gain control or have a sense of entitlement, and second, that they are committed by people in higher professions. However, these crimes are also committed by poorly paid underlings, although the masterminds behind the commission of such crimes can also be rich people enjoying a higher social status in their occupation. White collar crimes are often committed because of peer pressure or are dependent on the culture of the company.

As our society is growing towards modernity and the world is experiencing new technological advancements, the rate of crime is also increasing at a faster rate. Particularly, the growth in white collar crimes has been enormous. From the medical profession to educational institutions, these crimes are being committed everywhere. The cases of online fraud are also increasing at an alarming rate. India, as a developing nation, has faced difficulties in leading its economy towards growth because of these crimes in general and corruption in particular. 

The investigating officials are in need of training where they could acquire the skill to trace these criminals; otherwise, tracking them is a difficult, complicated and tiresome job. The investigating officials’ work should be scrutinised to ensure transparency in the work, as white collar crimes are committed by people enjoying higher social status in their occupation.

The government must make laws that are strict enough to reduce the commission of such crimes. And the system should be such that not only do there exist laws giving strict punishment to the accused, but also dispose of maximum cases in a short while. If not done so, then people will soon lose complete faith in the system, as these crimes are committed by people who should act as role models for society. 

The media has a key role to play in reducing the rate of white collar crimes. It has been noted that most of the white collar crimes go unreported. So, if the media becomes more active towards publishing frauds and scams at higher levels and revealing how the people in higher positions in a company use their powers arbitrarily and also make efforts in making people aware of the white collar crimes and avoiding corrupt practices, then this would help in reducing the rate at which the white collar crimes are being committed.

Frequently Asked Questions (FAQs)

What is the 10-80-10 rule under the Fraud Triangle theory?

According to the 10-80-10 rule of the Fraud Triangle theory, it shows that 10% of people would never commit fraud, 80% of people might do that if they get all the necessary elements, which are pressure/motive, opportunity and rationalisation. Whereas, 10% of the population would commit fraud if they got an active opportunity. 

References

• Para 4; A.I.R. 1987 SC 1321

• 1964 A.I.R. 295 SCR (4) 224

• https://www.indianbarassociation.org/wp-content/uploads/2020/01/White-Collar-Crime-Survey-2019.pdf 

• https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/assurance/forensic-investigations-compliance/the-changing-dynamics-of-white-collar-crime-in-india.pdf 

• https://ijcrt.org/papers/IJCRT2008234.pdf 

• https://www.ndtv.com/india-news/icici-bank-ex-ceo-chanda-kochhar-husband-deepak-kochhars-arrest-by-cbi-amounts-to-abuse-of-power-bombay-high-court-5087762 

• https://www.latimes.com/archives/la-xpm-1989-03-28-mn-666-story.html 

• https://economictimes.indiatimes.com/tech/ites/cognizant-agrees-to-pay-25-million-to-settle-secs-bribery-charge/articleshow/68018171.cms 
• https://indianembassynetherlands.gov.in/page/ease-of-doing-business-in-india/

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