Briefly, the Supreme Court while analyzing certain provisions of the Indian Penal Code has inter alia held that:

i.              Companies and corporate houses can no longer claim immunity from criminal prosecution on the ground that they are incapable of possessing the necessary mens rea for the commission of criminal offences.

ii.            Corporation is virtually in the same position as an individual and may be convicted of common law as well as statutory offences including those requiring mens rea. Mens Rea is attributed to corporations on the principle of alter ego? of the company, i.e. the person or group of person that guide the business of the company.

iii.           Deception is a necessary ingredient for offences of cheating. Deception by the accused of the person deceived must be fraudulent or dishonest and such deception must induce the person deceived to (i) part with or deliver property or (ii) do or omit to do anything that which the person would not otherwise do or not do.

iv.           Misleading statements which withhold the vital facts for intentionally inducing a person to do or to omit something would amount to deception and misleading statements which wrongfully cause damage to a person deceived would amount to cheating.

v.      Non disclosure of relevant information would also be treated as mis-representation of facts
leading to deception.

Conclusion: The Supreme Court has held that a corporation is virtually in the same position as any individual and may be convicted of common law as well as statutory offences including those requiring mens rea. This judgment is a good example for companies to note that truthful representations of facts in any document is vital to the stakeholders and any misrepresentation with the intent to only induce investments in the company may be treated as cheating and is a criminal offence.

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Category : Company Law (3490)
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Tags : indian penal code (9)

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