Bns – Corporate & Economic Crimes
What Are Corporate and Economic Crimes?
Corporate and economic crimes involve illegal acts committed by companies or individuals within a corporate setting, usually aimed at financial gain or manipulation. These crimes damage the economic integrity of markets, affect stakeholders, and sometimes involve fraud on a large scale.
Typical corporate and economic crimes include:
Fraud and Embezzlement
Insider Trading
Money Laundering
Tax Evasion
Corporate Governance Violations
Bribery and Corruption
Misappropriation of Funds
Counterfeiting and Market Manipulation
Legal Framework
Indian Penal Code (IPC): Sections dealing with cheating, criminal breach of trust, forgery.
Companies Act: Regulations on corporate governance and offenses.
Prevention of Corruption Act
Prevention of Money Laundering Act (PMLA), 2002
Securities Laws: SEBI Act, Insider Trading Regulations
Income Tax Act: Tax evasion offences.
Case Laws on Corporate and Economic Crimes
1️⃣ Satyam Scandal – Union of India v. Ramalinga Raju and Others (2010)
Facts:
The founder of Satyam Computers admitted to inflating the company's financial statements by billions of rupees.
Holding:
The Supreme Court and investigating agencies held the accused liable for massive corporate fraud and ordered prosecution under IPC, Companies Act, and PMLA.
Legal Principle:
Corporate executives can be held criminally responsible for falsification of financial records and cheating shareholders.
2️⃣ Securities and Exchange Board of India (SEBI) vs. Sahara India Real Estate Corporation Ltd. (2012)
Facts:
Sahara raised billions of rupees through optionally fully convertible debentures (OFCDs) without proper SEBI approval.
Holding:
The Supreme Court ordered Sahara to refund investors with interest and found the company guilty of violating securities laws.
Legal Principle:
Companies must comply with securities regulations; failure amounts to economic crime and attracts strict penalties.
3️⃣ Harshad Mehta Securities Scam Case (1992)
Facts:
Harshad Mehta manipulated stock prices using forged bank receipts and illegal fund transfers, causing huge losses to banks and investors.
Holding:
Courts convicted Mehta and others under IPC and the Securities Laws for cheating, forgery, and criminal conspiracy.
Legal Principle:
Market manipulation and fraudulent practices in securities trading are criminal offenses.
4️⃣ P. Chidambaram v. Enforcement Directorate (INX Media Case, 2019)
Facts:
Former Finance Minister was accused of facilitating illegal foreign investment and money laundering through INX Media.
Holding:
The case is ongoing but highlights investigation under PMLA and Prevention of Corruption Act.
Legal Principle:
Corporate crimes involving political corruption and money laundering attract strict investigation and prosecution.
5️⃣ Ketan Parekh Stock Market Scam (2001)
Facts:
Stockbroker Ketan Parekh manipulated stock prices by circular trading and insider trading.
Holding:
SEBI and courts penalized him and imposed bans under securities laws.
Legal Principle:
Insider trading and market manipulation disrupt market integrity and are punishable offenses.
6️⃣ National Herald Case – Sonia Gandhi & Rahul Gandhi (2016)
Facts:
Alleged misuse of company funds and diversion of funds involving a corporate entity linked to political figures.
Holding:
Ongoing legal proceedings under criminal laws relating to breach of trust and criminal conspiracy.
Legal Principle:
Corporate crimes may involve high-profile political and economic actors, requiring rigorous investigation.
Summary Table of Corporate & Economic Crime Cases
| Case Name | Year | Key Legal Issues | Principle Established |
|---|---|---|---|
| Satyam Scandal | 2010 | Corporate fraud, falsification | Executives criminally liable for financial statement fraud |
| SEBI v. Sahara India | 2012 | Securities regulation violation | Strict compliance with securities laws required |
| Harshad Mehta Scam | 1992 | Market manipulation, forgery | Fraudulent securities practices are criminal offenses |
| INX Media Case | 2019 | Money laundering, corruption | Corporate crimes linked to political corruption prosecuted |
| Ketan Parekh Scam | 2001 | Insider trading, market rigging | Insider trading and circular trading are punishable |
| National Herald Case | 2016 | Misuse of funds, breach of trust | Corporate crime investigation involves even political leaders |
Conclusion
Corporate and economic crimes significantly impact economic stability and investor confidence. Courts have been increasingly vigilant in prosecuting corporate fraud, securities violations, and money laundering. Statutory frameworks like PMLA, SEBI regulations, and Companies Act provide the legal basis for tackling these crimes, supported by judicial precedents.
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