“Whoever imposes severe punishment becomes repulsive to people while he who awards mild punishment becomes contemptible. The Ruler just with the rod is honoured. When deserved punishment is given, it endows the subject with spiritual good, material well-being and pleasures of senses.”

                                                                                                                                     -Kautilya

INTRODUCTION

Economic offence is a distinct type of criminal offence. Economic crimes not only cause financial hardship for individuals, but they can also have major consequences for the overall economy. Economic crimes such as forgery, currency counterfeiting, financial scams, fraud, money laundering, and so on are important concerns that have an impact on the nation’s security and governance. Thus, the punishment in cases of such offences should not be so lenient that it does not have an adequate deterrent effect on the society at large. It is, therefore, the solemn duty of the Court to strike a proper balance between the nature of the crime and loss caused to the public exchequer and the sentence awarded, as awarding a lesser sentence encourages any criminal and, as a result of the same, the society suffers.

This Article aims to provide an overview of economic crimes in India, as well as legislative efforts to address them, with a focus on the sentencing policy used by Indian Courts. The Article is divided into four sections. The first section gives an overview of economic offences. The second section deals with the types of economic offences and relevant legislations addressing these offences. The third section delves into the jurisprudence of sentencing and the fourth section focuses on the sentencing policy adopted by the Courts in cases of economic offences.

I. ECONOMIC OFFENCES: OVERVIEW

Economic offences are often referred to as White/Blue Collar crimes. Usually people of influence or people who come from wealthy backgrounds are found involved in such crimes with the help of some unscrupulous and corrupt government functionaries and advanced technology.

Although in some parts of the world, like the United States, the term “economic offence” has been defined, a rigorous definition of the same is still lacking in India.

The Law Commission in its 47th Report has attempted to define economic offences as under [http://lawcommissionofindia.nic.in/1-50/report47.pdf]:-

““Economic offences” are those that affect the country’s economy, and not merely the wealth of an individual victim. In this category fall white collar crimes i.e. crimes committed in the course of their occupation by members of the upper class of society, offences calculated to prevent or obstruct the economic development of the country and endanger its economic health, evasion of taxes, misuse of position by public servants, offences in the nature of breaches of contracts resulting in the delivery of goods not according to specifications, hoarding and black marketing, adulteration of food and drugs, theft and misappropriation of public property and funds, and trafficking in the licences, permits etc.”

Considerations that often distinguish economic offences from other types of crime are summarised as follows:

1. 1. The motive of the criminal is avarice or rapaciousness (not lust or hate).
   2. Background of the crime is non-emotional (unlike murder, rape, defamation etc.). There is no emotional reaction as between the victim and the offender.
   3. The victim is usually the State or a section of the public, particularly the consuming public (i.e. that portion which consumes goods or services, buys shares or securities or other intangibles). Even where there is an individual victim, the more important element of the offence is harm to the society.
   4. Mode of operation of the offender is fraud, not force.
   5. Usually, the act is deliberate and wilful.
   6. Interest aimed to be protected through criminal legislations against these offences is two-fold-
      A. Societal interest in the preservation of-
      (i)  the property or wealth or health of its individual members, and national resources, and
      (ii) the general economic system as a whole, from exploitation, or waste by individuals or groups;
      B. Social interest in the augmentation of the wealth of the country by enforcing the laws relating to
      taxes and duties, foreign exchange, foreign commerce, industries and the like.

These unique features of economic offences have resulted in a fluid and unsettled jurisprudence in the sentencing of such offenders.

II. LAWS TO DEAL WITH ECONOMIC OFFENCES IN INDIA AND THE PUNISHMENT PRESCRIBED THEREIN

Several laws dealing with economic offences were established to punish offenders. Furthermore, these Acts were legislated to preserve the normal operations of commerce, contracts, and so on, and to allow them to take place with or without the least amount of malpractices.

But, have these legislations been remarkable in dealing expressly with this criminological subset? More so, are the punishments provided under these legislations proportionate to the damage and danger caused by these offences?

Before delving into the issue of proportionality, we need to examine the quantum of punishment prescribed under these special statues.

Prevention of Corruption Act, 1988.

Section	Description Title	Minimum Punishment	Maximum Punishment
7	Public servant taking gratification other than legal remuneration in respect of an official act.	Three years	Seven years + Fine.
8	Taking gratification, in order, by corrupt or illegal means, to influence public servant.	Three years	Seven years + Fine.
9	Taking gratification, for exercise of personal influence with public servant.	Three years	Seven years + Fine.
10	Punishment for abetment by public servant of offences defined in section 8 or 9.	Six months	Five years + Fine.
11	Public servant obtaining valuable thing, without consideration from person concerned in proceeding or business transacted by such public servant.	Six months	Five years + Fine.
12	Punishment for abetment of offences defined in section 7 or 11.	Three years	Seven years + Fine.
13	Criminal misconduct by a public servant.	Four years	Ten years + Fine.
14	Habitual committing of offence under sections 8, 9 and 12.	Five years	Ten years + Fine.
15	Punishment for attempt.	Two years	Five years + Fine.

Prevention Of Money Laundering Act, 2002.

Section	Description Title	Minimum Punishment	Maximum Punishment
4	Punishment for money-laundering	Three years	Seven years + Fine up to Rs. 5 Lakhs. (Ten Years in case where the proceeds of crime involved relate to any offence specified under paragraph 2 of Part A of the Schedule.)

 Economic Offences Under Indian Penal Code, 1860.

Section	Description Title	Minimum Punishment	Maximum Punishment
406	Punishment for criminal breach of trust	–	Three years + Fine
408	Criminal breach of trust by clerk or servant	–	Seven years + Fine
409	Criminal breach of trust by public servant, or by banker, merchant or agent.	–	Imprisonment for life or Seven years + Fine.
420	Cheating and dishonestly inducing delivery of property.	–	Seven years + Fine.
466	Forgery of record or Court or of public register etc.	–	Seven years + Fine.
467	Forgery of valuable security, will, etc.	–	Imprisonment for life or Ten years + Fine.
468	Forgery for purpose of cheating	–	Seven years + Fine.
471	Using as genuine a forged document or electronic record.	–	Shall be punished in the same manner as if he had forged such document or electronic record.
477A	Falsification of accounts.	–	Seven years or Fine or both.
120B	Punishment for Criminal Conspiracy.	–	Six months or Fine or both.

An analysis of the above tabular representation depicts that the maximum punishment provided for most of these offences is ‘seven to ten years.’ Only in respect to few offences, illustratively, offences under the Indian Penal Code, i.e., Forgery for valuable security, will etc. [Section 467] or Criminal breach of trust by public servant, or by banker, merchant or agent [Section 409, IPC], the maximum punishment prescribed is imprisonment for life.

The problem that persists with these legislations is that the maximum punishment which are prescribed for such offences is not punitive enough to deal with the situation effectively. In fact, the maximum punishment should reflect that there is widespread social disapproval of these types of offences, but unfortunately, that cannot be seen on examining the sentencing provisions of these legislations which have been legislated to curb such economic offences.

Furthermore, the present trend of legislation as also the judicial approach to such offences appears to be that these offences are treated lightly and the punishment is neither adequate nor proportionate to the gravity of the offence.

For example, if someone were to break into your house and steal 5 lakhs, it is less of a penalty than if someone accosts you in the street at gunpoint and takes 5 lakhs , because they have put you in fear and we value our right to be free of fear. So, we have a higher penalty for robbery than we do for burglary.

However, the said principle becomes inapplicable when it comes to economic crimes wherein the offenders cause grave harm, not only to the victim who has directly suffered, but to the overall economy of the country. These offenders are allowed to play around and perform their financial shenanigans at the cost of the law abiding citizens who are the ultimate victims of such crimes. The punishment that is prescribed for such offences is far less as compared to the actual loss and harm that is caused. Given the stakes, it is surprising that even though the impact of white collar criminals is much worse than that of traditional criminals, however, the “white collar” helps the offender stay clear of the “blacks” of long imprisonment periods.

Recently, Mr. Lalu Prasad, the former Chief Minister of Bihar, yet again made headlines for the fifth episode in the series of his infamous “Fodder Scams”. A special CBI Court in Ranchi sentenced him to five years imprisonments for the illegal withdrawal and misappropriation of Rs. 139.5 crores from Doranda Treasury. That’s correct – five years’ imprisonment for Rs. 139.5 crores scam! This is where the punishment part raises questions – whether a five-year sentence is sufficient to deter economic scams (going by the deterrence theory) and whether five-year sentence is proportional to the gravity of offence (going by the theory of proportionality). Clearly, the answer to both the above mentioned propositions would be a loud “no”. When the prescribed punishment fails the basic theories of punishment, the idea of punishment gets blurry. The aim and purpose of the punishment and the quantum thereof will lose its importance and resultantly, such offences will continue to rise.

When lead scams like Fodder scam, 2G scam, PNB scam, etc. have a maximum punishment which is same as some minor scams involving comparatively minute amounts, it cripples the basic foundation of the idea of punishment and justice. Severity of punishment should be commensurate with the seriousness of the wrong. But clearly, the maximum punishments provided under the statutes mentioned above, do not meet the threshold of proportionality principle.

In the case titled, AP Suryakrasam vs. State of Tamil Nadu & Ors., (W.P [MD] No. 14481 of 2020), the Bench of Justices N. Kirubakaran and B. Pugalendhi of Madras High Court orally suggested that the country needs stringent penalties to curb the menace of corruption in the country. The Bench, in its order, observed:

“The Central Government may consider imposing punishment, such as, “hanging” or “death penalty”, for corrupt practices or for demanding and accepting bribes, like in China, North Korea, Indonesia, Thailand and Morocco.”

The Bench further observed:

“People are compelled to accept corruption as normal one. Corruption has become deep rooted and has spread like Cancer. Every day, it is reported in the media that many officials are caught red handed, while taking bribes. Hence, the punishment needs to be enhanced.”

Therefore, there is an urgent need to enhance the maximum punishment for such offences so that these cases are properly and effectively dealt with and the offenders are adequately punished thereby leading to an adequate deterring effect on the society at large.

III. JURISPRUDENCE OF SENTENCING IN INDIA

Coming to the sentencing policy of the Indian legal system, it is seen that there are no overarching (and few settled) principles governing the sentencing of the economic offender. To the extent that there is general convergence in the approach to sentencing economic offenders, the approach is often not sound.

For instance, in deciding on the question of sentence the judge is expected to take into consideration, all relevant facts and circumstances of the case. All care should be taken to ensure that sentence imposed is in proportion to the nature and gravity of the time.

In the case of Dhananjoy Chatterjee vs. State of W.B., (1994) 2 SCC 220, the Hon’ble Supreme Court while considering the imposition of appropriate punishment has held in para 15 as under:

“…Imposition of appropriate punishment is the manner in which the Courts respond to the society’s cry for justice against the criminals. Justice demands that courts should impose punishment befitting the crime so that the Courts reflect public abhorrence of the crime.”

A three-Judge Bench of the Supreme Court in Ahmed Hussein Vali Mohammed Saiyed vs. State of Gujarat, (2009) 7 SCC 254, observed as follows:

“99. … The object of awarding appropriate sentence should be to protect the society and to deter the criminal from achieving the avowed object to (sic break the) law by imposing appropriate sentence. It is expected that the courts would operate the sentencing system so as to impose such sentence which reflects the conscience of the society and the sentencing process has to be stern where it should be. Any liberal attitude by imposing meagre sentences or taking too sympathetic view merely on account of lapse of time in respect of such offences will be result wise counterproductive in the long run and against the interest of society which needs to be cared for and strengthened by string of deterrence inbuilt in the sentencing system.

1. 1. 100. Justice demands that courts should impose punishment befitting the crime so that the courts reflect public abhorrence of the crime. The court must not only keep in view the rights of the victim of the crime but the society at large while considering the imposition of appropriate punishment. The court will be failing in its duty if appropriate punishment is not awarded for a crime which has been committed not only against the individual victim but also against the society to which both the criminal and the victim belong.”

After extensively referring to the objects of punishment in State of Punjab vs. Bawa Singh, (2015) 3 SCC 441, the Court held that

“16. …undue sympathy to impose inadequate sentence would do more harm to the justice system to undermine the public confidence in the efficacy of law. It is the duty of every court to award proper sentence….”

Further, in the case of State of Uttar Pradesh vs. Sanjay Kumar, (2012) 6 SCC 107, the Supreme Court highlighted the general principles of sentencing. The relevant portion of this judgment is reproduced hereunder:-

“Sentencing policy is a way to guide judicial discretion in accomplishing particular sentencing. Generally, two criteria, that is, the seriousness of the crime and the criminal history of the accused, are used to prescribe punishment. By introducing more uniformity and consistency into the sentencing process, the objective of the policy, is to make it easier to predict sentencing outcomes. Sentencing policies are needed to address concerns in relation to unfettered judicial discretion and lack of uniform and equal treatment of similarly situated convicts. The principle of proportionality, as followed in various judgments of this Court, prescribes that, the punishments should reflect the gravity of the offence and also the criminal background of the convict. Thus, the graver the offence and the longer the criminal record, the more severe is the punishment to be awarded.”

In view of the above it can be inferred/deducted that the Court has to make a balance between 2 different principles i.e. the “aggravating circumstances” and the “mitigating circumstances”.

Following are some of the extenuating/mitigating and aggravating circumstances:

Extenuating/mitigating circumstances:

1. 1. • antecedents of offender;
      • nature of the offence;
      • circumstances of the offence;
      • prior criminal record of the offender;
      • age-tender or old;
      • background with reference to education, home life, sobriety, social background and economic condition;
      • emotional and mental condition;
      • prospect of rehabilitation;
      • provocation-sudden fight;
      • absence of mens rea;
      • influence or instigation of some other person;
      • self-preservation;
      • exceeding self defense;
      • state of health;
      • delay in disposal of case;
      • drunkenness.

Aggravating circumstances:

1. 1. • gravity of offence;
      • deliberate and well planned crime;
      • habitual offender;
      • causing hurt for extortion;
      • securing aid of accomplices;
      • breach of trust and misappropriation especially public money;
      • perjury and fabricating false evidence (Sec.193);
      • offence perpetrated by fraudulent means;
      • socio-economic offences with planned profit making;
      • menace to public health, eg. Adulteration of food articles;
      • degradation of conduct, eg. Infanticide, daring assault on women;
      • personal gain at the expense of innocent;

Proportionality and Aggravating and Mitigating Circumstances:

The Courts in gauging the seriousness of an offence, have permitted a wide range of variables other than the harm caused and the offender’s culpability. However, there are several problems with allowing factors not directly related to the offence to have a role in evaluating offence seriousness.

Firstly, many of the sentencing variables which are currently regarded as key considerations in the sentencing calculus, such as the offender’s prospects of rehabilitation and the need for specific deterrence are, in fact, misguided.

Secondly, it is contradictory to claim that the principle of proportionality means the punishment should be commensurate with the seriousness of the offence, and then allow considerations external to the offence to have a role in determining how much punishment is appropriate.

Finally, by allowing such considerations a look in, much of the splendour of the principle of proportionality dissipates.  Should the Courts when elaborating on the matters that are relevant in gauging the seriousness of the offence, give much adherence to the aggravating and mitigating circumstances?

The criminal law adheres in general to the principle of proportionality in prescribing liability according to the culpability of each kind of criminal conduct. It ordinarily allows some significant discretion to the Judge in arriving at a sentence in each case, presumably to permit sentences that special facts of each case warrants. Judges in essences affirm that punishment ought always to fit the crime; yet in practice, sentences are determined largely by other considerations. Sometimes it is the correctional needs of the perpetrator that are offered to justify a sentence. Sometimes the desirability of keeping him out of circulation, and sometimes even the tragic result of his crime. Inevitably these considerations cause a departure from ‘just deserts’ as the basis of punishment and create cases of apparent injustice that are serious and widespread.

Giving the offender a lighter sentence would make the country’s justice system questionable. The common man will lose faith in the judicial system. In such cases, he understands and appreciates the language of deterrence more than the reformative jargon.

Therefore, undue sympathy to impose inadequate sentence would do more harm to the justice system to undermine the public confidence in the efficacy of law, and society could no longer endure under such serious threats. It is , therefore, the duty of every Court to award proper sentence having regard to the nature of the offence and manner in which it was executed or committed, etc. This position was illuminatingly stated by this Court in Sevaka Perumal v. State of T.N., AIR 1991 SC 1463.

IV. APPROACH ADOPTED BY THE COURTS IN SETENCING ECONOMIC OFFENDERS

Economic offences are generally regarded as being committed principally for greed. Thus, the paramount consideration in sentencing should be the amount of money involved. Other important considerations are the level of sophistication and planning of the offence and whether or not a breach of trust occurred.

According to Bentham the seriousness of crime should be measured by their respective social harm rather than by the sinfulness of the other transcendental qualities and when crimes are caused by rational efforts of man to augment their pleasure, as the case with economic crimes, those deserve to be punished strictly and adequately so that the retributive and deterrent purpose of punishment is properly secured.

The cardinal role of general deterrence in relation to such crimes has been confirmed by numerous authorities. For example in State of Gujarat v. Mohanlal Jitamalji Porwal and Anr.,(1987) 2 SCC 364, the Supreme Court, observed as under:-

“The entire Community is aggrieved if the socio-economic offenders who ruin the economy of the State are not brought to books. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the Community. A disregard for the interest of the Community can be manifested only at the cost of forfeiting the trust and faith of the Community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the National Economy and National Interest.”

In Prem Kumar Parmar v. State, 1989 RLR 131, the Court observed that such offences are even worse than murders. It was observed

“The economic offences having deep rooted conspiracies and involving huge loss of public funds whether of nationalized banks or of the State and its instrumentalities need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of our country. Therefore, the persons involved in such offences, particularly those who continue to reap the benefit of the crime committed by them, do not deserve any indulgence and any sympathy to them would not only be entirely misplaced but also against the larger interest of the society. The Court cannot be oblivious to the fact that such offences are preceded by cool, calculated and deliberate design, with an eye on personal gains, and in fact, not all such offences come to the surface. If a person knows that even after misappropriating huge public funds, he can come out on bail after spending a few months in jail, and thereafter, he can continue to enjoy the ill-gotten wealth, obtained by illegal means, that would only encourage many others to commit similar crimes in the belief that even if they have to spend a few months in jail, they can lead a lavish and comfortable life thereafter, utilizing the public funds acquired by them.”

In Central Bureau of Investigation vs. Jagjit Singh, (2013) 10 SCC 686, the Supreme Court observed that such offences are great social wrongs and they have immense societal impact, the ultimate victim being the society as collective. It was said such offences not only creates a hazard in the financial interest of the society and but also creates a deep dent in the economic spine of the nation.

In Madhav Hayawadanrao Hoskot vs. State Of Maharashtra, (1978) 2 SCC (Cri) 469, full Bench of Hon’ble Supreme Court had severely castigated the lenient view taken by the Sessions Court in sentencing a convict in offences and observed as under:

“The soft justice syndrome vis-a-vis white collar offenders scandalizes the Court. It stultifies social justice and camouflages needed severity with naive leniency”.

“7. Social defence is the criminological foundation of punishment. The trial judge has confused between correctional approach to prison treatment and nominal punishment verging on decriminalisation of serious social offences. The first is basic and the second pathetic. That Court which ignores the grave injury to society implicit in economic crimes by the upperberth ‘mafia’ ill serves social justice. Soft sentencing justice is gross injustice where many innocents are the potential victims. It is altogether a different thing to insist on therapeutic treatment, hospital setting and correctional goals inside the prison (even punctuated by parole, opportunities for welfare work meditational normalisation and healthy self-expression) so that the convict may be humanised and, on release, rehabilitated as a safe citizen. This Court has explained the correctional strategy of punishment in Giasuddin’s Case (1978) 1 SCR 153 : (AIR 1977 SC 1926). Coddling is not correctional any more than torture is deterrent. While iatrogenic prison terms are bad because they dehumanize, it is functional failure and judicial pathology to hold out a benignly self-defeating non-sentence to deviants who endanger the morals and morale, the health and wealth of society.

CONCLUSION

The imposition of penalty levels that are proportionate to the severity of the offence, and are not corrupted by considerations related to other (misguided) penal objectives, would lead to significant improvements in the consistency and fairness of the sentencing process when punishing economic offences.

Unless the Courts award appropriately deterrent punishment taking note of the nature of the offence and the status of the offenders involved at the relevant time, people will lose faith in the justice delivery system and the very object of the special legislation on prevention of these crimes will be defeated. As of now, the appropriate sessions/special courts do not have the discretion to impose sentence more than 7 – 10 years in cases where the public exchequer has lost millions of rupees. This is because the legislations in their present form have simply capped the maximum limit to around 7 – 10 years.

The Court is the statute’s conscience, its decisions must reflect and promote the policy goals of punishment, lest the public’s faith in the Courts is shaken. The common citizen will not be surprised by the sentence decision. It should represent the general public’s disgust with the crime. As a result, the Court has a responsibility to safeguard and promote the public interest while also fostering public faith in the rule of law’s efficacy. Misplaced sympathy or unwarranted leniency will send a wrong signal to the public giving room to suspect the institutional integrity, affecting the credibility of its verdict.

The Parliament of country may need to revisit the existing legislations surrounding this framework and if required make suitable amendments. Best practises from around the World needs to be carefully studied on the basis of which some of these amendments can be made. In part II of this article, we shall be discussing and quoting from some of the best practises across the globe thereby highlighting the sentencing guidelines/provisions applicable against economic offences in those respective jurisdictions.