Corporate Criminal Liability for Securities Offerings

Mihir and I had previously discussed (here and here) the Supreme Court's judgment in the Iridium Motorola case rendered in October 2010. We have now posted a more detailed analysis in a case note titled "Corporate Criminal Liability and Securities Offerings: Rationalizing the Iridium-Motorola Case" that is scheduled to be published in the National Law School of India Review. The abstract is as follows: This case note analyzes the decision of the Supreme Court of India in Iridium India Telecom Ltd. v. Motorola Incorporated & Ors (AIR 2011 SC 20, [2010] 160 Comp Cas 147). The decision is momentous as it clarifies the position under Indian law that a legal person such as a company is capable of having mens rea. It is an important step in promoting the use of criminal sanctions to regulate corporate behavior. At the same time, it is crucial to note that the Supreme Court stops short of ruling convincingly on the methods by which mens rea of a company can be proved. It places reliance on the anthropomorphic approach of the English courts in Tesco Supermarkets Ltd. v. Nattrass ([1972] AC 153 (HL)) without in any way considering the subsequent crucial development in the form of the more flexible approach in Meridian Global Funds Management Asia Ltd. v. Securities Commission ([1995] 2 AC 500 (PC)). Similarly, the Supreme Court does not conclusively deal with the effect of Risk Factors in determining the existence of 'deception' as an ingredient of an offence of cheating due to misrepresentation in a private placement offering document. Of course, the Supreme Court was concerned only with an appeal on preliminary aspects relating to an order of quashing under section 482 of the Code of Criminal Procedure, 1973. In this note, the authors argue that while Iridium must hold the field on the ability of a company to have mens rea, its rulings on the other aspects must be accepted in measured terms only as possible guidance for further specific judicial determination.

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