Corporations and the Law of Defamation : On whether a company can be an ‘accused’ or a ‘complainant’ in a criminal action for defamation ?

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The Law of Defamation has been a topic of intense legal debate in the recent times. Apart from a recent challenge as to its very constitutionality (which was turned down by the Hon’ble Supreme Court), with the rise in corporate activity – certain other legal questions have also arose as to : whether a corporation can be a ‘complainant’ in a prosecution for defamation alleging injury to its reputation, and conversely : whether a criminal complaint for defamation can be filed against a ‘company’ as an accused ?

This blog is an attempt to briefly flag these issues :

First of all, let us examine : Whether the Criminal Law of Defamation be invoked by Corporations/Companies? 

The answer is ‘Yes’ and clearly not far to seek. Explanation 2 to Section 499 itself reads as under :

“It may amount to defamation to make an imputation concerning a company or an association or collection of persons as such” 

Therefore, a Criminal Complaint for defamation can be filed by a juristic entity, such as a company. A recent illustration would be the prosecution of Priya Pillai, a Greenpeace activist, by Mahan Coal in relation to a blog written by her concerning the effect of allocation of coal reserves on the forest life and environment. This has led to Ms.Pillai challenging the very legal competency of corporations to invoke criminal defamation provision, and the matter is currently sub judice on that limited question before the Hon’ble Supreme Court. The decision on this point is eagerly awaited. But as of now, Expln. 2 to Section 499 holds the field and a corporation is entitled to file a criminal complaint alleging injury to its reputation and dignity.

This leads us to the next question : “Whether a company can be prosecuted for having committed defamation ?” 

This questions is slightly more complicated. A bare perusal of Section 499 of the IPC reads  : “Whoever, by words either spoken or intended to be read, or by signs or by visible representations, makes or publishes any imputation concerning any person intending to harm, or knowing or having reason to believe that such imputation will harm, the reputation of such person, is said, except in the cases hereinafter expected, to defame that person”. On the first blush, the use of word ‘Whoever’ seemingly gives it a broad ambit and will bring corporations within its ambit as an accused.

There is a direct judgment of the Hon’ble High Court of Delhi on this point in the case of Raymond Ltd & Ors v. Rameshwar Das Dwarkadas P. Ltd, 2013 SCC OnLine Del 1328.

In a nutshell, the ccase concerned a trademark dispute between the parties.  Raymond was alleged to have printed some posters alleging trademark infringment on the part of the respondent/complainant, which, according to the complainant were injurious to its reputation. This led to a criminal complaint being filed against Raymond Limited and its Directors. A petition u/s 482 of the CrPC was filed by Raymond seeking quashing of the complaint and proceedings emanating thereunder.

Arguments by Raymond

  • In Kalpnath Rai v. State (AIR 1998 SC 201), the Hon’ble Supreme Court has laid down that unless the statute clearly excludes mens rea in the commission of offence, the same must be treated as essential ingredient of the criminal act to become punishable. {In the facts of the case, it was held : that a company cannot be said to have requisite mens rea to harbor a terrorist if any terrorist was allowed to occupy the room in its hotel}
  • Apply the above logic to the law of defamation, it was argued that : the offence of defamation mandatorily requires mens rea (Reliance in this regard was placed on : Zee Telefilms Limited v. Sahara India Commercial Corporation Limited (2001) 1 CALLT 262 HC). It was argued that ‘intention to cause harm’ is the most essential sine-qua-non of an offence under Section 499 IPC. Now, Since a company is an artificial person or a juristic entity, it is incapable of having any mind and hence question of it having such a state of mind could not arise. ThereforeRaymond Ltd. being a juristic person cannot possess mens rea and thus cannot be held criminally liable for the offence of defamation punishable under Section 500 IPC.

In this factual and legal background, the Court adopted the above arguments and held :

In this view of matter, I hold that since the first Petitioner cannot possess any mens rea it cannot be guilty of the offence of cheating under Section 499 read with Section 500 IPC.

Proceedings were also quashed against the Individual directors on the ground that there were no specific allegations and no specific role was attributed to them in the entire episode. Besides this, the court also felt that this was a case where a criminal hue was given to an essentially civil dispute and prosecution in such a case will not be conducive to the ends of justice. The Court, therefore, by invoking Section 482 of the CrPC quashed the proceedings against the company and its directors.

PLEASE NOTE : 

PS : The preposition above has to be taken with a pinch of salt. The Supreme Court  in Iridium India Telecom v. Motorola (2011) had categorically held that the companies and corporate houses can not claim an immunity from criminal prosecution on the ground that they are incapable of possessing the mens rea for the commission of criminal offences. By way of the principle of attribution, the criminal intent of the alter ego of the company/body corporate i.e. the persons or group of persons in control of the affairs of the company and at the helm of its affairs, would be attributed to the company.

The relevant excerpts from Iridium (supra) are reproduced as follows :-

38. From the above it becomes evident 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. The criminal liability of a corporation would arise when an offence is committed in relation to the business of the corporation by a person or body of persons in control of its affairs. In such circumstances, it would be necessary to ascertain that the degree and control of the person or body of persons is so intense that a corporation may be said to think and act through the person or the body of persons. The position of law on this issue in Canada is almost the same. Mens rea is attributed to corporations on the principle of ‘alter ego’ of the company.

39. So far as India is concerned, the legal position has been clearly stated by the Constitution Bench judgment of this Court in the case of Standard Chartered Bank Vs. Directorate of Enforcement (2005) On a detailed consideration of the entire body of case laws in this country as well as other jurisdictions, it has been observed as follows:

“There is no dispute that a company is liable to be prosecuted and punished for criminal offences. Although there are earlier authorities to the effect that corporations cannot commit a crime, the generally accepted modern rule is that except for such crimes as a corporation is held incapable of committing by reason of the fact that they involve personal malicious intent, a corporation may be subject to indictment or other criminal process, although the criminal act is committed through its agents.”

 

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