"In India, there is no legislation as such that defines an 'economic offence". Economic offences encompass all crimes which occur during the course of any economic or business activity.

In the beginning, such offences including corruption and criminal misconduct were dealt with under the provisions of the Indian Penal Code, 1860 (IPC). However, with the steady increase in economic offences of many varieties, such as tax evasion, trafficking, smuggling etc., all of which are too specific to be brought under the purview of IPC alone, the Government of India felt the need for creating different legislations dealing with such offences.

The salient features of an economic offence were first discussed in the Report of the 47th Law Commission of India (1972), formulated on the topic of 'Trial and Punishment of Social and Economic Offences' ('Report')1. The Government of India, while formulating this Report, had recognized economic offences as a separate category of crimes that require special attention, to ensure swift disposal of cases and meting of punishment. Thereafter, special legislation such as the Prevention of Money Laundering Act, 2002 ('PMLA') was brought out to prescribe the procedures and penalties for economic offences.

It goes without saying that, due to such an ad-hoc arrangement, one set of facts expose an offender to prosecution under multiple legislations. Consequently, the gravity of the crime as well as the parameters for granting bails or deciding punishments for such crimes have not been very clear and there is an overlap of procedures. Therefore, in order to fully understand and organize how economic offences are being tackled today, we have examined the existing laws in relation to such offences, the amendments to the regime brought out by the Companies Act, 2013 ('2013 Act'), the judicial history of granting of bails/ anticipatory bails with respect to economic offences, and scope for further changes."2

The National Crimes Report Bureau of India classifies specific acts as economic offences. According to statistics released by the report of NCRB on economic offences it was reported 150,287 cases in the year 2018, 159,878 cases in the year 2019, 140,341 cases in the year 2020 with a rate of total economic offences 10.7%.3 There has been a sharp surge in economic offences in 2021 and 2022, according to recently released data from the National Crime Records Bureau.

Around 1.93 lakh cases were reported in 2022, 11 per cent higher compared to 2021. Rajasthan reported the maximum number of cases, while most related to forgery, cheating and fraud. The data indicate that in 2022, States such as Rajasthan, Telangana, and Uttar Pradesh contributed significantly to registered economic offence cases in India. These States accounted for 14.4 per cent, 13.6 per cent and 11.6 per cent cases, respectively, of the total cases.4

Evolution Of Economic Offences In India

The evolution of economic offences in India traces back to ancient times when there were rudimentary forms of economic regulations and penalties for fraudulent practices. However, the modern concept of economic offences began to take shape during the colonial period under British rule. The British introduced various laws to regulate economic activities and trade, primarily to serve their colonial interests.

These laws included the Indian Contract Act, 1872, the Sale of Goods Act, 1930, and the Companies Act, 1866, among others. Economic offences during this period were primarily concerned with issues such as fraud, breach of trust, and embezzlement.

Post-independence, India witnessed significant legislative reforms aimed at addressing emerging economic challenges and protecting the interests of the nation. The Prevention of Corruption Act, 1947, was enacted to combat corruption in public offices, while the Foreign Exchange Regulation Act, 1973, aimed to regulate foreign exchange transactions and prevent illegal currency transactions.

The 1990s marked a turning point with economic liberalization policies, leading to the dismantling of the License Raj and the opening up of the Indian economy to foreign investment. This period saw a surge in economic activities, accompanied by new forms of economic offences such as money laundering, insider trading, and securities fraud.

47th Law Commission Report On Socio Economic Crimes

In India, the 29th Law Commission Report suggested to take into consideration the Santhanam Committee report of 1964.5 The committee report observed that, "the Penal Code does not deal with any satisfactory manner with acts which may be described as social offences having regard to the special circumstances in which they are committed and which have now become a dominant feature of certain powerful sections of modern society.

In most of the offences that were identified, two features could be witnessed, economic benefit and unjust enrichment. It also suggested that a separate chapter should be included in IPC to deal with socio-economic crimes."6 Later the 47th Law Commission Report laid down a new composite category of socio- economic crimes, illegal way of performing commercial and allied transactions and evasion of public taxes or monetary liabilities.7

The offences which were incorporated in 47th Law Commission Report are:

• 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
• Trafficking in licenses, permits, etc.

The survey includes an analysis of the case –laws having socio-economic ramifications. The cases pertains to offences under socio-economic legislations in India, namely Essential commodities Act 1955, Prevention of Black-marketing and maintenance of supplies of essential commodities Act 1980, Food safety and Standards act 2006, Prevention of corruption Act 1988, Narcotic and Psychotropic substances Act 2006, Foreign Exchange Regulation Act 1973, Foreign Exchange Management Act 1999, Income Tax Act, 1961, Conservation of foreign Exchange and Prevention of smuggling Activities Act, 1974 (COFEPOSA), Drugs and cosmetics Act 1940, Dowry Prohibition Act, 1961, and Immoral Traffic Prevention Act 1956. 9

Economic Offences

Economic offences in India can be classified into three categories.

1. Traditional Economic crime which includes corruption, smuggling, bogus imports etc.
2. Emerging technological economic crimes that include credit card frauds, counterfeiting, cyber crimes etc.
3. Crimes through which proceeds of transnational organized crime are transmitted abroad like money laundering.

Corruption

Corruption is defined as immoral behavior by those in positions of authority. Those who misuse their authority may be persons or members of organizations such as enterprises or governments. Giving or receiving bribes or improper gifts, double-dealing, and deceiving investors are all examples of corruption. Corrupt behavior is often the result of government intervention in the economy but it can be prevented with certain checks and balances.

Smuggling

Smuggling is one of India's primary economic crimes, consisting of covert activities resulting in unrecorded commerce. Although it is hard to quantify the precise number of commodities smuggled in India, it is safe to claim that smuggling happens at such a high level that it accounts for a significant portion of all economic crimes perpetrated. Smuggling, in its broadest definition, also covers drug trafficking, migrant smuggling, organ trafficking, and human trafficking.

Invoice Manipulation

This type of transaction is most common among trading partners. The individual who commits this type of offence is regarded as guilty of forging fake documents and records.

Bogus Imports

Bogus trade means the performance of business activities with the purpose of fraudulently evading payment of VAT.

Cyber Crimes

Economic crimes committed by using technology. There is a rapid increase of this kind of offences. For example, theft of computer services, unauthorized access to protected computers, software piracy etc.

Counterfeiting

Manufacture of false money for gain, a kind of forgery in that something is copied so as to defraud by passing it for the original or genuine article.

Credit Card Frauds

As financial institutions introduce innovations against counterfeiting and fraud, increasingly sophisticated ways of profiting from or beating those systems are devised. Most of the credit card fraud is committed by using counterfeited cards, which are pre-embossed or re-encoded.

Money Laundering

The term "money laundering" describes the process of concealing the true owners of illegally obtained funds. This process gives legitimacy to criminal funds by "washing" them through various institutions so that they can be used without detection of the illegal activity that produced them. Each phase of money laundering, also known as a "washing cycle," removes a "layer of the taint or criminal" from those funds.

Difference Between Socio-Economic Offences And White-Collar Crimes

While addressing socioeconomic offences, it is vital to mention white-collar crimes, which are likewise socioeconomic offences but are perpetrated by a person of high social rank. Simply put, white collar crimes are tied to a country's business sectors, i.e., perpetrated by wealthy individuals. Because large corporations dominate the economy, there will be widespread disorder in society. Though the concept of white collar crime is not that simple, It actually involves many social, economic and legal issues, the issues having great impact in the society.16

The term "white-collar crime" was first used by the American criminologist Edwin H.Sutherland to define a violation of the criminal law committed by "a person of respectability and high social status in the course of his [or her] occupation" (White Collar Crime, 1949). In 1981 the U.S. Department of Justice developed a further definition, which included "nonviolent crime for financial gain utilizing deception and committed by anyone who included "nonviolent crime for financial gain utilizing deception and committed by anyone who has special technical and professional knowledge of business and government, irrespective of the person's occupation."17

(Dictionary of Criminal Justice Data Terminology, Bureau of Justice Statistics). Sutherland ont only coined the term "white collar crime" but also expressed his views that the criminals who commit these white-collar crimes be distinguished because the people who commit socio- economic offences are violating the general provisions but the white –collar criminals violate and breach the regular penal code and which are not connected with their occupation and the persons.

Socio-economic offenses and white-collar crimes are two terms used to describe non-violent criminal activities that are typically committed by individuals in positions of power or influence in the business or government sector. While there is some overlap between these two categories, there are also important differences. These are typically refer to a broader range of crimes that are committed for financial gain and often involve some level of deception or fraud. Examples of socio-economic offenses include tax evasion, money laundering, embezzlement, and bribery. These crimes are often committed by individuals or groups who are looking to make a profit through illegal means.

On the other hand, white-collar crimes typically refer to specific types of socio-economic offenses that are committed by individuals in professional or managerial positions. These crimes often involve complex financial transactions and are committed with the intent to obtain personal financial gain or to benefit the individual's organization. Examples of white-collar crimes include insider trading, securities fraud, and accounting fraud.

In summary, socio-economic offenses are a broader category that encompasses a range of crimes committed for financial gain, while white-collar crimes are a specific subset of socio-economic offenses that are committed by individuals in positions of power or influence in the business or government sector, and often involve complex financial transactions.

The Legislations Related To Economic Offences

• The IPC provides the punishment for certain economic offences such as criminal misappropriation, criminal breach of trust, receiving or dealing in stolen property, cheating, creating fraudulent deeds, concealment of property, forgery, falsification of accounts, sale of adulterated drugs etc.
• The Central Excise Act, 1944 provides the punishment for evasion of excise duty.
• The Income Tax Act, 1961 criminalizes tax evasion, income concealment etc. The Act also imposes a penalty on failure to furnish returns, comply with notices issued under the Act or concealment of particulars of income as well as any fringe benefits.
• The Customs Act, 1962 regulates how the goods should be moved in or out of the country, confiscation for improperly imported goods, and for safeguards against smuggling.
• The PMLA is a landmark legislation in India that lays down what acts constitute money laundering, punishment for money laundering, etc.
1. Section 3 of the PMLA defines 'Money laundering' as the direct or indirect attempts to indulge or knowingly assist or knowingly be a party or be actually involved in any process or activity connected with the proceeds of crime and protecting it as untainted property.
2. 'Proceeds of crime' has been defined under Section 2(u) as any property derived or obtained, by any person as a result of criminal activity being directly a Scheduled Offence or relating to a Scheduled Offence or the value of any such property.
3. The Schedule mentioned in the PMLA classifies the various offences, referred to as 'Scheduled Offences', into 3 parts, basis which the penalty is prescribed. Even though the offences described under the Schedule have already been covered under existing legislations like the IPC, the PMLA has been created to cater particularly to the handling of the proceeds from such offences.
4. The Bombay High Court, in the case of Hasan Ali Khan v. UOI, stated that an offence is committed under the PMLA when an attempt is made to demonstrate a legitimate source of earning with respect to a tainted property. The decision thus gave judicial support to the type of offences outlined under the PMLA.
5. Keeping in mind the offenders that have crossed the Indian borders and are evading arrest, the Central Government had also passed the Fugitive Economic Offenders Act, 2018 ('FEO Act') which specifically caters to deter fugitive economic offenders from evading the process of law in India. While said Act does not define 'economic offences', the Schedule to the Act once again contains a list of offences for which, if any person has committed and has thereafter left India to avoid criminal prosecution, or being already abroad refuses to return to India, he is deemed a 'fugitive economic offender'. The FEO Act borrows a lot of definitions from PMLA and empowers the Directors and Deputy Directors appointed under PMLA with additional rights to report/ declare fugitive economic offenders, details of their properties, etc., for attachment of the same.
6. The Insolvency and Bankruptcy Code, 2016 deals with fraudulent initiation of bankruptcy proceedings, by imposing penalty of not less than INR 1 lakh which may extend to INR 1 crore in such cases.

Fraud under the Companies Act, 2013:
To begin with, as economic crime has taken on new and larger forms, the definition of 'fraud' in Section 447 of the 2013 Act has also been expanded to include any act, omission, concealment of fact, or abuse of position that is intended to gain an unfair advantage over, or harm the interests of the company, its shareholders and creditors. This brings all forms of corruption, deception, conflicts of interest, and bribery under its purview.

As per the new legislation, as soon as fraud is detected, it is recommended to reopen account books, and go for voluntary amendment of financial statements or the Director's Report, with the agreement of the jurisdictional National Company Law Tribunal (NCLT). Until now, auditors were only mandated to report serious fraud and were not required to evaluate whether fraud had occurred in any and every transaction. However, auditors now have an additional burden to pose as whistle-blowers by reporting immediately to the Central Government any fraud being perpetrated in the company's affairs.

The Serious Fraud Investigation Office (SFIO), subsisting under the 2013 Act, is now a statutory entity with the authority to make arrests for fraud-related offences. The National Financial Reporting Authority (NFRA) is meant to regulate auditors and has extensive powers to investigate professional or other misconduct by chartered accountants. 18

Judicial Attitude On Socio Economic Offences

The role of the judiciary in combating economic offences is paramount in upholding the rule of law, ensuring accountability, and safeguarding the integrity of financial systems. Through its adjudicative functions, the judiciary plays a crucial role in interpreting laws, adjudicating disputes, and imposing sanctions on offenders.

In the context of economic offences, the judiciary fulfills several key roles through its important judgements, these are:

1. Y.S. Jagan Mohan Reddy v. C.B.I.
   This has been observed by the Supreme Court while considering a bail application, that: "The economic offence having deep-rooted conspiracies and involving huge loss of public funds 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 the country. While granting bail, the Court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interests of public/State and other similar considerations."
    
2. Chidambaram v. Directorate of Enforcement. And Directorate of Enforcement v. Ashok Kumar Jain (1998) 2 SCC 105
   The anticipatory bail was denied by the Apex Court stating that the powers of anticipatory bail under Section 438 of the Code of Criminal Procedure, 1973 is an extraordinary power and that should be exercised sparingly, more so in cases of economic offences which affect the very fabric of the economy in our society.
    
3. Ashwini Kumar Patra v. Republic of India and Pankaj Grover v. Directorate of Enforcement
   The prayers for bail have been dismissed outright by the High Courts, citing the huge amount of proceeds of crime. The Court also observed that the economically sound position of the accused would make them a flight risk, as they could abscond to any other country avoiding arrest as well as judicial proceedings. In short, a common yardstick adopted by all Courts when granting bail, that comes out from all these cases, is the amount of proceeds of crime, the apprehension of witness tampering or the chance for the accused to abscond, etc.
    
4. Jai Prakash Singh v. State of Bihar and another (2012) 4 SCC 379
   The Supreme Court held as under: "Parameters for grant of anticipatory bail in a serious offence are required to be satisfied and further while granting such relief, the court must record the reasons therefor. Anticipatory bail can be granted only in exceptional circumstances where the court is prima facie of the view that the applicant has falsely been enroped in the crime and would not misuse his liberty."
    
5. Y.S. Jagan Mohan Reddy v. CBI (2013) 7 SCC 439
   Observing that economic offences constitute a class apart and need to be visited with different approach in the matter of bail, in Y.S. Jagan Mohan Reddy v. CBI (2013) 7 SCC 439, the Supreme Court held as under: "Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offences having deep-rooted conspiracies and involving huge loss of public funds 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 the country."
    
6. Nimmajadda Prasad Versus CBI (2013) 7 SCC 466
   Hon'ble Apex Court in (2013) 7 SCC 466, titled Nimmajadda Prasad Versus CBI, while observing that white collar crimes were on the rise affecting development of the country as a whole, held that while granting bail, the Court has to keep in mind the nature of accusations, nature of evidence in support thereof, severity of punishment on conviction, character of accused, circumstances peculiar to the accused, reasonable possibility of securing presence of accused at trial, reasonable apprehension of witnesses being tempered with, larger interests of public/State and other similar considerations. At this stage, it is not necessary to establish guilt of accused beyond reasonable doubt. Economic offences need to be viewed seriously.
    
7. Central Bureau of Investigation v. Ramesh Gelli (2016)
   This case involved charges of financial irregularities and fraud in a prominent Indian bank. The Supreme Court's intervention and subsequent rulings demonstrated the judiciary's commitment to investigating and prosecuting high-profile economic offenders, regardless of their status or influence.

There are some observation that can be deduced from the above judgement which clearly shows the stance of Indian courts with respect to economic offenses, these are:

1. Economic crimes involve intricate plots and result in substantial public fund losses.
2. These crimes have a detrimental impact on the national economy, posing a significant threat to its financial stability.
3. It is imperative to treat these offenses with gravity and recognize them as serious violations.
4. Perpetrators of economic crimes meticulously plan their actions solely for personal gain, regardless of the broader societal consequences.
5. When economic offenders evade accountability, the entire community suffers from the repercussions of their actions, which undermine the state's economy.
6. In contemporary times, economic offenses are essentially societal wrongdoings, affecting the public collectively.
7. The severity and scale of economic offenses primarily affect the general public.
8. Economic crimes carry heightened seriousness due to their impact on society.
9. These offenses are typically perpetrated by individuals in white-collar professions.
10. Economic crimes cause significant harm to both the nation's health and wealth.
11. Bail considerations for economic offenses require a distinct perspective and approach.

Reform Proposals And Future Directions

Even though there are various legislations with respect to economic crimes, these crimes are still rising in the society as the graph is showing below.

The data reveal an upward trend in FCF cases, with an increase from 1.27 lakh cases in 2017 to 1.70 lakh cases in 2022. On the other hand, CBT increased from 20,371 cases in 2017 to 21,814 cases in 2022. Interestingly, cases registered under counterfeiting have shown a a positive decline, decreasing by half from 1,171 cases in 2017 to 670 cases in 2022. 25

According to NCRB, the police arrested 1.69 lakh individuals for economic offences in 2022, with only 16,869 of them being convicted. The backlog of pending cases is particularly noteworthy, with approximately 2.20 lakh cases pending at the end of the year. This results in a pendency percentage of 53.5 per cent. 26

Suggestions:
To curb these types of activities in the society some measures that should be taken:

1. Implementation of 47th law report's suggestions.
2. With the steep rise in economic offences in India, the existing judicial system is over-burdened with cases, in turn resulting in a decrease of arrests and convictions. Such dire situations call for a special court/body dedicated solely to dealing with economic offences, to ensure speedy disposal of cases.
3. Apart from penal actions against individuals, the affected party should be compensated if they have faced any losses due to the accused's actions.
4. Information sharing for action against economic crimes, including offences related to corruption (as mentioned in the G-20 meet) against those who move abroad after committing a crime in India.
5. Easement and strengthening of asset recovery mechanisms from offenders.
6. Promoting integrity among specialized authorities involved in preventing and combating corruption (e.g., E.D., C.B.I., etc.).

End Notes:

1. https://lawcommissionofindia.nic.in/cat_new/
2. https://www.lexology.com/library/detail.aspx?
3. Economic Offences (State/UT-wise) - 2018-2020 (National Crime Records Bureau) Economic Offences (States/UTs)-2020 | National Crime Records Bureau (ncrb.gov.in) accessed 23 March 2023.
4. https://www.thehindubusinessline.com/data-stories/data-focus/led-by-rajasthan-telangana-economic-offences-rise-in-last-two-years
5. 29th Law Commission report http://lawcommissionofindia.nic.in/1-50/Report29.pdf (NIC,1964) accessed 23 March 2023.
6. https://www.legalauthority.in/judgement/p-chidambaram-vs-directorate-of-enforcement-41213
7. 47th Law Commission report https://patnahighcourt.gov.in/bja/PDF/UPLOADED/BJA/MISC/298.PDF (NIC, 1972) accessed 23 March 2023.
8. ibid,9.9 Jupi Gagoi, Socio-Economic Offences https://ijcrt.org/papers/IJCRT2201227.pdf accessed 23 March 2023.
9. James Chen, Corruption: Its Meaning, Type and Real – world Example (Investopedia, 1 June 2022) Corruption: Its Meaning, Type, and Real-World Example (investopedia.com) accessed on 23 March 2023.
10. Bogus trade definition (Law Insider, 22 August 2017) https://www.lawinsider.com/dictionary/bogus-trade accessed 23 March 2023.
11. Britannica, Counterfeiting (Encyclopedia Britannica, 21 May 2019) https://www.britannica.com/topic/counterfeiting accessed 23 March 2023.
12. Aparajitha Jha, What are Economic offences in India? (Law Circa, 22 March 2023) What are Economic offences in India? - Law Circa accessed 23 March 2023.
13. Brendan T. Hewson, The Battle against Money Laundering (Westlaw, 1997) https://www.legalservicesindia.com/article/436/Money-Laundering.html accessed 23 March 2023.
14. Ibid,11.
15. Benson, Simpson, White collar crime, An opportunity perspective (3rd edn,2009) 23.
16. G. Nagarajan, Dr.J.Khaja Sheriff, White collar crimes in India, vol 1 (2012).
17. https://www.lexology.com/library/detail.aspx
18. 2022 SCC ONLINE TS 1504
19. 1998 AIR SC 631
20. 2013 AD SC 5 674
21. 2013 AD SC 5 549
22. 017 MHC 8014
23. https://www.thehindubusinessline.com/data-stories/data-focus/led-by-rajasthan-telangana-economic-offences-rise-in-last-two-years/article67641196.ece
24. 24. id.