Bankruptcy Fraud and Victim Redressal System: A Time for Change

Date01 October 2019
publishedDate01 October 2019
DOI10.1177/2516606919841792
Bankruptcy Fraud and
Victim Redressal System:
A Time for Change
Kanwal D. P. Singh1
Anant Vijay Maria2
Abstract
The white-collar crimes in India are either underreported or brushed away due
to crony capitalistic tendencies. The non-reporting of such crimes renders the
victims without any due redressal, which in turn leads to the catastrophic problem
of non-availability of an appropriate legal framework or statistics to address the
core problem. This then leads to the bigger problem of victimology with respect
to white-collar crimes in India. The world faced a similar problem and rather a
peculiar one when the US economy was in shambles due to the subprime crisis
wherein the banks, regulatory framework, Congressmen and many other parts of
the state machinery were part of the inevitable downward spiral of the US econ-
omy. Several decades of investigations and analysis of the subprime crisis of 2008
led to the juxtaposition of bankruptcy fraud and its redressal by victim-oriented
schemes. The innocent victims had no remedy left except for prosecution which
also was not taken seriously by the Attorney General of the USA. This article, thus,
analyses the menace of bankruptcy fraud qua its impact on the victims. The article
is divided into three parts: Part I analyses the US bankruptcy legal framework and
its victim compensation schemes. Part II analyses the UK position of the same
while discussing the recent framework for redressal of Insolvency Services and
Victim Compensation. Part III analyses India’s current Insolvency and Bankruptcy
Code, 2016, the offences under the said Code and the need for its redressal and a
greater need for a victim-oriented scheme in order to protect the framework and
the innocent victims suffering due to bankruptcy fraud.
Keywords
Bankruptcy, fraud, insolvency, victimology
Article
Journal of Victimology
and Victim Justice
2(2) 184–201, 2019
2019 National Law
University Delhi
Reprints and permissions:
in.sagepub.com/journals-permissions-india
DOI: 10.1177/2516606919841792
journals.sagepub.com/home/vvj
1 Professor and Dean, University School of Law and Legal Studies, Guru Gobind Singh Indraprastha
University, Delhi, India.
2 Research Scholar, University School of Law and Legal Studies, Guru Gobind Singh Indraprastha
University, Delhi, India.
Corresponding author:
Anant Vijay Maria, 49, Pushpanjali Apartments, Plot No.10, Sector-4 Dwarka, New Delhi 110078, India.
E-mail: anant.vijay.maria@gmail.com
Singh and Maria 185
Introduction
The world has discussed and deliberated, at large, the wrongdoings of financial
institutions during the subprime crisis and the misplaced regulations3 or a lack
thereof, which caused irreparable harm and injury to people at large. The deregula-
tion that was the cause of the problem is yet to be properly reconstructed as a matter
of fact.4 The various bankruptcies that occurred during the period, as well as various
fraudulent details, came to the forefront. The larger key issue which goes unnoticed
is that of the understanding of victimization which goes beyond the normative con-
struct. The victimization of white collar5 or financial crime has been severe, ranging
from financial, physical to emotional harm, which is not being accounted for due to
lack of literature6 and statistics7 being gathered to prove the same. Gregg Barak, in
his treatise Theft of a Nation,8 addressed such issues at large on the underrepresenta-
tion of white-collar studies and the weathering framework regarding white-collar
crime.9 The issue further points us towards the Sutherland and Tappan debate10
whereby the mere labelling of civil harm and statutory violations dilutes the inten-
sity of the actual criminal behaviour behind such issues.
The entire process from identification of victim to the remedy that lie in the
civil cases is a troubled and silent tormented journey. The problem of identifica-
tion lies with the construct of the victim as a concept due to the various value-
based judgements such as cultural, political and so on.11 This, coupled with the
high cost of access to justice, leads to a huge burden on the victim who will not
have deep pockets as that of the financial perpetrator. In the USA, the trend of
settlements without admission of fault or guilt leads to a further problem as wit-
nessed during the reductions of mortgage balances. The mammoth size of banks
and financial conglomerates which were labelled easily as ‘Too big to fail and Too
big to Jail’12 further showcased the problem in identification of the law enforce-
ment as well as criminologist to address the problem at hand.13
3 J. A. Kirshner, The Bankruptcy Safe Harbor in Light of Government Bailouts: Reifying the
Significance of Bankruptcy as a Backstop to Financial Risk, 18 n.Y.U. J. Legis. & PUb. PoLY 795
(2015).
4 P. g. MAhoneY, Deregulation and the Subprime Crisis, 104 VA. L. reV 235 (2018).
5 P. Leighton, Corporate Crime and the Corporate Agenda for Crime Control: Disappearing
Awareness of Corporate Crime and Increasing Abuses of Power, 14 W. CriMinoLogY reV 38 (2013).
6 D. MCgUrrin, M. JArreLL, A. JAhn & b. CoChrAne, White Collar Crime Representation in the
Criminological Literature Revisited, 2001–2010, 14 W. CriMinoLogY reV 3, 19 (2013).
7 L. e. DerVAn & e. s. PoDgor, White-Collar Crime: Still Hazy After All These Years, 50 gA. L. reV
709, 768 (2016).
8 G. bArAK, theft of A nAtion: WALL street Looting AnD feDerAL regULAtorY CoLLUDing (Rowman
& Littlefield, 2012).
9 g. bArAK, The Flickering Desires for White-Collar Crime Studies in the Post-Financial Crisis: Will
They Ever Shine Brightly, 14 W. CriMinoLogY reV 61 (2013).
10 K. hoLtfreter, Sutherland-Tappan Debate, in enCYCLoPeDiA of White-CoLLAr & CorPorAte CriMe
777–778 (L. M. sALinger, ed., SAGE Publications, 2005).
11 S. WiLL, s. hAnDeLMAn & DAViD brotherton, eds., hoW theY got AWAY With it: White CoLLAr
CriMinALs AnD the finAnCiAL MeLtDoWn (Columbia University Press, 2013).
12 J. W. MArKhAM, Regulating the Too Big to Jail Financial Institutions, 83 brooK. L. reV 517, 578
(2018).
13 r. tiLLMAn, Too Big to Jail, 14 W. CriMinoLogY reV 31 (2013).

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