The Supreme Court has ruled that criminal proceedings against a company cannot be quashed merely because the investigating agency has failed to identify or charge the individual through whom the alleged offence was committed.
A bench of Justice JB Pardiwala and Justice Manoj Misra dismissed an appeal filed by pharmaceutical company Sanofi India Ltd, challenging a Karnataka High Court order that had refused to quash criminal proceedings against it.
Case involves alleged bribery in BARC medicine procurement
The case stems from a CBI investigation into the procurement of medicines for the Bhabha Atomic Research Centre (BARC).
According to the chargesheet, a BARC official allegedly colluded with Sanofi India to purchase medicines at inflated prices and received bribes in return for providing undue benefits to the company.
Sanofi India argued that it could not be prosecuted because criminal intent, or mens rea, could not be attributed to the company. It also contended that a company cannot be sentenced to imprisonment if found guilty.
However, the Supreme Court rejected the argument that an individual must necessarily be identified and made an accused alongside the company.
98-page judgment explains corporate criminal liability
Justice JB Pardiwala authored the 98-page judgment, examining how the acts and criminal intent of individuals can be attributed to companies.
The Court held that a company can be prosecuted even for offences where imprisonment is prescribed or where proving mens rea is an essential element.
However, there are exceptions where the nature of the offence requires a form of personal intent that a company, as an artificial entity, cannot possess.
The Court said the chargesheet must, at the preliminary stage, establish that the alleged offence was committed by the company itself. The company’s role can be inferred from its actions, decisions and transactions, without necessarily identifying the particular individual who carried them out.
What is ‘mens rea’?
Mens rea is a legal term meaning a guilty mind or criminal intent.
In simple terms, it refers to the intention behind an act. When a person knowingly and deliberately commits an unlawful act, the required criminal intent may be established.
The Supreme Court said that at the initial stage, mens rea can be inferred from the surrounding facts and circumstances. Identifying a particular individual is not always necessary at that stage.
A detailed determination of whose actions and intentions should be attributed to the company can be made during the trial.
Court lays down 3-step test for company liability
The Supreme Court also outlined a three-step framework for determining whether an individual’s actions and criminal intent can be attributed to a company:
1. Examine the Articles of Association The court will first examine the company’s constitutional documents to determine who had authority to act on its behalf.
2. Check delegated authority The court will then examine whether that authority was delegated to an individual who had sufficient independence and decision-making power. The person’s formal designation will not be decisive.
3. Apply a special attribution rule if required If the first two steps do not provide a clear answer, the court may develop a “special attribution rule” based on the purpose and policy of the relevant law.
Why the ruling matters
The judgment reinforces that companies cannot automatically avoid criminal prosecution simply because the investigating agency has not identified a specific employee or officer as an accused.
The Court noted that corporate criminal liability has historically been a complex area because a company is an artificial and intangible entity, separate from its shareholders and members.
At the same time, the bench clarified that companies do not enjoy any special exemption from the ordinary principles governing the quashing of criminal proceedings.
The Supreme Court also observed that the law governing corporate criminal liability in offences requiring mens rea remains complex and may require further legislation and a broader review.
