Company Can Be Prosecuted For Criminal Offences Without Identifying Guilty Natural Person: Supreme Court

The Supreme Court on Monday held that identification of a natural person is not a prerequisite, at the threshold stage, for prosecuting a corporate entity for an offence involving mens rea.

A Division Bench comprising Justices J.B. Pardiwala and Manoj Misra made the observation while dismissing an appeal filed by Sanofi India Limited against the Karnataka High Court's refusal to quash criminal proceedings arising from a CBI chargesheet.

“All that is required, at this stage, is that an offence be made out, and this is made out irrespective of identification. Attribution, as a process, requires going into the niceties of a given case, and since the Court at this stage cannot undertake that exercise, identification is not a question that ought to be of importance at the threshold. Consequently, the Appellant's contention that the proceedings against it be quashed solely on the ground of non-identification of a natural person cannot be sustained.” the Bench held

Sanofi India Limited, a public limited company engaged in manufacturing pharmaceutical products, supplied medicines to the Rare Materials Project of Bhabha Atomic Research Centre (BARC) pursuant to tenders during 2011-12, 2013-14 and 2015-16.

The CBI alleged that Dr. P. Anand, a Scientific Officer (Medical) at BARC, conspired with pharmaceutical companies, including Sanofi, to procure medicines at inflated rates and in excess of requirements. The chargesheet alleged that Dr. Anand favoured Sanofi by misclassifying medicines as proprietary, excluding competing bidders and not placing orders with the lowest bidder, causing a wrongful loss of ₹3.53 lakh to BARC. It also alleged that Dr. Anand received illegal gratification of ₹42,750 from Sanofi.

The Trial Court took cognizance of the offences under the Indian Penal Code and the Prevention of Corruption Act. No employee or official of Sanofi was arraigned as an accused.

Sanofi approached the Karnataka High Court seeking quashing of the proceedings, arguing that a company could not be prosecuted for an offence involving mens rea without arraigning its directors of persons in charge of its affairs. The High Court rejected the plea, holding that prosecution of a corporate entity without arraigning its directors or persons in charge was maintainable and that the allegations required examination at trial. Sanofi then approached the Supreme Court.

The Bench examined the English common law position on corporate criminal liability and observed that the identification doctrine applies mainly where an offence requires proof of mens rea. It noted that for offences based only on conduct, a company may be directly liable or, in appropriate cases, vicariously liable.

It relied on the Supreme Court's decision in Standard Chartered Bank v. Directorate of Enforcement, wherein it was held that a company can be prosecuted even where the offence carries mandatory imprisonment, provided the law also prescribes a fine. Since imprisonment cannot be imposed on a company, the Court held that a fine alone can be imposed on a corporate accused.

Referring to Indian precedents, the Court observed that a corporation can generally be prosecuted even for offences involving mens rea or carrying mandatory imprisonment.

“The position under Indian Law is thus clear that a corporation can be prosecuted for an offence notwithstanding that it carries a mandatory sentence of imprisonment, or requires proof of mens rea. It appears that a corporation cannot be prosecuted only where the offence is punishable with imprisonment alone, or where the offence, by its nature, requires personal malicious intent, such that it is incapable of commission by a corporation at all.” it stated

The Court considered how the mens rea of a natural person can be attributed to a corporation and laid down a three-stage framework:

(i) Authority: Whether the person had the power, under the company's constitutional documents or company law, to perform the act.

(ii) Delegation: Whether that power was delegated to the person with sufficient discretion and independence.

(iii) Attribution: Whether the nature and purpose of the statute require a special rule to attribute that person's acts and state of mind to the corporation.

The Court held that a corporation can possess mens rea only through attribution from a natural person. It clarified that the complete requisite mens rea must exist in at least one natural person and cannot be created by combining the partial states of mind of different individuals.

It further held that the chargesheet need only show that the corporation itself committed the offence; it need not identify the particular individual through whom the offence was committed. The Bench said that the corporation's role can be established through its conduct, decisions and dealings, even without naming a natural person.

On quashing of the proceedings, the Court observed that identification of the natural person and attribution of mens rea are matters that may strengthen the prosecution's case, but are not essential for disclosing an offence against the corporation at the initial stage.

Lastly, the Bench held that the chargesheet and material on record prima facie showed that natural persons had acted on behalf of Sanofi and that their acts could have involved the requisite mens rea. It said this was sufficient at this stage and no further examination was necessary.

Accordingly, the Court dismissed the appeal.

For Appellant: Advocates Aditya Vikram Bhat, V.P. Singh, Anind Thomas, Priyank Ladoia, Mayank Pandey, AOR, Raghav Seth, Prerna Ponnappa, and Priyanka Shetty

For Respondent: Advocate Mukesh Kumar Maroria, AOR