Beyond the Corporate Veil: Supreme Court Clarifies Criminal Liability of Companies
The Supreme Court has significantly clarified the contours of corporate criminal liability, holding that a company can be prosecuted for offences involving mens rea even where the individual employee or officer responsible for the alleged offence has not been identified or arraigned as an accused.
In Sanofi India Ltd. v. Central Bureau of Investigation, (2026 INSC 957), decided on September 7, 2026, a Bench comprising Justice J.B. Pardiwala and Justice Manoj Misra examined a fundamental question in corporate criminal law: Can a company face criminal prosecution when the prosecution has not identified the particular natural person whose conduct and mental state are sought to be attributed to the company?
The Supreme Court answered this in the affirmative, but with important qualifications.
A Company Cannot Hide Behind Its Corporate Personality
The case arose from alleged irregularities in Sanofi India Limited’s supply of pharmaceutical products to BARC, including allegations of preferential treatment, illegal gratification and a wrongful loss of approximately Rs. 3.53 lakh.
Sanofi sought quashing of the proceedings before the Karnataka High Court, arguing that no individual officer or employee had been arraigned. The High Court declined to interfere, holding that a company can be prosecuted for offences involving mens rea. The Supreme Court has now affirmed this position and clarified the principles governing attribution of an individual’s conduct and mens rea to a corporation.
Identification of an Individual Is Not a Mandatory Starting Point
A significant aspect of the judgment is the Court’s rejection of the proposition that criminal proceedings against a company must necessarily fail unless the prosecution first identifies and prosecutes the individual responsible for the company’s conduct.
The Court held that the non-identification or non-arraignment of a natural person, by itself, is not sufficient to quash proceedings against a corporate entity at the threshold stage.
This, however, does not mean that a company can automatically be prosecuted merely because the alleged conduct occurred in the course of its business.
At the prima facie stage, the allegations must indicate:
- that one or more natural persons acted on behalf of the corporation;
- that their conduct was connected with the offence alleged; and
- that, considering the surrounding circumstances, the existence of the requisite mens rea is not patently absurd or inherently improbable.
The Court therefore distinguished between identifying the individual and establishing a sufficient factual basis for attributing the conduct to the company. The former need not necessarily precede the latter.
The Three-Stage Attribution Framework
- Check the Company’s Structure: See whether the company’s constitutional documents gave the person the relevant authority.
- Check Delegated Authority: Determine whether the person had express or implied authority to act for the company.
- Consider the Purpose of the Statute: If neither applies, examine whether the purpose of the law requires attributing the person’s conduct to the company.
Corporate Criminal Liability Is Not Automatic
The judgment distinguishes corporate involvement from corporate criminal liability. The mere fact that an employee, director or senior executive committed an offence in the course of their work does not automatically make the company liable.
The prosecution must establish a legal connection between the individual’s conduct and mens rea and the corporation. The Court therefore emphasised that attribution is transaction-specific, requiring an assessment of whose conduct, in relation to the particular transaction, can legally be treated as the conduct of the company.
The Role of Mens Rea
The judgment reaffirms that a corporation can possess mens rea through attribution. Since a company acts through natural persons, the requisite mental state must be established in an individual before it can be attributed to the corporation. However, such attribution is not automatic and must be assessed in light of the individual’s authority, the circumstances of the transaction and the nature of the offence.
From Corporate Immunity to Corporate Accountability
The law on corporate criminal liability in India has gradually moved away from the idea that companies should be protected from criminal prosecution. In Standard Chartered Bank v. Directorate of Enforcement ((2005) 4 SCC 530), the Supreme Court held that a company cannot claim immunity merely because the offence carries a mandatory term of imprisonment. This was followed by Iridium India Telecom Ltd. v. Motorola Inc. ( 2011) 1 SCC 74), where the Court recognised that a company can have mens rea by attributing the criminal intent of the individuals who represent its “directing mind and will” to the company.
The Sanofi India Ltd. v. CBI judgment takes this principle a step further. While the earlier decisions established that companies can be punished and can possess mens rea, Sanofi clarifies that prosecution against a company need not fail at the outset merely because the specific individual responsible has not yet been identified or arraigned. The Court has therefore made it clear that the question of individual responsibility can be examined during the course of the trial, provided there is a sufficient basis to proceed against the company at the initial stage.
A New Standard for Corporate Liability.
The Sanofi India judgment marks an important development in the law of corporate criminal liability by making it clear that a company cannot escape prosecution merely because the individual responsible for the alleged offence has not yet been identified or arraigned. At the same time, the Court has made clear that corporate liability cannot be presumed and must be supported by a prima facie link between the company, the individual’s conduct and the required mens rea. By laying down a structured approach to attribution, the judgment seeks to strike a balance between holding companies accountable for criminal conduct and protecting them from unfounded prosecution.
