New Delhi: The Supreme Court on Monday ruled that criminal proceedings against a company cannot be quashed merely because the investigating agency has not identified or made a director, employee or any other individual acting on its behalf an accused in the case.
The ruling came as a bench of Justices J B Pardiwala and Manoj Misra dismissed an appeal filed by Sanofi India Limited against a Karnataka High Court order that had refused to quash criminal proceedings arising from a Central Bureau of Investigation (CBI) case.
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The case concerns alleged irregularities in the procurement of medicines for the Bhabha Atomic Research Centre (BARC). According to the chargesheet, a BARC official allegedly conspired with Sanofi India in the purchase of medicines at inflated prices, while illegal gratification was purportedly paid in return for undue favours.
These allegations have not yet been established at trial.
While Sanofi India was named as an accused, the CBI did not prosecute any of its directors, officers or employees. The company consequently argued that the proceedings could not be sustained because no natural person whose conduct or criminal intent could be attributed to it had been identified or arraigned.
Sanofi also contended that a company, being an artificial legal person, could not independently possess mens rea, or criminal intent, and could not be subjected to imprisonment in the event of conviction.
Justice Pardiwala, who authored the 98-page judgment, examined how the actions and state of mind of individuals may be attributed to a corporate entity.
Rejecting Sanofi India’s argument, the court held that Indian law permits the prosecution of a company for offences requiring proof of criminal intent and even for offences carrying a mandatory sentence of 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," the top court said.
The bench held that the absence of an identified individual at the stage of considering a petition for quashing criminal proceedings was not, by itself, fatal to the prosecution.
"What the chargesheet must disclose, on its face, is that the corporation itself has committed the offence," it said, holding that the company’s alleged role could be disclosed through its conduct, decisions and dealings without necessarily naming the individuals who carried them out.
The court, however, did not dispense with the requirement of proving criminal intent. It held that a corporation can possess mens rea only through attribution from one or more natural persons. Whether such attribution can conclusively be made is a factual question that ordinarily has to be determined during the trial.
According to the judgment, the company’s state of mind may, at the threshold stage, be inferred from the surrounding facts, transactions and circumstances. It need not necessarily be linked to a specifically identified employee before the case is allowed to proceed.
The court observed that corporate criminal liability had developed in recognition of the economic and social power exercised by companies and their capacity to cause substantial harm.
"While the academic debate goes on, it is beyond question that, both in India and elsewhere, corporations can and are being subjected to criminal liability.... This has been primarily driven by the pragmatic recognition that corporations, as institutions commanding vast financial and sociopolitical power, possess the ability to cause serious harm...," the court said.
Acknowledging the legal difficulty in assigning human actions and intentions to an artificial entity, the bench added:
"Corporate criminal liability is a notoriously-vexed issue and the difficulty traces back to two fundamental notions we simultaneously hold about corporations. First, a corporation is an artificial person with an identity distinct from that of its members. Second, a corporation is merely an abstraction, that is, an impalpable thing or, as is famously said, a corporation has 'no soul to damn and no body to kick'," it said.
The Supreme Court laid down a sequential, three-stage framework for determining when the actions and criminal intent of an individual can be treated as those of a company.
At the first stage, a court must examine the company’s constitutional documents, including its memorandum and articles of association, and the rules flowing from company law to determine who was vested with the authority to carry out the act in question.
If the constitutional documents do not provide an answer, the court must consider whether the relevant authority had been expressly or implicitly delegated to an individual. The inquiry would focus on whether that person possessed sufficient discretion and independence to act on behalf of the company, rather than merely examining the person’s formal designation.
If neither of the first two stages resolves the question, a court may formulate a special rule of attribution by examining the purpose and policy of the statutory provision under which the company is being prosecuted.
The framework, therefore, does not automatically treat the actions of every employee as those of the company. Attribution would depend on the authority exercised by the individual, the degree of discretion available and the objective of the law concerned.
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The bench also rejected the contention that the prosecution of a company necessarily depends on a natural person being simultaneously made an accused.
It distinguished cases involving direct corporate criminal liability from statutory provisions that create vicarious liability for directors or officers based on an offence committed by a company. In cases of direct liability, the failure to arraign an individual would not, on that ground alone, justify terminating proceedings against the corporate entity.
The court nevertheless clarified that companies do not lose the protections available to other accused persons. A complaint or chargesheet against a company can still be quashed if it fails to disclose the essential ingredients of an offence or if the allegations are inherently improbable.
The bench held that the allegations and material in the Sanofi India case met the threshold required for the matter to proceed to trial. It, however, made no final determination on the company’s guilt or on whether the conduct and mens rea of any individual could ultimately be attributed to it.
Finding no error in the Karnataka High Court’s refusal to quash the case, the Supreme Court dismissed Sanofi India’s appeal. The Registry was also directed to circulate the judgment to all High Courts. The ruling was delivered in Sanofi India Ltd v Central Bureau of Investigation, Criminal Appeal No. 4250 of 2026.
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