[Shailee Basu is an Associate at Shardul Amarchand Mangaldas & Co. and based in Delhi]
A corporation has no body with which to be punished and no mind with which to form criminal intent. Yet modern criminal law increasingly treats the corporation as a criminal actor in its own right. The Supreme Court’s recent judgment in Sanofi India Ltd. v. Central Bureau of Investigation, is an important development in this direction. The Court has now provided a structured framework for determining when the acts and mental states of natural persons can be attributed to a corporation, while making clear that corporate liability is not merely a form of vicarious liability.
The case arose from a CBI prosecution concerning the procurement of pharmaceutical products for the Bhabha Atomic Research Centre (“BARC”). The allegations concerned Dr P. Anand, an officer at BARC, and pharmaceutical companies, including Sanofi India, and involved alleged criminal conspiracy and improper procurement at inflated prices. The chargesheet invoked, among other provisions, sections 120B and 420 of the Indian Penal Code, 1860, andsections 11, 12 and 13 of the Prevention of Corruption Act, 1988. Notably, while Dr. Anand and Sanofi were arraigned, no employee or official of Sanofi was arrayed as an accused. Therefore, Sanofi approached the Karnataka High Court seeking quashing of the proceedings, principally arguing that a corporation could not be prosecuted for an offence requiring mens rea without identifying and arraigning the natural person whose conduct and state of mind could be attributed to it. The High Court rejected this contention and held that prosecution of the company was maintainable even in the absence of its directors or persons in charge. Sanofi consequently approached the Supreme Court.
The Supreme Court rejected the proposition that the absence of a co-arraigned natural person, by itself, was sufficient to terminate the prosecution against the company. At the same time, the Court found that the chargesheet failed to disclose the foundational facts necessary to establish a prima facie case of criminal conspiracy against Sanofi. The proceedings were therefore ultimately quashed.
Through Sanofi, the Court discussed two important questions. The first is whether a corporation can possess mens reaat all which is already answered in the affirmative in the Indian jurisprudence of corporate criminal responsibility. The second is how that mens rea is to be attributed to it, which the Court sought to examine in Sanofi.
Sanofi addresses this second question through an attribution framework which looks first to the company’s constitutional arrangements, then to delegation of authority, and finally, where necessary, to a special rule of attribution derived from the purpose of the statute.
As the Court itself recognises, corporations possess substantial financial and institutional power and can cause serious harm. It is also not always easy to identify and punish the individuals operating behind the corporate structure. The problem is particularly acute because the corporate structure can separate the organisation from the individuals through whom its decisions are made. If responsibility is invariably reduced to the particular employee who carried out the offending act, the wider organisation may escape scrutiny. Corporate criminal liability responds to precisely this accountability gap. The Court’s discussion of corporate criminal liability recognises that the law has increasingly moved towards treating the corporation as an entity capable of bearing responsibility for wrongdoing committed through its organisational machinery.
The practical difficulty is that complex corporate structures can make this human agency difficult to see. Subsidiaries, layers of delegation and decentralised decision-making may separate the legal entity from the individual who actually conceived, authorised or facilitated the conduct. However, the corporation should not be able to escape responsibility merely because its activities are distributed across an organisational structure. But the converse is equally important: the corporate form should not become a place behind which individual criminal responsibility disappears.
This is where Sanofi‘s discussion of identification at the quashing stage is particularly significant. The Court rejects the argument that proceedings against a company must automatically fail because the natural person has not been identified or arraigned at this stage. Yet it does not say that human agency is irrelevant. On the contrary, the Court holds that allegations against a corporation must, at least prima facie, reveal (i) that some natural person or persons acted on its behalf, (ii) that the action is referable to the offence, and (iii) that the surrounding circumstances do not make the requisite mens rea patently absurd or inherently improbable.
Corporate Liability and Individual Liability Answer Different Questions
In Sanofi, the Court expressly clarifies that its attribution framework operates in one direction, from the natural person to the corporation, and has no bearing on the criminal liability of the natural person.
Sanofi does not say that natural persons must invariably be prosecuted whenever a corporation is prosecuted, which was already settled in Sunil Bharti v. CBI – where the Court held that a director cannot be automatically criminally liable whenever the company commits a crime. Nor would such a rule make sense: criminal liability must remain evidence-based, and corporate office alone cannot establish personal guilt. It just says that it is not necessary for the prosecuting body to identify a natural person as a condition precedent for prosecuting a corporation. However, the allegations have to prima facie reveal involvement of natural person(s).
Corporate liability and individual liability answer different questions arising from the same transaction. Comparative law illustrates this more explicitly. For instance, Canada’s Criminal Code provides that an organisation may be a party to an offence where a senior officer, acting within the scope of authority and with the requisite mental state, commits the offence, directs other representatives to commit it, or knowingly fails to take reasonable measures to stop it. The model therefore connects corporate responsibility to identifiable human authority without making the corporation’s liability merely dependent upon a separate conviction of that individual. The European Union provides for liability of legal persons where offences are committed for their benefit by persons in leading positions, while expressly stating that liability of the legal person does not preclude criminal proceedings against natural persons who commit, incite or are accessories to the offence.
The principle is therefore not one of choosing between the corporation and the individual but recognising that one transaction can generate two legally distinct forms of responsibility.
The Consequences of Punishing a Corporation
There is, however, another side to the argument for corporate liability which deserves greater attention. Punishing a corporation is not equivalent to punishing an individual.
A corporate fine may be imposed on a company, but the economic consequences of that fine are ultimately distributed among human beings. While shareholders already sign up to bear the risk of losses, employees may face uncertainty or loss of employment, consumers may face increased prices or reduced services, creditors and suppliers may also be affected. The corporate form therefore creates a duality where criminal law treats the corporation as an independent actor, while the consequences of the punishment necessarily travel through the individuals who live and work within its economic orbit.
This is one reason why corporate sentencing presents a problem that individual sentencing does not. The traditional corporate punishment, a fine, may be necessary to deter wrongdoing, but a sufficiently large fine may exceed the corporation’s ability to pay and threaten its continued existence.
What Should Follow from Sanofi?
Sanofi moves beyond the bare proposition that corporations can possess mens rea and provides a structured account of how that mens rea can be attributed. Its approach also recognises an important procedural reality: the inability to identify or arraign a particular natural person at the threshold should not, by itself, immunise a corporation from prosecution.
At the same time, the judgment’s reasoning makes clear that the corporation’s criminal mind remains rooted in human agency. That does not make corporate liability derivative in every case; nor does it make every director or employee criminally liable. It does, however, require criminal law to keep both levels of responsibility in view. Where the evidence establishes the corporation’s liability and independently establishes an individual’s criminal responsibility, the two should operate cumulatively.
The two forms of liability therefore perform different punitive functions. Corporate punishment can target the economic and organisational capacity through which wrongdoing was enabled or rewarded; individual punishment can attach responsibility to the human actors whose own conduct satisfies the elements of the offence. One cannot always achieve the purpose of the other.
Further, punishment of corporate actors must be calibrated to the nature and gravity of the misconduct, the company’s internal structure, the extent of harm caused, and its financial capacity to bear the sanction. This calls for a more nuanced legislative framework, one that ensures that punishment operates on the corporation as the culpable entity, while minimising collateral harm to stakeholders who may have had no involvement in the underlying wrongdoing.
– Shailee Basu
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