Non-Identification Of Natural Person No Ground To Quash Prosecution Against Company: Supreme Court Lays Down Three-Stage Test For Attributing Mens Rea To Corporations

The Court further clarified that neither the identification of the specific individual who acted for the corporation, nor the arraignment of that individual as a co-accused, is a mandatory prerequisite for maintaining a prosecution against the company itself. It held that such requirements, if imported wholesale into every case, would risk stifling genuine prosecutions against corporations at the very outset, particularly in circumstances where the identity of the actual wrongdoer within the corporate hierarchy may not be readily ascertainable even after investigation.

A Division Bench of Justice J.B. Pardiwala and Justice Manoj Misra, observed, “…The role of attribution, properly understood, is to establish mens rea conclusively, and that is a task to be undertaken during the trial. The framework laid down above also makes clear that attribution is not a simple question with a fixed set of answers. It is an intricate inquiry, involving the consideration of several factors. Consequently, whether attribution ought to occur in a given case is ultimately a matter for trial. Identification, in this sense, is accordingly a question that does not assume primary importance at the threshold”.

“Viewed from another angle, insisting on identification at this threshold risks something further: it would permit the power under Section 482 CrPC to be exercised in a manner that stifles prosecution at the outset, even where the allegations make out an offence against the corporation in clear terms. This may play out in more than one way. A complainant filing an FIR against a corporation often only knows that someone within the corporation committed the act in question, without any means of knowing who. To an extent, this may hold even once the investigation is complete. The investigating agency may not always be able to identify the individual actually responsible, yet may still, based on other circumstances, arrive at the conclusion that the corporation committed the offence with the requisite mens rea. Were identification pressed as a general rule in dealing with companies, prosecution in such instances would be stifled at the very threshold”, the Bench noted further.

Senior Advocate Siddharth Luthra appeared for the appellant and Mukesh Kumar Maroria, AOR appeared for the respondent.

The appellant, a pharmaceutical manufacturer, supplied medicines to the Rare Materials Project of the Bhabha Atomic Research Centre (BARC) during 2011-12, 2013-14, and 2015-16. It was arrayed as an accused in an FIR alleging that Dr. P. Anand, a Scientific Officer at BARC, had conspired with several pharmaceutical companies to procure medicines at inflated rates and in excess quantities.

The chargesheet alleged that Dr. Anand, in league with the appellant, either misclassified items as proprietary to bypass competitive bidding, omitted competing bidders from tenders, or declined to award contracts to the lowest bidder, causing a wrongful loss of ₹3,53,361 to BARC. It was further alleged that Dr. Anand received illegal gratification of ₹42,750 from the appellant. Offences under Section 120B read with Section 420 IPC, and provisions of the Prevention of Corruption Act, 1988, were invoked. No employee or official of the appellant company was named as an accused.

The Trial Court took cognizance and issued process against the appellant and Dr. Anand. The appellant approached the Karnataka High Court under Section 482 CrPC, contending that a corporation cannot be prosecuted for an offence requiring mens rea without its "directing mind and will" being identified and arraigned. The High Court, relying on Iridium India Telecom Ltd. v. Motorola Inc. [(2011) 1 SCC 74], held the prosecution maintainable and dismissed the petition, observing that a trial was warranted given the specific allegations regarding rigged tender quotations. The appellant then approached the Supreme Court.

Issues Considered

The Court identified and addressed the following questions:

• Whether, and on what basis, a corporation can be said to possess mens rea under Indian law;
• If so, through what framework the mens rea of a natural person is to be attributed to the corporation;
• Whether non-identification of the natural person concerned renders a chargesheet incapable of disclosing an offence against the corporation;
• Whether non-arraignment of such a natural person is fatal to the prosecution of the corporation, as it would be in reverse under provisions creating vicarious liability (such as Section 141, Negotiable Instruments Act); and
• Whether, on the facts, the allegations against the appellant disclosed the commission of an offence sufficient to resist quashing.

Undertaking a detailed comparative survey, the Court traced the evolution of corporate criminal liability under English law, from the early nonfeasance cases, through Lennard's Carrying Co. v. Asiatic Petroleum Co. [1915 AC 705], the House of Lords' articulation of the "directing mind and will" test in Tesco Supermarkets Ltd. v. Nattrass [1972 AC 153], Lord Hoffmann's reformulation via "rules of attribution" in Meridian Global Funds Management Asia Ltd. v. Securities Commission [1995 2 AC 500], and the subsequent narrowing of the doctrine in the Barclays prosecutions.

It also traced Indian jurisprudence, noting that while Standard Chartered Bank v. Directorate of Enforcement [(2005) 4 SCC 530] settled that mandatory imprisonment does not immunise a company from prosecution, and Iridium India settled that a corporation can possess mens rea, neither decision addressed how such mens rea is to be attributed, a gap the Court found necessary to fill.

Drawing on the Barclays approach, the Court laid down a sequential three-stage attribution framework:

• First stage: whether the corporation's constitutional documents (memorandum and articles of association), or a rule implied by company law, vest the concerned person with power to do the act in question;
• Second stage: where the first stage fails, whether that power was expressly or impliedly delegated to the person with sufficient discretion and independence; and
• Third stage: where both fail, whether the purpose of the specific statute creating the offence, construed either in the abstract (for narrow provisions) or in light of the facts (for broad provisions), warrants fashioning a special rule attributing the act to the corporation.

The Court clarified that this exercise is transaction-specific and does not seek to identify a company's "directing mind" in the abstract, and that corporate mens rea cannot be assembled by aggregating partial states of mind across several individuals, it must be found in full within at least one natural person before attribution can occur.

Applying this to the question of quashing, the Court held that since attribution is an intricate inquiry requiring examination of internal corporate structures, delegation, and statutory purpose, it cannot be conclusively undertaken at the Section 482 CrPC stage.

It further distinguished Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd. [(2012) 5 SCC 661], holding that the requirement of arraigning a company before prosecuting its officers under Section 141 NI Act arises from that provision's specific vicarious-liability scheme, and cannot be reversed into a general rule requiring arraignment of natural persons before a company can be prosecuted directly.

The Court held that at the threshold stage, a chargesheet against a corporation must prima facie disclose: that some natural person acted on the corporation's behalf; that such action is referable to the alleged offence; and that the surrounding circumstances do not render the existence of mens rea patently absurd or inherently improbable.

Cause Title: Sanofi India Ltd. v. Central Bureau of Investigation (Neutral Citation: 2026 INSC 957)

Appearances:

Appellant: Siddharth Luthra, Senior Advocate.

Respondent: Mukesh Kumar Maroria, AOR.

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