The Supreme Court has clarified that a criminal prosecution against a company cannot be quashed merely because the individual who allegedly acted for the company has not been identified or made an accused.
A Bench of Justice J.B. Pardiwala and Justice Manoj Misra held that, at the stage of considering a petition under Section 482 of the Code of Criminal Procedure (CrPC), identification and arraignment of a natural person are not automatic prerequisites for continuing proceedings against a corporation.
The ruling came in Sanofi India Ltd. v. Central Bureau of Investigation, where the pharmaceutical company challenged criminal proceedings arising from alleged irregularities in the procurement of medicines for the Rare Materials Project of the Bhabha Atomic Research Centre (BARC).
Background of the Case
Sanofi India had supplied pharmaceutical products to BARC through tender processes during the relevant years. The CBI case arose from allegations involving Dr. P. Anand, a Scientific Officer (Medical) at BARC, and the company.
The chargesheet alleged that Dr. Anand had entered into a criminal conspiracy with the company in connection with procurement of medicines. It alleged, among other things, that certain products were treated as proprietary despite lower bids from other companies, competing bidders were excluded, and orders were not placed with the lowest bidder. The alleged loss to BARC was stated to be ₹3,53,361.
The company was charged under provisions relating to criminal conspiracy and cheating under the IPC, along with provisions of the Prevention of Corruption Act. However, none of its employees or officials was arraigned as an accused.
Sanofi argued that a company could not be prosecuted for an offence requiring a guilty state of mind, or mens rea, without identifying and prosecuting the natural person through whom that state of mind could be attributed to the company.
The Karnataka High Court rejected the challenge in 2019, holding that prosecution against a corporate entity could continue even without its directors or persons in charge being made accused.
Supreme Court’s Observation
The Supreme Court examined how a company can possess mens rea. It held that corporate mens rea can arise through attribution of the relevant act and state of mind of a natural person to the corporation. For this purpose, it laid down a three-stage framework.
The first stage examines whether the company’s constitutional documents or company law vested the person with the power to perform the relevant act. The second considers whether that power was delegated with sufficient discretion and independence. The third looks at the purpose of the statute and the surrounding circumstances to determine whether a special rule of attribution is required.
Importantly, the Court said the inquiry is transaction-specific and does not simply involve finding the person who generally controls the company.
"What the chargesheet must disclose, on its face, is that the corporation itself has committed the offence, not that it has also identified the particular individual through whom it did so."
The Court further held that mens rea may, at the preliminary stage, be disclosed through the surrounding facts and conduct even when no particular individual has been named. Whether attribution is ultimately established is ordinarily a matter for trial.
Decision
The Supreme Court clarified that non-identification or non-arraignment of a natural person, by itself, does not justify quashing a corporate prosecution under Section 482 CrPC. At the same time, proceedings can still be quashed where the allegations do not disclose an offence or are merely bald allegations unsupported by material.
In Sanofi India’s case, the Court found that the chargesheet and material on record prima facie indicated that natural persons had acted on behalf of the company and that the surrounding circumstances disclosed the possibility of the required mens rea. It therefore held that the High Court was not required to quash the proceedings.
The Court also clarified that its ruling was confined to the question of quashing under Section 482 CrPC and did not generally decide whether identification or arraignment of a natural person is necessary at some other stage of criminal proceedings.
The appeal was accordingly dismissed. Pending applications were also disposed of, and the Registry was directed to forward a copy of the judgment to all High Courts.
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