Supreme Court Establishes Framework for Corporate Criminal Liability

In a recent ruling concerning the pharmaceutical company Sanofi India, the Supreme Court of India has established a three-stage framework to determine when an individual’s conduct can be attributed to a company. This decision was made by a bench comprising Justices J B Pardiwala and Manoj Misra. The ruling addresses how a corporation's criminal liability can be assessed by linking an individual's actions and mental state to that corporation. The court emphasised the importance of examining the company's constitutional documents, specifically its memorandum and articles of association, to ascertain whether the individual had the requisite authority within the company’s structure. For example, if a Managing Director engages in dishonest conduct while performing an authorised act, both the action and the accompanying mental state can be attributed to the corporation. Should the constitutional documents fail to provide clarity, the court will then assess whether the authority in question was either expressly or implicitly delegated to the individual. Important to note is that mere employment or involvement in negotiations will not suffice to establish this link. If the first two stages do not resolve the inquiry, the final stage will consider the purpose of the statute under which the offence is alleged. This involves determining whether failing to attribute the individual’s conduct to the corporation would undermine the statute's objectives. This framework is intended to refine the process of statutory interpretation and does not broadly expand corporate liability. Even if one of the three stages is satisfied, attribution is not guaranteed, as specific case circumstances still need to be taken into account. The court also clarified that it does not seek to identify any individual who generally controls the company but focuses instead on the appropriate figure concerning a particular transaction. Simply holding a position such as director or senior executive does not automatically mean every act is attributable to the corporation. Furthermore, the court pointed out that the established framework is not needed in scenarios where the statute already specifies rules of attribution or imposes strict liability. This framework primarily applies in cases framed around natural persons needing to prove mens rea, as the prosecution tries to connect that state of mind to the corporation. Notably, it works only in one direction: it only addresses the potential for linking a natural person's actions to the company, without affecting the individual's own criminal liability, which adheres to standard criminal law principles. The court presented these three stages—corporate authority, delegated authority, and statutory purpose—as broad guiding principles rather than an exhaustive set of rules. This ruling is significant as it clarifies aspects of corporate criminal accountability, specifically involving mental state considerations in legal actions against companies.