Corporate criminal liability in India has been clarified by a Supreme Court decision setting out a three-part test for determining when an individual’s actions can be attributed to a company. The decision came in Sanofi India Ltd. v. CBI.

Key Takeaways

  • The test examines a person’s authority under company documents, the discretion attached to delegated powers and the purpose of the relevant statute.
  • The framework is not confined to directors or people formally in charge of a company.

How the attribution test works

Indian courts have generally accepted that companies can be held liable for criminal offences, including those requiring mens rea, or a guilty state of mind. The unresolved question has been whose conduct can be treated as the company’s own.

In the Sanofi decision, the Supreme Court set out three inquiries. The first is whether the company’s constitutional documents give the relevant power to the person concerned. If not, the second is whether delegated power could be exercised with sufficient discretion and independence.

If neither inquiry establishes attribution, the third asks whether the purpose of the relevant statute requires a special rule under which the company is bound by the individual’s actions.

Corporate criminal liability and delegated authority

The framework can extend beyond directors and people formally in charge to others acting on a company’s behalf. That makes the scope of an individual’s authority relevant to the attribution inquiry.

Lawyers at Shardul Amarchand Mangaldas & Co said companies would need to be mindful when preparing their constitutional documents and delegations of authority, since those documents would be the first point of inquiry in determining whether an officer’s wrongdoing can be attributed to the company.

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