In the recent judgment of Sanofi India Ltd. v. Central Bureau of Investigation (2026 INSC 957), the Supreme Court of India examined the principles governing the attribution of criminal liability to a company for criminal offences requiring mens rea. The Supreme Court considered the circumstances in which the acts and state of mind of individuals such as directors, officers and employees may be attributed to the company itself. Importantly, the Supreme Court also clarified that criminal proceedings against a company cannot be quashed solely on the ground that the prosecution has not identified or arraigned a director, officer, or employee through whom the company is alleged to have acted.
The Supreme Court Judgment
The matter arose from allegations concerning the procurement of pharmaceutical products by the Bhabha Atomic Research Centre (“BARC“). Sanofi India Limited had been arraigned as an accused along with a BARC scientific officer in proceedings alleging, amongst other things, conspiracy in relation to the procurement of medicines at inflated prices. However, no director, officer or employee of Sanofi had separately been identified as an accused.
Sanofi sought quashing of the proceedings, stating that where an offence requires mens rea, the company cannot be prosecuted without first identifying the individual whose actions and intention could be treated as those of the company. The Supreme Court, while dismissing this argument, held that the prosecution of a company does not necessarily fail merely because the particular natural person through whom the company is alleged to have acted has not been identified or separately prosecuted.
Importantly, however, the Supreme Court laid down a three-stage framework for determining when the actions and state of mind of an individual may properly be treated as those of the corporation.
The Test
The Supreme Court observed that, in the first instance, it should be determined whether the company’s constitutional documents or applicable principles of company law provide a particular individual the authority to undertake the act in question. If this assessment does not provide a definitive answer, it must be considered whether such authority was expressly or impliedly delegated to that individual and whether the individual had sufficient discretion and independence in exercising it. Where neither of the aforementioned tests provides an answer, for statutory provisions where such attribution is necessary, the courts must decide whether a special rule of attribution should apply.
Relevance to Businesses
The approach laid down by the Supreme Court is of significance to modern businesses, where decisions are rarely taken by one individual. Depending upon the size and structure of an organisation, a transaction may pass through business, finance, legal, compliance and management teams before it is finally implemented. In many cases, the person who formally signs a document may not be the person who made the underlying commercial decision. Conversely, an employee who is not part of senior management may in practice have considerable independence in relation to a particular function.
Clear Delegation of Authority
The judgment highlights the importance of actual allocation of authority within a company. Companies should have clear delegation of authority frameworks setting out who is entitled to take particular decisions, the limits within which such authority may be exercised and the circumstances in which further approval is required. This may include financial thresholds, requirements for multiple approvals and additional review for transactions carrying higher legal or regulatory risk.
However, having such a framework on paper is only part of the exercise. The Supreme Court’s recognition of implied delegation means that the manner in which a business operates in practice may also be relevant. Where an employee routinely takes decisions outside his or her formally documented authority, with the knowledge or acquiescence of senior management, it may be difficult for the company to subsequently rely only upon the written delegation matrix to demonstrate that the employee lacked authority.
Companies should therefore periodically review whether their formal approval structures accurately reflect their actual working arrangements. Changes in responsibilities, reporting structures and business functions should also be reflected in the relevant delegation documents rather than being allowed to develop informally over time.
The judgment also reinforces the importance of maintaining a record of significant corporate decisions. Investigations and disputes frequently arise several years after the relevant transaction. By that stage, employees may have left the organisation, management structures may have changed, and the individuals concerned may have limited recollection of why a particular decision was taken. Board and committee minutes, internal approval notes, delegation documents and material correspondence should be preserved in order to enable the company to establish who considered and approved a transaction and the basis on which the decision was made.
Compliance Policies
Most companies today have policies dealing with matters such as anti-bribery and corruption, conflicts of interest, procurement, gifts and hospitality, engagement of intermediaries and financial approvals. The existence of these policies is important, but their practical implementation is equally significant. Companies should ensure that internal policies are supported by appropriate approval processes and escalation mechanisms. Employees exercising functions involving higher legal or regulatory exposure should also understand both the scope and limitations of their authority.
Key Takeaway
From a corporate governance perspective, this judgment highlights that companies should be in a position to determine who had authority over a particular decision, how that authority was delegated, what limits applied to such authority and whether those limits were observed. The decision in Sanofi is therefore significant beyond the immediate question of whether a company may be prosecuted without identifying and arraigning the individual responsible for the alleged conduct. By focusing on the manner in which an individual’s actions and intention may be attributed to a corporation, the Supreme Court has brought the internal allocation and exercise of corporate authority into sharper focus.
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