Supreme Court Sets Three-Stage Corporate Mens Rea Test; Sanofi India Plea to Quash CBI Case Dismissed

The Supreme Court has laid down a structured three-stage approach for attributing an individual’s conduct and mental state to a company, while holding that a corporate prosecution for an offence requiring mens rea cannot be quashed merely because no employee or officer of the company has been identified or arraigned as an accused. The ruling came on 7 September 2026 in Sanofi India Ltd. v. Central Bureau of Investigation, reported as 2026 INSC 957.

A Bench of Justice J.B. Pardiwala and Justice Manoj Misra dismissed Sanofi India’s appeal against the Karnataka High Court’s refusal to quash criminal proceedings arising from a CBI chargesheet. The judgment is significant for corporate legal and compliance teams because it moves the attribution inquiry away from a rigid search for a single “directing mind” and instead sets out a sequential framework for deciding when the acts and state of mind of natural persons can be treated as those of the corporation itself.

What the Sanofi case was about

The case arose from pharmaceutical supplies to the Rare Materials Project of the Bhabha Atomic Research Centre. According to the prosecution case recorded by the Supreme Court, the CBI alleged that a BARC scientific officer conspired with Sanofi in procurement transactions and that the alleged conduct caused a wrongful loss of ₹3,53,361 to BARC. The prosecution also alleged an illegal gratification of ₹42,750. These remain allegations to be tested at trial; the Supreme Court did not determine criminal guilt in this appeal.

The chargesheet alleged offences under Section 120B read with Section 420 of the Indian Penal Code and provisions of the Prevention of Corruption Act, 1988. Importantly, no employee or official of Sanofi India was arraigned as an accused in the chargesheet. Sanofi argued that a corporation could not independently possess the mental element required for criminal conspiracy without identifying and prosecuting the natural person through whom the corporation supposedly acted.

The Karnataka High Court had rejected the quashing petition on 15 February 2019. The Supreme Court has now upheld that result and allowed the criminal proceedings to continue.

The three-stage attribution framework

The Supreme Court said attribution under Indian law should be approached sequentially and hierarchically. The first stage is to examine the company’s constitutional documents and the rules of company law to see whether they expressly or impliedly identify whose acts or state of mind are to be treated as those of the company for the matter in question.

If that does not answer the issue, the second stage is to examine delegation. The Court said authority may be delegated expressly or impliedly, but the relevant delegation must carry sufficient discretion and independence in relation to the act under examination. The inquiry therefore turns on the substance of the authority actually entrusted, not merely on an employee’s title or organisational rank.

If neither ordinary company-law rules nor delegation resolves attribution, the third stage is a special rule of attribution. At this stage, the court must construe the statutory provision creating the offence, its purpose and the surrounding facts to determine whose act or mental state the law intends to count as the corporation’s own. The Supreme Court treated this as an exercise in statutory construction rather than a free-standing doctrine detached from the offence in question.

No automatic requirement to arraign a natural person

The Court drew an important distinction between direct corporate liability and statutory schemes that expressly create vicarious liability subject to specific conditions. In the Sanofi case, the Court said the issue was one of direct attribution: once the requirements of the attribution framework are satisfied, the relevant act and state of mind are treated as the corporation’s own. In that setting, non-arraignment of a natural person does not automatically defeat the prosecution.

The judgment also says that non-identification of a specific natural person does not, by itself, make corporate mens rea impossible to allege. Surrounding facts and circumstances may disclose the possibility that persons acting for the corporation did so with the requisite state of mind, leaving the final attribution question to be tested at trial.

The ruling is not a blanket bar on quashing

The Supreme Court expressly preserved the ordinary threshold for quashing. Allegations against a company must still disclose an offence. At the threshold, the material should prima facie indicate that a natural person acted for the corporation, that the act is referable to the alleged offence, and that the circumstances do not make the required mens rea patently absurd or inherently improbable. If those elements are absent, quashing can still be warranted.

On the material before it, the Court held that the chargesheet crossed that prima facie threshold. It did not make a final finding that Sanofi possessed the alleged mens rea. That question, together with conclusive attribution, remains for trial.

Important limitation of the judgment

The Court specifically confined its discussion about identification and arraignment of natural persons to the exercise of power under Section 482 of the Code of Criminal Procedure at the quashing stage. It did not decide as a general proposition whether identification or arraignment may become necessary at a later stage in every kind of corporate prosecution.

The distinction matters for legal, audit and compliance teams. The judgment should not be read as overriding statutory provisions that create a separate vicarious-liability regime or prescribe their own conditions for prosecuting companies and responsible officers.

Practical implications for companies and advisers

- Corporate investigations can no longer be assessed only by asking whether a named director or employee has been prosecuted alongside the company.

- Delegation records, board-approved authorities, functional responsibilities and decision-making autonomy can become material to the attribution analysis.

- Compliance reviews should preserve evidence showing who had authority over the relevant transaction and how decisions were approved, escalated and documented.

- At the quashing stage, the focus remains on whether the allegations and material disclose a prima facie corporate offence, not on finally proving the company’s mental state.

The Supreme Court dismissed the appeal and directed that a copy of the judgment be forwarded to all High Courts. For Chartered Accountants advising corporate boards, internal-audit teams, forensic professionals and finance leadership, the immediate takeaway is that corporate criminal exposure must be assessed through the underlying authority and attribution structure, not merely through the presence or absence of a named individual accused.

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Key takeaway

The Supreme Court has set out a three-stage framework for attributing conduct and mens rea to companies, while holding that a corporate prosecution cannot be quashed solely because no company employee is identified or arraigned.