Case Note & Summary
The present appeal arose from a judgment of the High Court of Karnataka dated 15.02.2019 in Criminal Petition No. 4280/2018, which dismissed a petition filed by the appellant company to quash criminal proceedings in Special C.C.No. 226/2017 pending before the Special Court for CBI Cases, Bengaluru. The appellant, a public limited pharmaceutical company, had supplied products to the Bhabha Atomic Research Centre (BARC) during 2011-12, 2013-14 and 2015-16. An FIR was registered in 2015 alleging a criminal conspiracy between Dr. P. Anand, a Scientific Officer at BARC, and various pharmaceutical companies to procure medicines at inflated rates and excess quantities. After investigation, a chargesheet was filed in 2017 against Dr. P. Anand and the appellant as accused nos. 1 and 2 respectively, for offences under Section 120B read with Section 420 IPC and Sections 11, 12, 13(2) read with 13(1)(b) and (d) of the Prevention of Corruption Act, 1988. No employee or official of the appellant was arraigned as accused. The prosecution alleged that Dr. Anand entered into conspiracy with the appellant by misclassifying items, omitting competing bidders, and declining lowest bids, causing wrongful loss of INR 3,53,361 to BARC and wrongful gain to the accused; and that Dr. Anand received illegal gratification of INR 42,750 from the appellant. The trial court took cognizance and issued process. The appellant sought quashing before the High Court arguing that a corporate entity cannot be prosecuted independently of natural persons for offences requiring mens rea, and since no employees were arraigned, prosecution was unsustainable. The High Court, relying on Iridium India Telecom Ltd. v. Motorola Inc., held that prosecution of a corporate entity without arraigning its directors or persons in charge is maintainable, and that disputed facts required trial. In the Supreme Court, the appellant contended that the identification principle from Tesco Supermarkets Ltd. v. Nattrass requires attribution of the directing mind's conduct and mental state, and absent identification and arraignment of such individual, prosecution cannot continue. The respondent relied on Iridium India and Standard Chartered Bank v. Directorate of Enforcement to argue that a company can be prosecuted without identifying employees, and that there was sufficient evidence of conspiracy and bribery. The Supreme Court framed the issue whether the High Court ought to have quashed proceedings on the sole ground that no natural person had been identified and arraigned. The court then began an elaborate analysis of corporate criminal liability, noting the fundamental difficulty arising from the dual nature of corporations as artificial persons and abstractions, and the need to attribute actus reus and mens rea through human agents. The provided judgment text does not include the final operative conclusion. The appeal's outcome remains undisclosed in the extract.
Headnote
A) Corporate Criminal Liability - Attribution of Mens Rea and Actus Reus - Corporation as Artificial Person - Indian Penal Code, 1860, Sections 120B, 420; Prevention of Corruption Act, 1988, Sections 11, 12, 13(2), 13(1)(b), 13(1)(d) - The court observed that criminal liability requires both actus reus and mens rea, while a corporation is an artificial person and an abstraction incapable of acting or possessing a guilty mind on its own; therefore attribution of human conduct and mental state to the corporation is necessary. The court noted the difficulty and stated that common sense would dictate that a corporation falls outside criminal liability altogether, but jurisprudence has developed doctrines to address this. The court began its analysis by examining the foundational question of how corporate criminal liability is envisaged. (Paras 15-18) B) Identification Principle - Directing Mind and Will - Tesco Supermarkets Ltd. v. Nattrass, [1972] A.C. 153 - The appellant contended that prosecution of a corporate entity for offences requiring mens rea is not sustainable without identification and arraignment of its alter ego or directing mind, relying on the identification principle from Tesco Supermarkets Ltd. v. Nattrass. The High Court, however, relying on Iridium India Telecom Ltd. v. Motorola Inc., (2011) 1 SCC 74, held that a criminal prosecution against a corporate entity without its directors or persons in charge being arraigned is maintainable. The Supreme Court framed the issue whether the High Court ought to have quashed proceedings on this ground, and the analysis involves examining corporate criminal liability in England and Wales and India. (Paras 6-8, 10, 14) C) Maintainability of Prosecution Against Company Without Arraigning Individuals - Quashing of Criminal Proceedings - Special C.C.No. 226/2017 - The appellant company was accused along with a public servant for offences under IPC and PC Act, including criminal conspiracy and abetment of illegal gratification, without any employee being arraigned. The High Court dismissed the quashing petition, holding that prosecution against a corporate entity without arraigning its directors is maintainable and that disputed facts require trial. The Supreme Court considered whether the High Court ought to have quashed the proceedings on the ground of non-identification and non-arraignment of natural persons. (Paras 4-8, 14)
Issue of Consideration
Whether the High Court ought to have quashed the criminal proceedings instituted against the appellant company on the ground that no natural person had been identified and arraigned alongside it.
Law Points
- Corporations are artificial legal persons distinct from members
- Criminal liability requires actus reus and mens rea
- Identification principle attributes conduct and state of mind of key personnel to corporation
- Prosecution of corporate entity for mens rea offences can be maintained without arraigning directors per Iridium India Telecom Ltd. v. Motorola Inc.
- (2011) 1 SCC 74
- Allegations of conspiracy and illegal gratification are to be proved at trial
