From Identification to Vicarious Liability: Shifts in Judicial Approaches to Corporate Criminal Liability in India

Abstract

This article analyzes the profound jurisprudential shift in India’s corporate criminal liability framework, tracing the evolution from the limited Identification Doctrine to a modern, evidence-based model for individual director liability. The analysis demonstrates how landmark Supreme Court judgments, including the 2005 Standard Chartered Bank ruling and the watershed 2015 decision in Sunil Bharti Mittal, firmly established this new legal position. The definitive 2025 rulings in Sanjay Dutt and K.S. Mehta reinforce that liability now hinges on clear proof of a director’s personal involvement and criminal intent, creating an equitable system that protects bona fide directors while fostering greater corporate accountability.

Introduction

Corporate criminal liability in India has long been a complex and evolving field. For a long time, the central legal question was how to hold an artificial legal entity-a company-criminally responsible when it lacks a physical body and a “guilty mind” (mens rea).¹ However, as global business has grown and white-collar crimes have become more sophisticated, the Indian judiciary has consistently evolved its approach to ensure corporate accountability. This article will trace the jurisprudential journey from the traditional Identification Doctrine to the more nuanced, conduct-based approach of vicarious and statutory liability, as defined by pivotal Supreme Court judgments.²

The primary legal challenge has been to reconcile the core tenets of criminal law-that a crime requires a guilty act (actus reus) and a guilty mind (mens rea)-with the fact that a corporation is an artificial person that acts through human agents.³ Key legal terms at the heart of this evolution include:

• Corporate Criminal Liability: The concept that holds a company accountable for criminal acts committed by its employees, directors, or agents.⁴
• Identification Doctrine: This principle attributes the criminal intent (mens rea) of a company’s “directing mind and will,” such as a senior director or manager, directly to the company itself.⁵
• Vicarious Liability: A principle that holds a company responsible for the criminal acts of its employees or agents when those acts are committed within the scope of their employment.⁶

This article will analyze how the Indian courts have addressed these challenges, moving away from a rigid, status-based approach to a more refined, conduct-based model for attributing criminal liability to individuals within a corporate structure.

Historical Foundations & Identification Doctrine

The modern law of corporate criminal liability in India is built upon the foundational legal fiction of corporate personality, which posits that a corporation is an artificial or juristic person, distinct from its individual members.⁷ This concept, established in the landmark English case of Salomon v Salomon & Co Ltd (1897), allows a company to have its own rights, duties, and the ability to sue and be sued.⁸

To overcome the dilemma of an artificial person not being able to form a “guilty mind,” Indian jurisprudence initially relied heavily on the Identification Doctrine, also known as the Alter Ego Doctrine. This doctrine, with its roots in English common law, asserts that the actions and mental state of certain key individuals within the company-its “directing mind and will”-can be considered the conduct and state of mind of the corporation itself.⁹ When these individuals act on behalf of the company, their criminal intent is attributed to the corporate entity, establishing the company as a primary offender.⁹ However, establishing the “directing mind” of a large, complex corporation has historically been a very high bar for prosecution, creating significant difficulties in holding large companies accountable for serious economic crimes.¹⁰

Judicial Evolution: Vicarious and Statutory Liability

The legal position on corporate criminal liability in India has evolved significantly from the limitations of the Identification Doctrine. This progression has been driven by a series of landmark Supreme Court judgments that have clarified the scope of both corporate and individual liability.

A pivotal moment arrived with the 2005 ruling in Standard Chartered Bank v Directorate of Enforcement. Prior to this, a significant legal question remained: could a company be prosecuted for offenses that mandated both imprisonment and a fine, given that a corporation cannot be imprisoned? The Court, in a landmark majority decision, ruled that a company could indeed be prosecuted for such offenses.¹¹ It held that while the imprisonment part of the sentence was physically impossible to impose, the fine could still be levied. The Court adopted a “purposive interpretation” of the penal statute, reasoning that the legislative intent to punish serious economic wrongdoing should not be defeated by a literal interpretation of the punishment provisions.¹² This judgment established a crucial precedent, opening the door for corporate accountability in India.

Yet, the clearing of one procedural hurdle often reveals a deeper, more intricate question. With the company’s criminal capacity established, the focus of the legal gaze shifted from the corporation itself to the individuals who make it act. A second equally critical turning point came with the 2015 judgment in Sunil Bharti Mittal v Central Bureau of Investigation. The Court meticulously clarified the application of the Alter Ego Doctrine, stating that it serves to attribute the criminal intent of a director to the company, but cannot be used “in reverse” to automatically attribute the company’s liability to the director.¹³ The ruling established a new, stringent standard for prosecuting directors, holding that an individual can be prosecuted along with the company only if there is “sufficient evidence of his active role coupled with criminal intent.”¹⁴ This case marked the definitive shift from a status-based approach-where a director’s title was sufficient for prosecution-to a conduct-based approach, where personal involvement must be explicitly proven.¹⁴

The principles from the Sunil Bharti Mittal case have been systematically reinforced by recent Supreme Court rulings. In Sanjay Dutt & Ors v State of Haryana (2025), the Court quashed criminal proceedings against directors where the complaint failed to name the company as an accused and lacked any specific allegations linking the directors to the offense.¹⁵ The Court reiterated that a director’s liability is not automatic and can only arise if the company is found guilty and there is direct evidence connecting the director’s conduct to the company’s liability.¹⁶

This was also demonstrated in K S Mehta v M/s Morgan Securities and Credits Pvt Ltd (2025), which provided a specific layer of protection for non-executive directors.¹⁷ The Court quashed the criminal complaints against the non-executive directors, holding that their “mere designation as a director does not automatically entail vicarious liability.”¹⁸ It emphasized that to hold a director liable, there must be a specific statutory provision for vicarious liability and clear, specific allegations detailing their personal involvement.¹⁸

Recent Developments and Academic Debate

The 2025 Supreme Court rulings in Sanjay Dutt and K.S. Mehta represent the final consolidation of a new judicial philosophy in India’s legal landscape. These judgments have effectively solidified a conduct-based standard for director liability, ensuring that prosecutors can no longer file complaints with “vague” and unsubstantiated allegations.¹⁶

This shift has significant implications for contemporary practice and has sparked academic debate. The rulings serve as a “wake-up call for regulators and prosecutors” to be more “meticulous” and “precise” in their prosecution efforts.¹⁹ The courts have created a critical safeguard against “unjust prosecution” and the “abuse of process,” protecting bona fide directors-particularly non-executive and independent directors-from bearing the brunt of criminal liability for corporate actions over which they had no direct control.²⁰

Academically, the progression from a state of total immunity for corporations to a more sophisticated legal framework has been largely heralded. Yet, beneath this carefully constructed framework, a deeper question persists: what if no single officer can be held responsible for an offense, and does the current system truly deter all forms of corporate misconduct? This remains a subject of considerable discussion.²¹

Comparative Perspective

While India’s legal framework has evolved considerably, it is useful to briefly compare its approach to other major jurisdictions. In the United Kingdom, for example, the high bar set by the Identification Doctrine has been circumvented by the introduction of “failure to prevent” offenses, such as under the UK Bribery Act 2010.²² These laws make a company automatically liable for failing to prevent bribery or tax evasion unless it can prove it had “adequate procedures” in place to prevent the crime.²² This approach avoids the complex task of identifying a “directing mind” and places the onus of compliance directly on the corporation.

Critique & Recommendations

While the judiciary’s efforts are laudable, a cold, objective analysis reveals that a primary weakness is the continued reliance on judicial interpretation to fill legislative gaps. The decriminalization of certain offenses under the Companies Act, 2013, through recent amendments, and the establishment of an in-house adjudication framework, demonstrate a legislative trend to reduce the burden on the judiciary.²³

To further strengthen the legal framework and ensure accountability, several recommendations can be considered:

• Legislative Clarity: There is a need for specific statutory provisions that explicitly impose vicarious liability on directors, rather than relying on general principles. This would provide greater clarity and a more predictable legal framework.²⁴
• The “Failure to Prevent” Model: India could consider adopting a “failure to prevent” model similar to the UK, particularly for complex economic crimes like fraud and money laundering. This would place a greater impetus on companies to implement robust and proactive compliance and governance frameworks.²²
• Due Diligence as a Safeguard: The current rulings compel directors to be more diligent. It is recommended that directors ensure strict compliance and maintain clear records of decisions to demonstrate their due diligence and lack of personal involvement, which can serve as a key safeguard against personal liability.²⁵

Conclusion

The evolution of corporate criminal liability in India, as chronicled through the foundational doctrines and culminating in the landmark judgments of 2005, 2015, and 2025, represents a successful and necessary jurisprudential journey. The law has moved from the initial challenge of establishing a company’s criminal capacity to a sophisticated framework that differentiates between the liability of the company and the personal culpability of its directors. The final, consolidated position, as enshrined in the recent Supreme Court rulings, definitively establishes a conduct-based standard, ensuring that liability is imposed based on personal involvement and criminal intent, not merely on a corporate designation.

This shift is a testament to the judiciary’s commitment to upholding the principles of fairness and justice, reinforcing the doctrine of separate legal personality, and protecting individuals from unwarranted legal harassment. For the corporate world, this new clarity is not a reduction in accountability but a refinement of it. It encourages more robust governance, mandates greater diligence, and fosters a more predictable and equitable legal environment. The judiciary’s stance ensures that corporate India’s growth is underpinned by a legal system that is both pro-business and pro-justice, holding the right parties accountable for the right reasons.²⁶

References

¹ Shrishaila B Mudhol, ‘Laws relating to corporate criminal liability’ (2020) 4 JCLM 12.   

² Aryan Pandey, ‘Directors in the Dock: Relooking At Director’s Liablity in Corporate Crime’, Global Business Law Review Blog – SCCLP, (5 February 2025).   

³ S Choudhury, ‘The Vicarious Liability Doctrine’ (2020) JLRJS 55.   

⁴ Pratyush Saxena and Chandana VS, ‘Corporate Criminal Liability’ (2022) 2 JC L J 1.   

⁵ Jyoti K Chawla, ‘Corporate Criminal Liability: A Comparative Analysis between India and the USA’, MONDAQ, (15 February 2021).   

⁶ Agru & Partners, ‘Corporate Criminal Liability in India’, AGRUD PARTNERS, (14 September 2021).   

⁷ Tanvi Bhatnagar, ‘All You Need to Know About Corporate Personality’, IPL EADERS, (18 August 2020).   

⁸ Norton Rose Fulbright, ‘The Corporate Criminal Liability Options Paper’, NORTON ROSE FULBRIGHT, (2 November 2023).   

⁹ Saxena and VS, supra note 4.   

¹⁰ Norton Rose Fulbright, supra note 8.   

¹¹ Standard Chartered Bank v Directorate of Enforcement 4 SCC 530.   

¹² Anubhav Pandey, ‘Standard Chartered Bank Case A Jurisprudential Analysis’ (2012) 2 IJLR 22.   

¹³ See Nishith Desai Associates, ‘Liability of Corporate Officials’, NISHITH DESAI ASSOCIATES, (1 October 2013).   

¹⁴ Sunil Bharti Mittal v Central Bureau of Investigation AIR 2015 SC 923.   

¹⁵ Abhay V and Shubhi K, ‘Evolution of Corporate Criminal Liability in India’ (2021) 5 IJRPR 3.   

¹⁶ K S and K S, ‘Can Company Directors Be Held Vicariously Liable Without Personal Involvement?’, K S & K, (5 February 2025).   

¹⁷ Rupin Chopra and Shantam Sharma, ‘Supreme Court Reinforces Protection for Company Directors Against Automatic Liability’, SSRANA, (16 January 2025).   

¹⁸ Quant LegalTech, ‘Supreme Court Strengthens Safeguards for Company Directors Against Automatic Liability’, QUANT LEGALTECH, (23 February 2025).   

¹⁹ Vinod Kothari & Co, ‘Affixing Vicarious Liability on Directors: See a Breakthrough’, Vinod Kothari & Co, (22 January 2025).   

²⁰ Acuity Law LLP, ‘Supreme Court: No Vicarious Liability on Directors’, Acuity Law, (2 January 2025).   

²¹ Quant LegalTech, supra note 18.   

²² Norton Rose Fulbright, supra note 8.   

²³ Abhay V and Shubhi K, supra note 15.   

²⁴ Norton Rose Fulbright, supra note 8.   

²⁵ Obhan & Associates, ‘Corporate Criminal Liability: The Companies Act, 2013’, Livelaw, (21 October 2021).   

²⁶ K.S. and K.S., supra note 16.   

²⁷ Akansha Singh and Sanjana Singh, ‘Sanjay Dutt v State of Haryana’, Strata Law, (10 January 2025).   

²⁸ Sunil Bharti Mittal v Central Bureau of Investigation, supra note 14.