Criminal Liability of Directors: An Analysis of Sunil Bharti Mittal v. Central Bureau of Investigation

Supreme Court in its judgement in Iridium Motorolla case had settled the issues of corporate criminal liability in India to a great extent. It held that a Company can be held for an offence involving mens rea as necessary ingredient. Further, it clarified that such mens rea would be attributed by applying the common law doctrine of directing mind and will in the sense that the metal state of the directing mind and will would be considered to be the mental state of the Company. In this way, a company is made liable for actions of its directors and other employers.

Whether its converse is possible is the issue Supreme Court was faced with in the case of Sunil Bharti Mittal v. Central Bureauof Investigation. The Apex Court appropriately held that converse of theory of attribution i.e. making directors and other employers of the company liable for the offences committed by the Company, is not permissible under criminal jurisprudence as that would amount to attribution of vicarious criminal liability.

It must be noted that vicarious criminal liability is generally not attributed. However, it can be done so whenever there is any specific provision in the penal statute providing for such attribution. It is apt to make reference to Section 141 of Negotiable Instruments Act, Section 32 of Industrial Disputes Act, environmental legislations (Air and Water Prevention and Control of Pollution Acts, Environment Protection Act), etc. These provisions permit the trial court to try both the company and directors at the same time by applying vicarious liability principle. Interestingly, even after recommendations made by Law Commission, no such provision has been added in IPC. Hence, a director cannot be penalized for IPC-offences committed by a company.

Further, in his blog, Umakanth V. has argued that the Supreme Court in Sunil Bharti case did not clarify as to “whether the invocation of the doctrine of piercing the veil would have resulted in a different outcome so long as the conditions for piercing exist in this case.” It is not uncommon to respond that corporate veil doctrine is generally founded in civil litigation cases only. It would be difficult to apply vicarious criminal liability through the back door of piercing the corporate veil.

Lastly, though very common to argue, it must be noted that applicability of above principles of criminal liability would depend on the question whether the person in charge acted in his individual capacity or official capacity.

Next post provides summary of the judgement in Sunil Bharti case.