The concept of corporate criminal liability in India

The concept of corporate criminal liability in India addresses the legal accountability of corporations, which are legally recognized as separate entities from their shareholders. Corporations, though lacking a mind or intent, can be held responsible for criminal acts under the principle of vicarious liability, where an entity is liable for the actions of individuals acting within the scope of their employment for the corporation’s benefit. Indian law extends this liability to corporations in areas such as anti-corruption, tax violations, money laundering, and securities regulations, implying that corporate entities can be criminally prosecuted regardless of the absence of individual intent or “mens rea.”

Historically, Indian courts did not subject corporations to trials for offenses that required mens rea or carried imprisonment as penalties, given that a corporation cannot physically serve jail time. Consequently, criminal responsibility often fell on individual directors, especially those overseeing specific operational areas. This approach introduced challenges in delineating the scope of liability, as the separation of responsibilities among board members could obscure direct accountability for criminal actions.

The Companies Act of 2013 further redefined corporate responsibility by imposing enhanced financial penalties and possible imprisonment for corporate offenses, acknowledging both civil and criminal liabilities. Under this act, directors and specific officers (referred to as “officers in default”) bear personal responsibility for corporate misconduct, intensifying oversight and accountability.

This evolving legal framework underscores the Indian judiciary’s approach to bridging the gap between corporate structure and criminal liability, setting a precedent for attributing corporate accountability to individuals who wield decision-making power and influence the entity’s conduct.