1. Can a Company / Bank Commit a Crime? Evolution of Law

Under classical law, a corporation cannot have mens rea - guilty mind. Indian Courts earlier said company cannot be prosecuted where punishment is mandatory imprisonment.

That position has been reversed.

The Doctrine Now:

• Identification / Alter Ego Doctrine: The intent of those who are the directing mind and will of the company - Board, MD, key managerial personnel - is attributed to the company.
• Attribution is one-way: Intent of company can be attributed from human alter ego TO company. Reverse attribution - company is accused, therefore automatically Directors are accused - is NOT permitted unless statute provides or active role is proved.

Under Bharatiya Nyaya Sanhita, 2023 [Successor to IPC], Sec 2(26) defines person includes company, and Sec 70 specifically authorizes prosecution of corporate bodies and allows imposition of fine where imprisonment is prescribed.

2. Under Which Laws Can a Bank be Criminally Liable?

a) BNS / IPC: Cheating (Sec 318 BNS), Criminal Breach of Trust (316), Forgery (336), Criminal Conspiracy (61)
b) Negotiable Instruments Act, 1881 - Sec 138 / 141: Dishonour of cheque issued by company / bank. Bank as drawer can be prosecuted.
c) Prevention of Money Laundering Act, 2002: Sec 3, Sec 70 - Bank as reporting entity liable if it knowingly assists laundering, failure to file STR under PMLA.
d) Prevention of Corruption Act: For PSU Banks - officers are public servants.
e) FEMA, 1999: Violation of foreign exchange remittance rules - ED prosecution, like salary remittance cases.
f) Companies Act, 2013 - Sec 447 - Fraud, false statements.
g) RBI / Banking Regulation Act: Criminal complaint by RBI for operating without license, fraud.

3. Landmark Case Laws You Must Know

1. Standard Chartered Bank & Ors. v. Directorate of Enforcement - AIR 2005 SC 2622 - (2005) 4 SCC 530

The Foundational Case. The question: Can a company be prosecuted for an offence where punishment is mandatory imprisonment + fine?

Supreme Court overruled earlier Velliappa Textiles view and held:

A corporation or company could be prosecuted for any offence punishable under law, whether it is coming under strict liability or absolute liability. Where imprisonment is mandatory, Court can impose only fine on the company. Corporate entities are liable for criminal offenses and not immune.

This is the bedrock of corporate criminal liability in India.

2. Iridium India Telecom Ltd. v. Motorola Incorporated - (2011) 1 SCC 74

Supreme Court imported the Tesco principle and held:
A company can be attributed mens rea of its alter ego. The criminal intent of those who guide the business can be imputed to the company. This is the attribution model.

3. Sunil Bharti Mittal v. CBI - (2015) 4 SCC 609

Most important for Banks and Directors.
The Supreme Court clarified reverse liability:

When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect.

To summon a Chairman/MD/Director who is NOT named in chargesheet, there must be:
i) Sufficient evidence of his active role coupled with criminal intent, OR
ii) Statute specifically provides for vicarious liability (like Sec 141 NI Act).

Mere designation is not enough. Court said criminal liability cannot be vicariously fastened onto Directors or officials of the banks merely because of their designation, in the absence of any specific allegations.

This was reaffirmed in Phoenix India vs Bank of Baroda officials case (2023) - No automatic prosecution of CMD/DGM for company's offence.

4. Aneeta Hada v. Godfather Travels & Tours (2012) 5 SCC 661

For NI Act Sec 138 cases against Banks/Companies:
Company must be made accused to prosecute its Directors. If company is not prosecuted, Directors cannot be prosecuted alone.

5. ANZ Grindlays Bank Ltd. & Ors. v. Directorate of Enforcement

Supreme Court held bank liable under FERA (now FEMA) for violations done through employees, even if specific employee not identified. Bank cannot claim it is only an artificial person.

6. Sanofi India Case - Supreme Court 2025-26

Latest development:

A Corporation Can Be Prosecuted Even If Individual Behind Offence Is Not Identified. Corporate criminal liability in such a case is not based on vicarious liability.

Court held: On a prima facie reading, if natural persons had acted on behalf of company in relation to alleged offences, company can be prosecuted.

7. Bank Vicariously Liable For Conduct of Employees - Supreme Court (Justices P.S. Narasimha & Aravind Kumar, 2024)

In consumer + criminal context:

Recipients of a fixed deposit cannot suffer at the cost of the criminal conduct of the Bank officials and that, in such an event the Bank would be held vicariously liable for the conduct of their employees.

Bank held liable to compensate, and separate criminal liability of officials does not absolve bank.

8. Banks Can't Be Summoned As Accused For Defamation - Delhi High Court 2024

Declaring a company 'Fraud' under RBI Master Directions on Frauds is not defamation. Court quashed summoning of Bank as accused for defamation.

4. Corporate Criminal Compliance - What RBI & Law Expects from Banks Now

After these judgments, compliance is not just a best practice, it is a defence.

RBI Mandated Framework:

1. Three Lines of Defence: Business, Risk & Compliance, Internal Audit
2. KYC/AML & PMLA Compliance: Appointment of Principal Officer, filing STR/CTR with FIU-IND, transaction monitoring. Failure is criminal under Sec 12 PMLA.
3. Fraud Risk Management: RBI Master Direction on Frauds 2024 - Early Warning Signals, forensic audit, staff accountability.
4. Whistle Blower & Vigil Mechanism: Under Companies Act Sec 177 and RBI Guidelines - Protected disclosure.
5. Board Approved Compliance Policy: Documented delegation of powers - to prove who is "directing mind" and to protect innocent Directors under Sunil Bharti Mittal test.
6. D&O Insurance + Indemnity: For Directors.

To Prove Compliance as Defence in Court, Bank Must Show:

• Crime was committed by a rogue employee contrary to documented policy
• Adequate due diligence and training was done
• Immediate reporting to regulator and police upon detection
• No benefit accrued to Bank
• Disciplinary action against employee

If Bank cannot show this, the mens rea of employee will be attributed to Bank under Standard Chartered + Iridium.

5. Practical Checklist for Banks

• Map all statutes where imprisonment is possible and ensure SOPs exist
• Maintain Active Role Register - Board minutes proving which Director approved what transaction
• Never use generic allegation like "all Directors liable" - CBI/ED complaints must have specific averments under Sec 141 NI Act / Sec 70 PMLA
• For PSU Banks, get Sanction under Sec 17A Prevention of Corruption Act before prosecuting officials

Bottom Line: After Standard Chartered Bank case, a Bank cannot say "we are an artificial person, we cannot go to jail". Court will fine the Bank heavily. And after Sunil Bharti Mittal, you cannot automatically jail the MD/Chairman for the Bank's offence without proving his active criminal intent.