The fight against corruption has strengthened in the past few years in India. As per Transparency International’s 2021 Corruption Perceptions Index (CPI), India has gone from 95th in 2011 to 85th in 2022, out of 180 countries. This has been possible owing to a positive shift in the fight against corruption through the introduction of laws and policy decisions, with the judiciary playing an active role.
Corruption in India was previously governed by the provisions of the Indian Penal Code, 1860 (IPC). However, this was insufficient for handling the complicated nature of the issues of corruption in government offices and public sector undertakings, which led to the advent of the Prevention of Corruption Act, 1947 (the “1947 Act”).
In 1988, with a view to making laws relating to corruption more effective by widening their coverage and strengthening the provisions, parliament passed a special act called the Prevention of Corruption Act, 1988 (PCA). The PCA was introduced to consolidate all provisions relating to corruption and to provide a more effective statute in combating corruption among public servants. The provisions relating to corruption under the IPC were repealed, to be brought under the purview of the PCA. Further, the PCA:
- expanded the scope of the definition of “public servant”;
- enhanced penalties; and
- provided for expediting proceedings.
However, the PCA neither criminalised bribe-giving per se (and as such, was said to immunise bribe-giving) nor covered acts of corruption in private enterprises, unlike the UK Bribery Act, 2010.
Amendments in 2018
Subsequently, the Prevention of Corruption (Amendment) Act, 2018 (the “Amendment Act”) was enacted after receiving Presidential assent on 26 July 2018.
One of the major developments brought in by the Amendment Act was the introduction of a supply-side offence, namely, acts qua bribing of a public servant. Therefore, the Amendment Act punishes any person who gives or promises to give an undue advantage to another with the intention to induce or reward a public servant for the improper performance of public duty. However, there is a defence available to such bribe-giver if:
- they have been compelled to provide undue advantage by the public servant; and
- they report the incident to the concerned law enforcement agency within a period of seven days.
The amended PCA also covers the offence of bribing a public servant committed by a commercial organisation for obtaining or retaining its business or an advantage in the conduct of its business. However, it is a defence for the commercial organisation if it is able to prove that it had in place adequate procedures in compliance with such guidelines as prescribed by the Central Government for preventing such persons from undertaking such conduct. There is a lack of clarity on what would be considered as “adequate procedures” by the commercial organisation, since there are no guidelines notified by the Central Government to date. Further, if an offence alleged to have been committed by a commercial organisation is with the consent or connivance of any director, manager, secretary or other officer, such individual shall be guilty of an offence under the provision and shall also be punished with imprisonment.
While the Amendment Act has attempted to make the implementation of anti-corruption laws more effective within India, the PCA still does not cater to the criticism of not dealing with corruption within private enterprises.
The lacuna left in the PCA vis-à-vis corruption and bribery within commercial enterprises is, however, largely covered by the Companies Act, 2013 (the “Companies Act”), which is the law governing companies in India. Section 447 of the Companies Act gives an expansive definition of “fraud”, broad enough to include any and all acts of bribery and corruption within the sphere of the company.
Under the Companies Act, auditors and directors are duty-bound to report any suspected fraud to the Central Government. In fact, certain kinds of entities are to establish a vigilance mechanism for reporting fraud. Fraud under the Companies Act is a penal act punishable with imprisonment for a minimum period of six months, and which may extend to up to ten years. Further, the Companies Act empowers the Serious Fraud Investigation Office to investigate and prosecute fraud within a company.
Obligation to Report Instance of Corruption
An obligation to report is inherent under Section 39 of the Code of Criminal Procedure, 1973 (CrPC), which categorically provided for an obligation to report certain cognisable offences provided in the IPC. Until the PCA was enacted in 1988, offences where there was an obligation to report included those dealing with cases of illegal gratification by a public servant provided in the IPC.
However, even after the provisions relating to corruption were repealed from the IPC by Section 31 of the PCA, no corresponding amendment was made to Section 39 of the CrPC. Therefore, it remained unclear as to whether the obligation to report corruption under Section 39 of the CrPC still continues qua offences relating to corruption, particularly when Section 31 of the PCA itself stood repealed as of 2001. The Hon’ble Supreme Court in Lokayukta, Justice Ripusudan Dayal v State of MP, (2014) 4 SCC 473, made the observation that it is the duty and obligation of every citizen under Section 39 of the CrPC to report an offence under the PCA to the police. However, this is more of a guidance tool, rather than a direction for a mandatory reporting requirement of instances of fraud and corruption.
Nonetheless, Section 8 of the PCA incentivises a bribe-giver, who may have been compelled to provide undue advantage by the public servant, to report an instance of bribery by providing protection from prosecution, if they report this within seven days of such incident.
Recent Judicial Trends
Expansive interpretation of the term “public servants”
Since the PCA is an enactment focused primarily on corruption involving a “public servant”, it is important to understand who would fall within the category of “public servant”. The PCA itself has provided a very wide definition of “public servant” to include any person who holds an office by virtue of which they are authorised or required to perform any public duty, as well as any person authorised by a court of justice to perform any duty. Recently, there have been many decisions looking at this aspect, and the trends would suggest that the scope is being expanded.
The Hon’ble Supreme Court of India in State of Gujarat v Mansukhbhai Kanjibhai Shah, (2020) 20 SCC 360, was dealing with an issue relating to whether a trustee in the board of a “deemed-to-be university” is a “public servant” under Section 2(c) of the PCA. The Hon’ble Court observed that the object of the PCA was not restricted to preventing bribery in government departments, but was also to make it applicable to individuals who conventionally might not be considered public servants, which may include those who perform public duties. While considering the question, reliance was placed on an earlier decision in CBI v Ramesh Gelli, (2016) 3 SCC 788, where the Hon’ble Court held that a chairman of even a private bank was a “public servant” under the PCA, while observing that giving a narrow interpretation to the term would defeat the very object of the statute. Therefore, the Hon’ble Court in Masukhbhai (supra) concluded that an official of a “deemed university” performed the same public duty as that of a government university.
More recently, the Hon’ble Jharkhand High Court in Sanjay Kumar Agarwal v CBI, 2023 SCC OnLine Jhar 394, while placing reliance on the decision of the Hon’ble Supreme Court in Mansukhbhai (supra) held that a resolution professional appointed under the Insolvency and Bankruptcy Code, 2016 (IBC) would come under the ambit of the definition of a public servant under the PCA, and as such, would be liable to prosecution under the PCA. The argument raised in this case was that a resolution professional is not carrying out a public duty and was not appointed by a court or a tribunal, but by a committee of creditors. It was further argued that the IBC specifically provided for the judges of the tribunal to be public servants within the meaning of the IPC, and the resolution professional did not fall within this category.
The Hon’ble High Court, however, rejected both these arguments, while observing that the tribunal has a role to play in the appointment of the resolution professional as the name suggested by the committee of creditors is forwarded to the board of Insolvency and Bankruptcy Board of India, by the tribunal. The High Court also observed that the functions of the resolution professional intimately relate to matters relating to loans extended by the banks, which are investments from the public at large, and therefore will come within the meaning of public duty. Having made these observations, it was held that there was nothing that stopped the applicability of the PCA to the resolution professional. The judgment is presently under challenge before the Hon’ble Supreme Court.
Another illustration of the expansion of the scope of “public servant” is the recent decision of the Hon’ble High Court of Jammu and Kashmir in Sheikh Abdul Majeed v Union Territory of J&K, 2023 SCC OnLine J&K 698, which held that even a lessor who had leased his private godown to Food Corporation of India, which is a statutory body, would be liable to prosecution under the PCA. It was observed that said lessor who owned the godown leased to the Food Corporation of India was performing a public duty, as he was acting on behalf of the Food Corporation of India and was discharging duties in which the public at large has an interest – for the reason that it relates to the public distribution system and the storing of food grains, which helps in maintaining national food security.
Prosecution of a bribe-giver
The PCA now has a separate standalone offence of bribe-giving. Recently, the Hon’ble Karnataka High Court in Sri Kailash S Raj and Others v State of Karnataka and Another, 2023 SCC OnLine Kar 42, dealt with a petition filed by a public servant, private individuals being officials of a private company, and two employees from whom recovery of roughly INR90 lakhs was made, to quash a first information report registered under various provisions of the PCA for allegedly bribing the public servant for gaining a government tender. This was a case of a commercial organisation seeking to bribe an official through its employees to obtain a government tender; therefore, the High Court took the prima facie view that the offence under the PCA could be said to be attracted, and so refused to quash the FIR and allowed the investigation to continue, while observing that “it is high time the menace of corruption is plugged and nipped in the bud by making the bribe-giver susceptible for such prosecution, like the bribe-taker.”
The question of whether, in a case where the complainant dies or turns hostile, the prosecution can prove the demand for a bribe by way of circumstantial evidence, in the absence of direct evidence, came up before a constitution bench of the Hon’ble Supreme Court in Neeraj Dutta v State (NCT of Delhi), (2023) 4 SCC 731.
Post the Amendment Act, the courts are witnessing increasingly more prosecutions under the PCA, beyond just public servants and against private individuals and companies. A very interesting question arises on the applicability of the aforesaid decision, as earlier the bribe-givers were effectively immune from prosecution so long as they gave a statement and acted as whistle-blowers. However, now the prosecutor might not have the benefit of the statement of the bribe-giver as complainant, as the bribe-giver themself faces prosecution under the PCA; therefore, the only way to prove the offence of bribery would be by way of circumstantial evidence.
Sanction to commence investigation
Section 17A of the Amended Act bars any inquiry or investigation by a police officer into an alleged offence by a public servant committed in the discharge of official duty or functions, without prior approval of the competent authority. In a recent decision in Central Bureau of Investigation v Santosh Karnani, (2023) SCC OnLine SC 427, the Hon’ble Supreme Court was called upon to decide an anticipatory bail application arising out of an FIR registered under the provisions of the PCA. An argument was made with regard to the non-compliance of the mandatory provision under Section 17A of the PCA. The Hon’ble Court rejected said contention, and with reference to the first proviso to Section 17A of the PCA held that a case involving arrest of the person on the spot on the charges of accepting an undue advantage would not require a prior sanction to investigate under Section 17A of the PCA. It was further held that the requirement of prior approval would not be applicable in a trap case, as it would defeat the very purpose of the trap and the investigation, which clearly is not the intention of the provision.
Prosecution qua IPC offences may continue even if sanction under the PCA is not granted
Recently, the Hon’ble Supreme Court in A Sreenivasa Reddy v Rakesh Sharma, (2023) 8 SCC 711, while dealing with a case of prosecution of a bank manager under the PCA, held that if sanction for prosecution is not accorded in terms of the requirement under Section 19 of the PCA, the accused “public servant” would be entitled to be discharged from prosecution under the PCA. However, the same would not preclude the continuation of prosecution against them under provisions of the IPC, such as for offences of conspiracy, cheating, etc, where applied.
Power of seizure of assets in respect of investigation under the PCA
During the course of a criminal investigation, a police officer has general powers to seize any property which may be suspected of being related to the commission of any offence. In the context of prosecutions launched under the PCA, Section 18A of the PCA provides that the provisions of the Criminal Law Amendment Ordinance, 1944 (CLAO) shall, as far as may be, apply to the attachment, administration of attached property, and execution of order of attachment or confiscation of money or property procured by means of an offence under the Act. No specific power of seizure is provided under the CLAO; however, it does allow for attachment of property related to a scheduled offence provided in the CLAO, by approaching the district judge of the area concerned as per the prescribed process.
The Hon’ble Apex Court in Ratan Babulal Rath v State of Karnataka, 2021 SCC OnLine SC 875, held that attachment/freezing of the bank account of the accused by taking recourse to the provision for seizure as provided in the CrPC was unsustainable, as the PCA is a complete procedural code in itself. Therefore, recourse for attachment of property must be taken by following the procedure prescribed under the CLAO. In light of this decision, the investigating agencies under the PCA are finding it difficult to seize property/articles found in relation to the commission of an offence under the PCA, since every seizure made by invocation of general powers of seizure provided under the CrPC is being challenged before a writ court on the grounds that the requisite procedure prescribed under the CLAO has not been followed for attachment of properties.
As discussed above, the recent amendment in 2018 and the various judicial pronouncements demonstrate that the trend is towards making the anti-corruption regime in India stronger and more effective.