Dec 20, 2023

Anti-Corruption 2024

This practice guide elaborates upon the existing legal framework, scope, defences and exceptions, penalties, etc. relating to the anti-corruption regime in India.

 3.1 Limitation Period

There is no specific statute of limitations under the PCA preventing any investigation agency from initiating an investigation or launching a prosecution before the court, or depriving any court from taking cognisance of an offence within a stipulated timeframe. However, the general criminal procedural law in India (the Code of Criminal Procedure, 1973) (CrPC) prescribes periods of limitation for launching prosecution only in respect of certain categories of offences, based on the quantum of punishment prescribed. For all offences under the PCA concerning more than three years, the limitation period prescribed under the CrPC is not applicable, meaning that prosecution may be launched at any point of time.

Further, the PCA provides that, as far as practicable, trials shall be held on a day-to-day basis and concluded within two years. If the trial is not concluded within two years, it is incumbent upon the court holding trial to record reasons for not being able to complete trial, and to extend the period for six months at a time. However, the total time taken to conclude the trial shall not ordinarily exceed four years.

 3.2 Geographical Reach of Applicable Legislation

The geographical reach of the PCA is the entirety of India, including all its states and Union territories; therefore, it does not have extraterritorial reach.

 3.3 Corporate Liability

The Amendment Act introduced corporate liability to the PCA, under which, “commercial organisation” has been defined comprehensively to not only include Indian companies but also foreign companies who carry on a part of their business in India.

These “commercial organisations” are susceptible to standing trial and suffering imposition of a fine if found guilty during trial for the offence of giving or promising to give any “undue advantage” to a public servant, to obtain or retain business or to obtain or retain any advantage in the conduct of its business.

Further, the commercial organisation can also be held liable for the offence of bribing a public servant, to induce the public servant to improperly perform a public duty or to reward the public servant’s improper performance, just as an individual so accused would be held liable.

While the IPC does not envisage vicarious liability, the PCA provides for a certain type of vicarious liability – ie, any person in charge of a company is liable for acts of the company, upon proof that such acts were committed with their consent or connivance. Therefore, individuals and companies can both be held liable for the same offence.

The Supreme Court of India in Religare Finvest Limited v State of NCT of Delhi and Another, reported at 2023 INSC 819, recently held that a successor entity can be held liable for offences by the target entity subject to the terms of the scheme of the merger, the nature of allegations and existence of proof against the entity.

After examining the law on this subject, the Supreme Court held that criminal liability of a company:

  • is recognised where it can be attributable to individual acts of employees, directors or officials of a company, or juristic persons (while relying on past pronouncements in Tesco, Meridian Global Funds, Standard Chartered BankandIridium);
  • is recognised even if its conviction results in a term of imprisonment (Meridian Global Funds and Iridium);
  • cannot be transferred ipso facto, except when in the nature of penalty proceedings (relying on McLeod Russel);
  • ceases to exist given that the legal effect of amalgamation of two companies is the destruction of the corporate existence of the transferor company; and
  • is succeeded to by the transferee company, apart from only in defined legal proceedings.

4.1 Defences

In criminal cases in India, an effective defence strategy must be based on facts which are plausible and backed by credible and admissible evidence. There cannot be a straight-jacket formula for defence, since each criminal trial turns on its own facts and evidence. Further, the defence strategy keeps evolving as and when evidence is produced and as testimonies are recorded in court.

During a trial, an accused person has a chance to establish their defence against the charges brought by the prosecution, including by cross-examining witnesses and bringing witnesses of their own.

For certain specific offences relating to a public servant under the PCA, no enquiry or investigation can be initiated without the prior sanction of the state or Central Government (as the case may be). The issue of whether this procedural requirement for obtaining a prior sanction (as introduced by the Amendment Act in 2018) will apply retrospectively is currently pending before the Supreme Court.

Further, if a person is found to have been “compelled” to give undue advantage to a public servant, they shall not punished for an offence of bribing the public servant, subject to the “compelled” person reporting the matter to law enforcement agencies within a period of seven days of giving the undue advantage.

Further, if a person is giving undue advantage in order to assist law enforcement agencies in their investigation under the PCA, such persons are not liable for the offence of bribing public officials.

The PCA recognises that a “commercial organisation” shall not be liable to such prosecution if it is able to prove that it had in place adequate procedures for preventing persons associated with the commercial organisation from undertaking such conduct. Pertinently, the PCA states that the Central Government shall prescribe such adequate procedures; however, none have been notified to date. Until such time, a commercial organisation may choose to frame its own policies and conduct regular internal training in order to present a defence that it took steps to prevent any such acts from being committed by its officials.

 4.2 Exceptions

There are no exceptions to the previously discussed defences (see 4.1 Defences).

 4.3 De Minimis Exceptions

See 4.1 Defences for any and all exceptions available to a person or commercial organisation under the PCA.

 4.4 Exempt Sectors/Industries

There are no sectors or industries which can plead exemption from the applicability of the PCA.

 4.5 Safe Harbour or Amnesty Programme

In the course of proceedings under the PCA, the court may, at any stage of inquiry or trial, grant pardon to such person on the condition of their making a full and true disclosure of the circumstances within their knowledge with respect to the offence in question, whether as a principal or abettor of such offence, with a view to obtaining evidence of any person supposed to have been directly or indirectly concerned in or privy to an offence, and as provided under the PCA.

If an accused person pleads guilty to an offence during or before commencement of trial, the courts have discretion to take a lenient view while sentencing them. However, while exercising this discretion, the court cannot award a sentence which is lower than the minimum sentence prescribed for such offence.

6.1 National Legislation and Duties to Prevent Corruption

The PCA as originally enacted did not expressly provide for any duties to prevent corruption. However, parliament amended the PCA in 2018 such that the application of the PCA has been extended to include commercial organisations. Section 9 has therefore been amended to criminalise the act of bribing as well as an attempt to bribe a public official by a commercial organisation.

However, the amendment also states that if a commercial organisation has implemented adequate procedures to ensure compliance of guidelines (as may be statutorily introduced) to prevent corruption, the same shall be treated as a valid defence available to such a commercial organisation.

It should be noted that the government has not formally issued any guidelines under Section 9 that a commercial organisation may adopt, thereby ensuring compliance of such guidelines by its employees. However, this amendment has made it incumbent upon companies to introduce internal policies, guidelines or codes of conduct to ensure their employees are routinely sensitised towards India’s anti-bribery law, and as regards their duty to act in a manner to prevent bribery.

Such internal policies, guidelines or codes of conduct are modelled on international best practices, since the government has not yet released guidelines under Section 9. In situations where a company has failed to implement any internal anti-bribery policies, guidelines or codes of conduct, the defence under Section 9 is not available to a commercial organisation – therefore rendering it liable to prosecution under the PCA.

 6.2 Regulation of Lobbying Activities

There is currently no national legislation in India regulating lobbying activities. Various laws in India are routinely enacted after going through a process of public consultation on draft bills/legislation. While companies and commercial organisations (including their trade bodies and industry associations) are permitted to participate in legislative consultative processes, such participation cannot, however, cross the line drawn by Section 7 of the PCA, which makes it illegal for a “public servant to take gratification other than legal remuneration in respect of an official Act”.

In 2015, a private member’s bill – the Disclosure of Lobbying Activities Bill, 2015 (proposed lobbying bill) – was introduced in the Upper House of the Parliament of India, but lapsed and never became law.

 6.3 Disclosure of Violations of Anti-bribery and Anti-corruption Provisions

There is no express provision under the PCA which casts a duty on any person to report commission of any offence under the PCA by another person to any law enforcement authority.

However, Section 8 of the PCA states that if a person has been compelled to give a bribe to any public officer, such person is legally obligated to report/disclose this to a law enforcement authority within a period of seven days. Section 8 also envisages a duty to disclose in a scenario where a person, before giving a bribe to a public officer, is obligated to inform a law enforcement authority when such bribe is being offered in order to assist any law enforcement authority or investigating agency to investigate any offence under the PCA against an identified person.

While the duty of disclosure under the PCA is limited to the aforementioned circumstances, there is nonetheless a duty cast upon listed companies under Section 177(9) of the Companies Act 2013 to internally implement a “vigil mechanism” enabling its directors and employees to report illegal conduct and behaviour. In cases where such conduct is reported, Section 177(10) requires such listed company to disclose this on its website and in its board report. Further, it is also the duty of independent directors to ensure that such a “vigil mechanism” envisaged under Section 177(9) is workable and effective, so that the sanctity of such “vigil mechanism” is not compromised.

 6.4 Protection Afforded to Whistle-Blowers

In 2014, the Indian Parliament enacted the Whistle-Blowers Protection Act 2014; however, the Act is yet to be operationalised.

As stated in 6.3 Disclosure of Violations of Anti-bribery and Anti-corruption Provisions, Section 177(9) of the Companies Act 2013 casts a duty on listed companies to ensure that their “vigil mechanism” is framed in such a manner that it contains adequate safeguards and sufficient checks and balances for preventing victimisation of employees who report illegal conduct and behaviour.

In addition, corporate governance rules introduced by the Securities Exchange Board of India (SEBI) require listed companies to introduce a whistle-blower policy which is workable and effective, and which also provides adequate safeguards to whistle-blowers.

 6.5 Incentives for Whistle-Blowers

Indian law does not provide any incentive to whistle-blowers. However, it provides adequate mechanisms for presenting victimisation of whistle-blowers under the Companies Act 2013. As stated previously, the Whistle-Blowers Protection Act 2014 has not been operationalised.

 6.6 Location of Relevant Provisions Regarding Whistle-Blowing

As previously mentioned, the Whistle-Blowers Protection Act 2014 has not been operationalised. The applicable provisions can be located only in internal policies mandated either under the Companies Act 2013 or through SEBI corporate governance rules.




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