The Indian economy is characterised by the presence of a ‘big’ government – the Indian
political structure encompasses central and state governments, as well as various local self governance structures. This means that a single business entity may be subject to a number of central, state and local regulations, requiring approvals and registration to commence and operate its business, compliance, periodic reporting and inspections, and the exercise of individual discretion by government officials at various levels.
Apart from performing such functions, the government also operates large commercial
enterprises in several sectors, including education, defence, aviation (which is in the
process of divestment), railways (a near monopoly), infrastructure, banking, telecoms and
healthcare. In addition to operating commercial enterprises, the incumbent government
has increased its endeavours to open its commercial activities to participation by nongovernment business entities and enter into collaborations with such entities, with the
objective of providing a boost to the economy and ensuring the quality of products and
services at competitive prices. Accordingly, interactions with the government (in its various
forms) and government-owned enterprises are unavoidable for entities looking to do
business in India. It is also important to bear in mind that Indian laws and regulations often
provide for considerable discretion in the hands of government agencies and personnel, and
this can make interacting with the government a subjective and time-consuming exercise.
While Indian anti-corruption laws are fairly stringent, corruption is not uncommon in
India. However, recent years have been marked with a growing public dissatisfaction over
corruption and its cost to the Indian economy. Over the past several years, there has been
a strong public sentiment against corruption, and high-profile instances of corruption have
become key political issues.
The incumbent Indian government has also taken a hard-line stance on corruption issues and
has prompted the introduction of several legislative measures aimed at tackling corruption in
India, including: strengthening laws relating to prosecution of bribe-givers, facilitators and
inﬂuence peddlers; expansion of existing laws governing money laundering and ‘benami’
(i.e., proxy) transactions; and new laws to target undisclosed income and assets (whether in
India or abroad) and accused persons absconding from prosecution. Most importantly, the
past few years have seen a change in attitude of enforcement agencies, which have started
enforcing anti-corruption laws aggressively in India against the perpetrators of corrupt
practices as well as their advisors, auditors and other agents who either support or ignore the
existence of such practices, and have been supported in their eﬀorts by the judiciary (which
has taken an active role in monitoring corruption cases) and civil society.
Brief overview of the law and enforcement regime
Prevention of Corruption Act, 1988
The primary anti-corruption statute in India, the Prevention of Corruption Act, 1988
(‘PCA’) criminalises receipt of any ‘undue advantage’ by ‘public servants’ and the provision
of such undue advantage by other persons. The PCA states that an ‘undue advantage’ is
any gratification (not limited to being pecuniary in nature or estimable in money) other
than the legal remuneration which a public servant is permitted to receive either from the
government or any other organisation served by such public servant. Further, the term
‘public servant’ has a wide definition under the PCA, and includes any person in the service
or pay of any government, local authority, statutory corporation, government company, or
other body owned or controlled or aided by the government, as well as judges, arbitrators,
and employees of institutions receiving state financial aid. The Supreme Court of India
has also held that employees of banks – public or private – are considered ‘public servants’
under the PCA.1
The oﬀences under the PCA include: (1) public servants obtaining any undue advantage
with the intention of, or as a reward for improperly or dishonestly performing or causing
performance of public duty; (2) public servants obtaining any undue advantage without (or
for inadequate) consideration from a person concerned in proceedings or business transacted
either by the public servant or any other public servant to whom such public servant is a
subordinate; and (3) criminal misconduct by a public servant (which includes possession of
disproportionate assets) and a habitual oﬀender.
The PCA also targets the conduct of ‘middlemen’, inﬂuence peddlers or intermediaries who
facilitate bribery, by criminalising the act of obtaining any undue advantage to cause the
improper or dishonest performance of public duty. Until 2018, bribe-givers were brought
within the ambit of the PCA through the oﬀence of ‘abetment’ of the oﬀences mentioned
above; however, legislative changes made to the PCA in 2018 have expressly targeted
bribe-givers by criminalising the act of providing or promising to provide a bribe to any
person (irrespective of whether such person is a public servant or not) to induce or reward a
public servant to improperly or dishonestly perform a public duty. The bribe-giver may also
be charged with ‘criminal conspiracy’ to commit oﬀences under the PCA. The penalties for
various oﬀences under the PCA include imprisonment ranging from six months to 10 years,
and a fine (for which no maximum amount is prescribed). Further, legislative changes
to the PCA in 2018 also introduced provisions pertaining to attachment and confiscation
of property procured by way of an oﬀence under the PCA. It is not inconceivable for
investigating authorities to allege that any advantage received by a bribe-giver pursuant to
the bribery (which is an oﬀence under the PCA) could also be subject to attachment and
confiscation, and not just the property of the public servant(s) in question.
Under the PCA, if there is an agreement or attempt to give or receive a bribe, this in itself
is sufficient to constitute an oﬀence (and attract prosecution), and the actual payment of a
bribe is not necessary. Further, it is immaterial whether the bribe has been obtained for a
public servant’s own benefit or the benefit of any other person, either directly or through
any other person. The 2018 amendment states that the obtaining, accepting, or attempting
to obtain an undue advantage in itself is an oﬀence under the PCA, even though the ultimate
performance of a public duty by a public servant is not improper. Oﬀences under the
PCA are generally investigated by a special enforcement unit called the Central Bureau of
Investigation (‘CBI’) or the state anti-corruption departments of the police.
It may also be noted that the prior sanction of the government is required for the initiation of prosecution under the PCA against public servants. However, this safe harbour applies
only to proceedings against serving and retired public servants and not persons accused of
giving bribes. Trials for oﬀences under the PCA are conducted before special courts set up
for this purpose. The 2018 amendment states that there shall be an endeavour to conclude
the trial within a period of two years from the date of initiation of proceedings, subject to a
maximum time period of four years.
Service rules for government officials
Government officials in India are also bound to conduct themselves in accordance with
the ‘service rules’ applicable to diﬀerent classes of officials, including the Central Civil
Services (Conduct) Rules 1964 and the All India Services (Conduct) Rules 1968 (‘Service
Rules’). The Service Rules prohibit government officials from receiving gifts, hospitality,
transport, or any other pecuniary advantage that exceeds certain specified thresholds from
individuals other than near relatives or personal friends (with whom such official has no
business dealings) without the sanction of the government; however, a casual meal, a casual
lift, or other social hospitality is permitted. The Service Rules also provide that government
servants are not permitted to accept lavish or frequent hospitality from persons with whom
they have official dealings, and prohibit government servants from engaging in any trade,
business, or other employment, canvassing in support of any business and participating,
except in the discharge of official duties, in the registration, promotion or management of
any company for commercial purposes. A contravention of the Service Rules can lead to
initiation of disciplinary proceedings against the official concerned, the consequences of
which can include termination of service.
Foreign Contribution Regulation Act, 2010
The Foreign Contribution Regulation Act, 2010 (‘FCRA’) prohibits the acceptance of
hospitality or contributions from ‘foreign sources’ by persons including legislators, judges,
political parties or their office-bearers, government servants and employees of bodies owned
or controlled by the government, except with the permission of the central government. The
FCRA defines the term ‘foreign source’ to include any foreign citizen, company, entity,
multinational corporation, trust or foundation. Further, non-governmental organisations
(including charities) receiving contributions from a ‘foreign source’ are required to be
registered under the FCRA and report such contributions. The FCRA provides for an
exception for personal gifts valued up to INR 25,000 (approximately USD 334, based on a
value of USD 1 = INR 74.86), therefore such gifts are not prohibited.
In addition to the requirement of obtaining the central government’s consent or registration
for the purpose of receiving contributions from a foreign source, the FCRA provides for
suspension and cancellation of a registration granted by the central government in case of
a contravention of the terms of the registration, the FCRA, or in the larger public interest.
A contravention of the FCRA is punishable with imprisonment of up to five years, or a fine,
or both. Where the oﬀender is a company, persons such as directors and other managerial
personnel may be held liable for the oﬀence.
Right to Information Act, 2005
The Right to Information Act, 2005 (‘RTI Act’) allows Indian citizens to obtain information
held by any public authority, subject to specified exceptions for national interest, legislative
privilege and right to privacy. Further, the RTI Act requires public authorities to publicly
disclose certain types of information relating to their functions (for example, they must
publish relevant facts while formulating important policies or announcing decisions that
aﬀect the public and provide reasons for their decisions). The information requested by
a citizen is required to be provided in a timely manner (within a period ranging from 48
hours (if the life and liberty of any person are involved) to 30 days). An authority has
been set up at the central and state levels to monitor complaints from citizens under the
RTI Act (including a refusal of access or a failure to respond). Such authorities are the
Chief Information Commissioner at the central level and the state-specify information
commissioners at the relevant state levels. The RTI Act was amended in October 2019
to allow the central government to formulate rules and regulations governing the tenure,
salaries, allowances and other terms and conditions of service of the Chief Information
Commissioner and the information commissioners, which had been fixed under the RTI Act
prior to such amendment.
In recent years, the RTI Act has proved to be a key tool in the fight against corruption –
requests for information by activists and citizens have been successful in bringing to light
instances of corruption in government tenders and public procurement programmes. The
RTI Act promotes transparency in the government and bureaucracy’s decision-making, and
by facilitating publication of official records, which ensures that any lapses are brought into
the public eye.
Central Vigilance Commission Act, 2003
The central government has constituted the Central Vigilance Commission (‘CVC’) pursuant
to the Central Vigilance Commission Act, 2003. The CVC is the government watchdog that
is tasked with inquiring into (or commissioning an inquiry into) oﬀences alleged to have
been committed under the PCA. It is also responsible for advising, planning, executing,
reviewing and reforming vigilance operations in central government organisations. The CVC
is required to operate impartially and free of executive control and can refer investigations
to the CBI.
Powers and functions of the CVC include: exercising superintendence over the Delhi
Special Police Establishment for the examination of oﬀences under the PCA; and inquiring
or causing an investigation to be made on the recommendation of the Central Government
for oﬀences under the PCA. The CVC has the same powers as a civil court to summon and
enforce attendance, receive evidence on affidavits, etc.
Lokpal and Lokayuktas Act, 2013
The Lokpal and Lokayuktas Act, 2013 is a relatively recent piece of legislation which
provides for the establishment of corruption ombudsmen (called ‘Lokpal’ at the central
level, and ‘Lok Ayuktas’ at the state level), which act independently from the executive
branch of the government. These bodies have been empowered to investigate allegations
of corruption against public functionaries, including oﬀences under the PCA (including
allegations against the prime minister and other central ministers, members of parliament
and other public servants). Further, public servants are required to declare the assets held by
them (together with their spouse and dependent children) on an annual basis. The Inquiry
Wing of the Lokpal has been vested with the powers of a civil court. The Lokpal has powers
of confiscation of assets, proceeds, receipts and benefits that have arisen or been procured
by means of corruption in special circumstances.
Companies Act, 2013
The Companies Act, 2013 (‘Companies Act’) is India’s law governing companies and
places a strong emphasis on corporate governance and the prevention of corporate fraud.
Under the Companies Act, auditors and cost accountants are mandatorily required to report
any suspected frauds (above a specified threshold) to the central government. Certain types
of companies are also mandated to establish a vigilance mechanism for the reporting of
The Companies Act defines the term ‘fraud’ quite broadly, and this could encompass acts
of private or commercial bribery. Fraud is a criminal oﬀence under the Companies Act
and is punishable with imprisonment ranging from six months to 10 years and/or a fine.
The Companies Act also obligates directors and senior management to maintain systems
for ensuring compliance with applicable law, as well as accuracy of the books, records
and financial statements of the company. Contravention of such provisions is punishable
with fnes (which depend upon the quantum of the amount involved in the fraud) and
The Companies Act has also led to the empowerment, and practically the operationalisation,
of the Serious Fraud Investigation Office (‘SFIO’), which is empowered to detect, investigate
and prosecute white-collar crimes and fraud. The SFIO has broad powers to conduct
inspections, discover documents, search and seize evidence, carry out arrests, among others.
Besides the SFIO, the Companies Act also establishes the National Financial Regulatory
Authority (‘NFRA’), which monitors and enforces compliance with the accounting and
auditing standards under the Companies Act. The NFRA has also been vested with powers
of investigation into matters of professional or other misconduct committed by any member
or firm of chartered accountants registered under the Chartered Accountants Act, 1949.
Prevention of Money Laundering Act, 2002
The Prevention of Money Laundering Act, 2002 (‘PMLA’) criminalises ‘money laundering’,
which it defines as direct or indirect attempts to knowingly assist or become party to, or
actual involvement in, a process or activity connected with the ‘proceeds of crime’ (including
its concealment, possession, acquisition or use) and in projecting or claiming such property
to be untainted property. Under the PMLA, ‘proceeds of crime’ are defined to mean any
property derived or obtained, directly or indirectly, by a person as a result of certain identified crimes (which are considered predicate oﬀences for the application of the PMLA).
The Finance Act, 2019 further amended the definition of ‘proceeds of crime’ to clarify that
it shall include any property which may be directly or indirectly derived or obtained as a
result of any criminal activity relatable to such identified oﬀence.
A crucial aspect of this law is that it permits the attachment of properties of accused persons
(and other parties who are connected with the proceeds of crime) at a preliminary stage of
the investigation (and even prior to conviction). The 2019 amendment also includes an
amendment that empowers the Special Court to restore confiscated assets to the rightful
claimants even during the trial.
The oﬀence of money laundering attracts a punishment of imprisonment of three to seven
years, and a fine. An investigation in relation to a contravention of the PMLA is initiated
and conducted by the Enforcement Directorate in India.
Legislative changes to the PMLA in 2018 included ‘fraud’ under the Companies Act as one
of the identified crimes which would attract the application of the PMLA. As a result, any
property derived or obtained pursuant to a fraud is considered ‘proceeds of crime’ under the
PMLA. Unlike the PCA, ‘fraud’ under the Companies Act is not linked only to bribery of
public servants but covers a much wider ambit.
The PMLA also requires banks, financial institutions and intermediaries (such as brokers
and money changers) to maintain records of transactions and ‘know your customer’ details
(as per norms specified by sectoral regulators), and to report suspicious transactions and
transactions exceeding a specified value.
Recent legislative changes to the PMLA propose to make all oﬀences ‘cognisable’ (i.e.,
which empower the Enforcement Directorate to arrest an accused on its own motion without
judicial warrant) and ‘non-bailable’ (that is, where grant of bail is a matter of discretionary
power in the hands of the court); however, these legislative changes are pending notification.
Further, the prerequisite of a first information report or charge sheet being fled in relation to
a scheduled oﬀence under the PMLA, prior to the Enforcement Directorate being competent
to investigate the oﬀence of money laundering resulting from such scheduled oﬀence, has
Black Money (Undisclosed Foreign Income & Assets) and Imposition of Tax Act, 2015
This enactment levies penal rates of tax on any undisclosed asset or income held abroad by
a person resident in India, and penalises individuals for non-disclosure of foreign income
or assets, wilful attempt to evade tax, failure to furnish requisite returns, etc. The objective
of this Act is to target undisclosed income and assets (potentially derived through illegal
means, including corruption) which have been ‘stashed’ oﬀshore by resident Indians.
Fugitive Economic Oﬀenders Act, 2018
In order to prevent oﬀenders accused of economic oﬀences from evading prosecution within
the country, the Fugitive Economic Oﬀenders Act, 2018 (‘FEOA’) was enacted on July 31,
2018. The FEOA targets fugitive economic oﬀenders against whom an arrest warrant has
been issued for certain predicate economic oﬀences involving INR 100 crores and who have
either left the country to avoid criminal prosecution or are abroad and refuse to return to face
criminal prosecution. Predicate oﬀences under the FEOA cover cheating and counterfeiting
under the Indian Penal Code, 1860, oﬀences under the PCA and PMLA, corporate fraud
under the Companies Act, benami transactions and tax evasion, among others. The strength
of the FEOA lies in its far-reaching measure of immediate confiscation of all properties of
any abscondee, which acts as a strong deterrent against any desertion from the country.
Overview of enforcement activity and policy
The past few years have witnessed a stark change in the approach towards enforcement of
anti-corruption laws. One of the driving forces behind this change has been the increased
public focus on the issue of corruption in government, combined with an active role played
by the judiciary in tackling corruption. This movement against corruption was triggered by
the discovery of several instances of large-scale corruption by highly inﬂuential ministers
and bureaucrats within the government machinery. Recently, instances of financial fraud
by established corporate giants and multi-millionaire businessmen have also come to light.
This led to a large-scale public outcry regarding the impact of corruption on the Indian
economy and its citizens.
Amidst growing public dissatisfaction regarding this state of aﬀairs, the government reacted
by enacting various legislative measures. In an attempt to bolster and cure India’s perceived
weakness in its anti-corruption machinery, in March 2019, the government appointed the
first Lokpal under the Lokpal and Lokayuktas Act, 2013. Further, alarmed by the increasing
number of financial defaulters absconding the jurisdiction of domestic law enforcement
agencies to avoid prosecution, the government enacted the Fugitive Economic Oﬀenders
Act, 2018. In early 2019, the former chairman of an established beverage-manufacturing
entity was declared India’s first Fugitive Economic Oﬀender under the new law, thus
enabling the government agencies to confiscate his properties in the INR 9,000 crore loan default case. While certain accused individuals have ﬂed India, the Indian government
has, in parallel, increased its eﬀorts to extradite such individuals and has charged them
under provisions of the PCA, PMLA and the Black Money (Undisclosed Foreign Income &
Assets) and Imposition of Tax Act, 2015.
On account of an increasing number of delinquent borrowers and non-performing assets,
anti-corruption enforcement has recently directed its focus towards corruption in the
financial services sector, particularly in the approval of large loans. In an eﬀort to bridge the
information asymmetry in the loan market and to shield the credit environment from further
shocks, the Reserve Bank of India has begun work in setting up a digital Public Credit
Registry (‘PCR’). The PCR is intended to be a comprehensive database of information
on all credit relationships in the country – from the point of origination of credit to its
termination. This registry will act as a central repository drawing real-time information
from the Securities and Exchange Board of India, the Ministry of Corporate Aﬀairs, the
Goods and Services Tax Network and the Insolvency and Bankruptcy Board of India.
Law enforcement agencies have initiated proceedings against various corporate giants
and businessmen for defrauding public and private sector banks. Another growing trend
is that enforcement agencies have become more sophisticated in unravelling complex
corporate or financial structures and have increased their reliance on technological tools.
Importantly, government agencies have also shown a willingness to take the assistance of
specialists such as private forensic auditors or investigators to help them in this endeavour
and provide expertise that they may lack themselves. Indian enforcement agencies have
also strengthened their relationships with agencies from other jurisdictions, and we have
witnessed far more cooperation and coordination in cross-border enforcement eﬀorts.
Perhaps the most welcome change has been an increased appetite among enforcement
agencies to aggressively investigate and pursue corruption cases, even against high-profile
politicians and powerful bureaucrats. Additionally, enforcement agencies have initiated
proceedings against statutory auditors of entities who have been subject to financial fraud.
The Ministry of Corporate Aﬀairs, the Securities and Exchange Board of India and the
NFRA have been at the forefront of prosecuting audit firms who, while being appointed as
statutory auditors of companies in India, have allegedly colluded with the management in
perpetrating fraud upon the entity, its shareholders, banks and the public at large.
It is interesting to note that, as regards the PMLA, the oﬀence of fraud under the Companies
Act was introduced as a scheduled oﬀence on April 18, 2018. Pursuant to Article 20 of
the Constitution of India, any finding of fraud prior to such period should not trigger the
provisions of the PMLA, since Article 20 of the Constitution of India expressly states that
no person shall be convicted of any oﬀence except for violation of the law in force at the
time of the commission of the act charged as an oﬀence; neither shall they be subjected to a
penalty greater than that which might have been inﬂicted under the law in force at the time
of the commission of the oﬀence. However, this principle in relation to PMLA proceedings
is in the process of being tested at the level of the Supreme Court of India. While the High
Court of Karnataka has upheld this principle in light of Article 20 of the Constitution of
India in Directorate of Enforcement v. Obulapuram Mining Company Private Limited,2 the
order passed by the High Court of Karnataka has been appealed before the Supreme Court
of India, which has passed an interim order 3 stating that the High Court’s order will not
operate as a precedent, pending the conclusion of proceedings before the Supreme Court.
The High Court of Bombay in the case of Babulal Verma and Ors. v. Enforcement
Directorate and Ors4 held that once an oﬀence under the PMLA is registered on the basis of a scheduled oﬀence, it stands on its own and thereafter does not require the support of the
scheduled oﬀence. Even if the scheduled oﬀence is compromised, compounded, quashed
or the accused therein is acquitted, the investigation by the Enforcement Directorate under
the PMLA is not aﬀected and can continue.
Law and policy relating to issues such as facilitation payments and hospitality
At the outset, it should be noted that unlike the US Foreign Corrupt Practices Act, the PCA
prohibits the payment of ‘facilitation payments’ or ‘grease money’. This has also been
clarified by a recently inserted illustration in the statute which states that if a public servant
demands money to process a routine application on time, the same would be an oﬀence under the PCA. It is important to recognise that, unlike the Service Rules or the FCRA, the PCA does not provide for any de minimis thresholds for gifts, meals, or hospitality in respect of public servants and the thresholds specified under the Service Rules and the FCRA can, at
best, be viewed as guidelines for de minimis amounts, on the assumption that there is no intent to violate the PCA. Moreover, the Supreme Court of India has held that the quantum paid as gratification is immaterial, and that conviction will ultimately depend upon the conduct of the delinquent public official and proof established by the prosecution regarding the acceptance of such illegal gratifcation.5 It should be noted that the true test of whether a person shall be prosecuted under any anti-bribery legislation is whether the mens rea to commit an act of corruption or violate any anti-bribery law existed on the date of such payment.
Therefore, the receipt of gratification or valuable things (however insignificant their value)
by a public servant, which is not within the legal remuneration of the public servant, could
potentially attract prosecution under the PCA. The provision of gifts, meals, or hospitality
of a nominal value (and below the thresholds specified in the Service Rules or FCRA)
could also be considered inconsistent with the PCA and constitute an illegal act. The
2018 amendment has made available the ‘adequate procedures’ defence to commercial
establishments. Thus, a company can demonstrate its lack of mens rea to commit an oﬀence
under the PCA by proving compliance with such guidelines as may be prescribed by the
central government to prevent persons associated with it from undertaking such conduct.
This defence is in line with that provided under the US Foreign Corrupt Practices Act and
the UK Bribery Act.
In view of the foregoing, the compliance regimes of multinational organisations operating in
India must be carefully crafted and customised to the Indian legal framework, and specific
legal advice should be obtained in this regard.
Key issues relating to investigation and enforcement procedures
Indian law recognises that communications between an attorney and a client are privileged.
It is, however, important that advice on Indian law be sought when evaluating the availability
of privilege in the specific facts of every case. In the context of an investigation, we suggest
that the company should appoint an Indian law firm to conduct the investigation, and
(although this position remains untested as a matter of law) any experts, investigators or
auditors should be appointed by the law firm to extend the privilege (to the extent available)
to any work product prepared by such experts, investigators, or auditors.
Data privacy concerns
Companies are generally permitted under Indian law to collect and review electronic data
stored on their servers or electronic equipment (such as laptops or phones) in the context of
an investigation, and this right should be specifically reserved by the company in its policy
manuals or employee handbooks. The Information Technology Act, 2000 and the rules
issued thereunder regulate the collection, storage, use and disclosure of sensitive personal
information (‘SPI’), such as passwords, financial information, medical records, biometric
information, etc.; therefore, a company should obtain the consent of an employee before
accessing or reviewing data from an employee’s personal electronic devices.
There is no express obligation under Indian law to self-report oﬀences under the PCA.
However, a reporting obligation imposed upon auditors may be triggered if the act also
qualifies for reporting under the Companies Act. Although the Code of Criminal Procedure,
1973 contains provisions relating to reporting obligations, it remains to be seen whether
Indian courts will extend these obligations to oﬀences under the PCA.
Proactive self-reporting of the kind available in the US (and related incentives regarding
penalty and prosecution) is not currently available in India.
Presumptions and exemptions under the PCA
Where the authorities can establish the receipt of gratification or a valuable thing by a public
servant, the PCA creates a legal presumption that the receipt was pursuant to an oﬀence under the PCA – the burden of proof is then on the accused to demonstrate that such receipt was not improper. Additionally, legislative changes made to the PCA in 2018 provide immunity to individuals accused of providing gratification, if such individual has been compelled to give such gratification and is willing to report the matter to the law enforcement authority or investigating agency within a period of seven days from the date of giving such gratification.
Multiplicity of enforcement proceedings and agencies
From the perspective of commercial organisations, it is important to recognise that multiple
agencies with similar powers are often competent to investigate diﬀerent aspects or facets
of a single set of facts. For example, the use of company funds to bribe an official of the
central government may constitute related but distinct oﬀences under the PCA, the PMLA
and the Companies Act, each of which may be investigated by a diﬀerent agency. If the
company in question is listed, the securities market regulator – the Securities and Exchange
Board of India – may also initiate proceedings against the company. Therefore, addressing
any compliance issues and/or dealing with an investigation requires companies to adopt a
nuanced and carefully crafted strategy.
Although the legislation protecting whistle-blowers has been enacted by the Indian
parliament, it is pending notification. The Securities and Exchange Board of India has
meanwhile oﬀered a monetary reward of 10% of the monetary sanctions to whistle-blowers
in relevant cases, up to a maximum amount of INR 100,000,000.
Overview of cross-border issues
As noted above, we have recently seen greater levels of interaction between Indian
authorities and their counterparts in other jurisdictions, and they have demonstrated a
willingness to invoke treaties and join forces for mutual assistance to investigate corruption
matters. Indian authorities have also been known to take note of settlements agreed between
multinational corporations and oﬀshore regulators such as the US Department of Justice,
and to initiate proceedings into the Indian businesses belonging to such corporations.
Therefore, corporations being investigated in other jurisdictions should also be prepared
in respect of potential investigations in India.
India has ratified the United Nations Convention against Corruption (‘UNCAC’) and the
United Nations Convention against Transnational Organized Crime and its three protocols;
both of these Conventions mandate the criminalisation of corruption and bribery of public
officials. The legislative changes to the PCA in 2018 were introduced with the intention
of removing any inconsistencies and aligning the provisions of the PCA with India’s
international obligations under the UNCAC.
It may be noted that there is no existing Indian law that applies to bribery of foreign public
officials by Indian companies, and a bill introduced in parliament in this regard (the Prevention of Bribery of Foreign Public Officials and Officials of Public Interest Organisations Bill, 2011) has since lapsed.
India has signed an Inter-Governmental Agreement with the United States to implement the
Foreign Account Tax Compliance Act (‘FATCA’) in India, allowing automatic exchange of
information between the two countries, and to combat tax evasion by nationals and companies in both countries. India is also a signatory to the Convention on Mutual Administrative Assistance in Tax Matters, and has agreed to implement the Common Reporting Standard for automatic exchange of tax and financial information, with eﬀect from 2017.
Corporate liability for bribery and corruption oﬀences
The Supreme Court of India has recognised the principle of corporate criminal liability in
India, and held that mens rea may be attributed to companies on the principle of ‘alter ego’
of the company, i.e., the state of mind of directors and managers who represent the ‘directing
mind and will’ of the company.6 It has stated that in order to attribute the mens rea of a
person or group of persons in a company, it is necessary to ascertain whether ‘the degree and
control of the person or body of persons is so intense that a corporation may be said to think
and act through the person or the body of persons’. Accordingly, for authorities to succeed
in holding a company criminally liable, the mens rea of the relevant employees will have
to be attributable to the company. In practice, however, Indian authorities typically charge
an employer company for the oﬀence along with the individual employee (regardless of the
seniority of the employee), and the liability of the company would need to be proved (or
disproved) at trial.
The PCA and the FCRA recognise the principle of corporate criminal liability. Recent legislative changes to the PCA in 2018 have included provisions which expressly state that in the case that an oﬀence is committed by a commercial organisation, such commercial organisation shall be liable to a fine if any person ‘associated with the commercial organisation’ provides any illegal gratification with the intention of obtaining or retaining business or advantage in the conduct of business, for such commercial organisation. A person is considered to be associated with a commercial organisation if such person provides services on behalf of such commercial organisation. This is a question of fact – not just the relationship between the person and the organisation – and such person could be acting as an employee, agent or subsidiary of such commercial organisation. Hence, an employee of the commercial organisation is deemed to have performed services for such commercial organisation.
As regards liability of senior management or directors for oﬀences committed by a company,
the 2018 amendment to the PCA, under section 10, clarified that when an oﬀence has been
proved in court to have been committed by a commercial organisation with the consent
or connivance of a director, manager, secretary or any other officer of such commercial
organisation, such persons shall be liable to be proceeded against, and be punished with
imprisonment and a fine if found guilty. The maximum term of imprisonment provided
is seven years. Recent legislative changes to the PCA have now incorporated vicarious
criminal liability. Such provisions state that in the case that any oﬀence is committed by
a commercial organisation, the directors, managers, secretaries and any other officers with
whose consent and connivance the oﬀence has been proved to have been committed, shall
be liable to penalties.
Additionally, the PCA now includes an ‘adequate procedures’ defence for commercial
organisations; however, the central government is yet to issue guidelines regarding the
compliance measures required to be undertaken by a company.
Following recent legislative developments in relation to various anti-corruption laws, no
further reforms, amendments or updates are currently contemplated. The implications of
recent developments, along with their enforcement and any practical difficulties arising
therefrom, will need to be analysed in future.
1. CBI v. Ramesh Gelli & Ors., 2016 (3) SCC 788.
2. WP No. 5962/2016.
3. Special Leave Petition to Appeal (Crl.) No(s). 4466/2017.
4. Criminal Application (APL) No. 201 of 2021 and Criminal Bail Application No. 974 of
2021; 2021 SCC OnLine Bom 392.
5. AB Bhaskara Rao v. Inspector of Police, CBI, Visakhapatnam, 2011 (4) KLT (SN) 35.
6. Iridium India Limited v. Motorola Incorporated & Ors., AIR 2011 SC 20.