Insights
Steps for enhancing the anti-bribery and anti-corruption framework in India
September 8, 2023India continues to be seen by foreign investors as a country with high-corruption related risks. The following policy changes in the anti-framework may be considered by the lawmakers.
Guidance on ‘adequate procedures’
Corporates can be held liable under the Prevention of Corruption Act, 1988 (PCA), if any associated person bribes a public servant to obtain or retain any business or business advantage for the corporate. The PCA provides a statutory defence against such liability, where the corporate can prove that it had put in place ‘adequate procedures’ to prevent such corruption. This is aimed at incentivising corporates to improve their compliance mechanisms. The PCA also provides that these procedures are required to be in compliance with the guidelines to be prescribed by the Central Government. These guidelines would help businesses in bolstering their compliance programmes and would also be helpful for courts in determining the adequacy of the procedures put in place by corporates organizations. It is therefore surprising that no such guidelines have been prescribed till date (despite the provision being in effect for more than 5 years). We are hopeful that these guidelines will be prescribed at the earliest, after due consultation.
Impose higher financial penalties
Prosecutors should seek imposition of hefty fines on corporates for their corrupt acts. Enabling provisions for imposition of fines (which are uncapped) and disgorgement of profits, already exist under the PCA. However, enforcement remains abysmal, with limited reported instances of substantial fines being imposed on corporates. Therefore, prosecutors should utilize the existing framework effectively and push for imposition of higher fines on corporates. Heavy fines would act as a deterrent for corporates and encourage them to improve their internal compliances. Interestingly, heavy fines have been imposed on companies in the US for violations of the FCPA.
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Settlement mechanisms and Deferred Prosecution Agreements (DPAs)
Settlement agreements/ DPAs act as effective tools to recover fines from the accused, while avoiding the time-consuming process of a trial. Such agreements typically involve an understanding, whereby the prosecutor/ enforcement agency agrees to not pursue the prosecution, provided, the accused agrees to pay a fine or compensation and agrees to abide by certain conditions. Such agreements are often entered into with enforcement agencies in the US, to resolve bribery charges. However, the PCA does not allow for a settlement prior to a trial through a settlement agreement/DPA. Further, the offences under PCA are not compoundable. Plea bargaining may not be a feasible option for corporates, as the same would involve monitoring from the trial court and may therefore be time-consuming. The fact that plea bargaining would also involve admission of a guilty plea may discourage corporates from admitting to violations, which need not be the case with settlement agreements. Introduction of a statutory framework recognizing settlement agreements/ DPAs for corruption related offences is recommended.
Timelines for trial and investigation
The PCA provides that an ‘endeavour’ is to be made to ensure that a trial is concluded within a period of 2 years. Additionally, the PCA also provides that the 2-year period may be extended by a maximum of 6 months at a time and the aggregate period for the trial (after the extensions) shall ‘ordinarily’ not exceed 4 years. The terms ‘endeavour’ and ‘ordinarily’ as used in the PCA indicates that these timelines are not mandatory. No guidance is provided as to what consequences will follow if the timelines are not followed. Despite the prescriptive timelines, corruption related trials continue to take inordinate time. Further, no such timelines have been prescribed for multiple appeals which may be filed with appellate authorities, post the conclusion of the trial. Accordingly, the PCA needs a relook, to minimise the discretion available at the trial stage for the time taken to conclude the trial/ appeals. Similarly, timelines may also be prescribed for timely completion of investigations by enforcement agencies like CBI and ED.
Reporting mechanism
The PCA does not impose any specific obligation to report corruption-related offences and experts differ as to whether such an obligation exists under Section 39 of the CrPC. Further, assuming such an obligation exists, there is limited guidance on the mechanism for such reporting and no incentives are provided to encourage corporates to voluntarily report commission of offences. The PCA may be amended to incorporate a reporting mechanism, whereby offending corporates may face a lighter fine, if they self-report and cooperate with the investigation.
Whistle blower incentives
Whistle blower incentives are becoming common tools for encouraging whistle blowers, outside India. In US, the SEC has established a whistle blower reward program, under which monetary awards (ranging between 10-30% of the money collected) can be awarded to eligible individuals who come forward with information leading to an enforcement action (including action regarding foreign bribery). The SEC has awarded more than $1.3 billion to whistleblowers under the program. India may also adopt a program to reward whistle blowers who report instances of corruption and are able to assist in recovery of fines from the offenders.
This article was originally published in Financial Express on 8 September 2023 Co-written by: Alina Arora, Partner; Apurva Zutshi, Principal Associate. Click here for original article
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Contributed by: Alina Arora, Partner; Apurva Zutshi, Principal Associate
Disclaimer
This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.
