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July 15, 2013

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Anti-Corruption Framework: A work in progress


- Jasleen K Oberoi, Partner [ Amarchand & Mangaldas & Suresh A. Shroff & Co ]
- Rohini Singh Sisodia, Senior Associate [ Amarchand & Mangaldas & Suresh A. Shroff & Co ]

jasleen-rohini

“ Corruption is a hydra-headed monster and the existing and proposed laws as well as other enforcement agencies have a long way to go before we manage to vanquish this beast that threatens to throw our grandiose future plans for economic and social progress off track

Corruption is in essence a term used to describe misuse of public position for private gain which hampers public interests. It not only involves public officials abusing their position, but also includes other private individuals and organisations connected to the public sector, like procurement-related firms, power brokers and influence peddlers etc.

Kofi Annan1, has articulated the crippling effect of corruption as under:

"Corruption debases democracy, undermines rule of law, distorts markets, stifles economic growth and denies many, their rightful share of economic resources of life-saving aid."

India is ranked 94th in corruption, out of a total of 176 nations as per the Corruption Perception Index2 of 2012 released by Transparency International. Although India is one of the fastest growing economies in the world, corruption prevailing at various levels has hampered socio-economic development of the country. Eradication of corruption is one of the major challenges faced by India today.

This article provides an overview of the Indian Legislations and bodies, which are charged with the responsibility of tackling the beast, which is corruption in India.

Anti-Corruption/Bribery Legislations - Fight Against Corruption


The principal legislations dealing with corruption and bribery issues in India include:

Indian Penal Code, 1860 (IPC)

Originally, there was no special legislation dealing specifically with corruption in India, and the IPC only contained certain limited provisions, criminalising and penalising corruption and bribery of public servants in India3.

Prevention of Corruption Act, 1988 (PCA) - the fountain head of Anti-Corruption laws in India

In recognition of the need for an exclusive anti-corruption/bribery legislation, the Prevention of Corruption Act was introduced in the year 1947 (PCA 1947). PCA, 1947 broadly included in its ambit, the then existing offences under sections 161 to 165A of IPC, along with a new provision on 'criminal misconduct'.

After several amendments to the PCA, 1947; PCA, 1988 was enacted with the intention to make the existing anti-corruption laws more effective by widening their coverage, strengthening the provisions and imposing stringent punishments.

Public Servant

PCA widened the scope of the expression 'public servant'4 to bring within its gamut every person who held an office by virtue of which he was required to perform any 'public duty'. Broadly, a public servant is referred to as any person who is remunerated out of public money and/or government funds or who performs a public duty; and the term 'public duty' has been interpreted to mean "a duty in the discharge of which the State, the public or the community at large has an interest"5.

PCA makes it a crime for a public servant or a person to take gratification other than legal remuneration in respect of an official act and outlines the following relevant provisions relating to offences and penalties6;

    • Section 7 criminalises acts of a public servant taking gratification, either pecuniary or that estimable in money, in respect of an official. The term "gratification" is not restricted to pecuniary gratifications or to gratifications estimable in money7."
    • Section 8 and Section 9 prohibit acceptance of gratification/reward to influence a public servant, in the exercise of his duties by means which are corrupt, illegal or through the exercise of personal influence with such public servant.
    • Section 11, apart from gratification, prohibits acceptance of a valuable thing without consideration or consideration from a person known or likely to be concerned in any proceeding/business transacted by the public servant.
    • Section 12 makes the abetment of any offence punishable under Section 7.
    • Section 13(1) (d), makes it an offence for a public servant to obtain for himself or for any other person any valuable thing or pecuniary advantage, by corrupt or illegal means or by abusing his position as a public servant.
    • Section 14 makes the habitual commission of offences detailed in Sections 8, 9 or 12 of PCA, punishable.


Private Sector

PCA, apart from public servants, also includes within its ambit private citizens who 'act as a tout or intermediary' in the offence of corruption and may be charged/liable under PCA8 in cases when they accept gratification as a motive or reward to induce a public servant to engage in corruption.

Today, PCA is at the forefront of anti corruption legislation in India, and coupled with provisions of other legislations including the IPC regulates, criminalises and penalises acts of corruption in India.

Other Legislations

Prevention of Money Laundering Act, 2002 (PMLA) is the primary legislation to combat money laundering and covers "Proceeds of Crime"9 which includes property derived or obtained as a result of criminal activity relating to offences specified under the schedule to the PMLA with certain offences under the PCA, falling under this Schedule.

The Foreign Exchange Management Act (FEMA) is also another legislation geared to prevent corruption. FEMA has certain provisions which penalise taking of commission etc and it is a valuable tool in dealing with corruption. Foreign Contribution Regulations Act (FCRA) prohibits any Judge, Government servant/ employee of Government Corporation or any other body controlled or owned by the Government; member of any Legislature; political party or office-bearer thereof from accepting foreign contributions/hospitalities subject to certain exceptions.

There are other legislations as well which have been put in place to curb the menace of corruption in specific sectors. For instance, Representation of People Act, 1951, prevents corrupt practices in connection with elections.

There is also a vast body of subordinate legislation10 formulated/issued by the Central and State Government in the form of service rules etc which are applicable to the various categories of public servants in different sectors including defence, aviation, railways etc, to regulate and prevent corruption. In essence, these rules relate to the conduct of public servants in public matters relating to acceptance of gifts, acquisition of movable and immovable property, carrying on private trade or business by any public servants etc.

Investigative & Enforcement Bodies/Agencies


The main bodies/agencies which are primarily responsible for investigating and probing into corruption and enforcement of anti-corruption laws in India are:

Although India is one of the fastest growing economies in the world, corruption prevailing at various levels has hampered socio-economic development of the country. Eradication of corruption is one of the major challenges faced by India today. Apart from the enactment of pending/proposed legislations, what is the real need of the hour is to identify and monitor reasons for failure of effective implementation of existing laws, and to plug the lacunae therein and this is the biggest challenge which Indian policy faces today

Central Vigilance Commission (CVC)

CVC was established in 196411 and accorded statutory status, by enactment of the Central Vigilance Commission Act, 2003, pursuant to directions given by the Supreme Court of India in the case of Vineet Narain v. UOI12. CVC is the apex body for exercising superintendence over vigilance matters and is a primary organisation that is tasked with the enforcement of the PCA in India. CVC also exercises supervision over CVO and CBI and may undertake an inquiry or investigation into any transaction in which a public servant working in any organisation, to which the executive control of the Central Government extends, is suspected or alleged to have acted for an improper or corrupt purpose. The Central Government has also designated13 CVC as the agency to act on complaints from 'whistleblowers' until specific legislation is passed by the Parliament.

Chief Vigilance Officer (CVO)

Vigilance units are set up in all ministries/departments/public undertakings/nationalised banks, at both central and state level to receive complaints and enquire into allegations of corruption, and a CVO is appointed as a head to each such unit with concurrence of the CVC and have a wide range of functions which include; to decide upon the existence of a vigilance angle on registration of a complaint, collecting intelligence on corrupt practices and reference of vigilance related matters to CVC etc.

Central Bureau of Investigation (CBI)

CBI was constituted in 1963 and it derives its powers to investigate under the Delhi Special Police Establishment Act, 1946 ("DSPE Act"). The Anti-Corruption Division of the CBI investigates cases of corruption, bribery and fraud committed by public servants of all Central Government departments, PSUs and Central Financial Institutions. It is a primary body for investigations of cases under PCA, and other criminal laws including IPC, and its major functions includes, enquiries into complaints, investigation and prosecution of offences, collection/evaluation of evidence, and tasks relating to prevention aspects of corruption etc. Anti-corruption Bureaus (ACB) are also set up at the state levels for investigations of cases relating to corruption and bribery.

Enforcement Directorate/Adjudicating Authority

The Directorate of Enforcement (ED) is primarily concerned with enforcement of provisions of FEMA and PMLA, to prevent leakage (loss) of foreign exchange and violation of anti-money laundering regulations, resulting from payment and receipt of bribery funds.

Serious Fraud Investigation Office (SFIO)

SFIO is relatively a new organisation, set up in October 2003 in the backdrop of stock market scams, failure of non financial banking companies, phenomena of vanishing companies, and plantation companies to investigate serious corporate frauds.

Other Bodies/Conventions

Additionally, SEBI14 and RBI, which are chief regulators of the stock exchange/security market and banking sector respectively, also have been conferred with investigative powers with respect to securities and corporate fraud scams. The Financial Intelligence Unit (FIU), under the Ministry of Finance undertakes investigations on matters pertaining to money laundering and related crimes.

Also, agencies/ departments constituted under specific legislations/regulations/rules, have powers to conduct investigations into matters relating to corruption and take necessary actions in accordance with the same.

Accordingly, there are multiple investigative and monitoring bodies in India, focussing on the fight against corruption. In the last few years, these bodies and agencies have been taking an increasingly proactive role in the battle against corruption in India.

UN Convention

India has on May 2011, ratified two UN conventions - the United Nations Convention against Corruption (UNCAC) and the United Nations Convention against Transnational Organised Crime (UNTOC) and its three protocols. The UNTOC is the first comprehensive and global legally binding instrument to fight transnational organised crime, of money laundering, related corruption and obstruction of justice. UNCAC complements the UNTOC and introduces a comprehensive set of standards, measures and rules that all countries can apply in order to strengthen their legal and regulatory regimes to fight corruption and proposes certain preventive measures and policies. With the ratification of the convention, it is now obligatory for the government to implement the provisions of the convention and file compliance reports with the UN.

Proposed Anti-Corruption Laws/ Legislations And Measures/Initiatives


In addition to the legislative measures already in place to prevent and fight corruption, there are also a number of proposed laws, geared towards setting out further checks on corruption in India, which include:

The Lokpal and Lokayuktas Bill, 2011 provides for the establishment of an independent corruption investigation body of Lokpal for the Union and Lokayukta for the states to inquire into allegations of corruption against certain public functionaries, similar to the western concept of Ombudsman. Parallely, a Jan Lokpal Bill has been proposed and debated by prominent civil activists, which suggests radical improvements to the Lokpal and Lokayukta Bill, 2011.

The Whistle Blowers Protection Bill, 2011 seeks to protect whistleblowers, i.e. persons making a public interest disclosure related to an act of corruption, misuse of power, or criminal offence by a public servant.

The Prevention of Bribery of Foreign Public Officials and Officials of Public International Organizations Bill, 2011 has been introduced by Parliament to honour India's commitment as a signatory to the UN Convention against corruption. This Bill seeks to introduce a mechanism to deal with bribery among foreign public officials and officials of public international organisations.

Public Procurement Bill, 2011 seeks to regulate government purchases through a transparent bidding process and covers all central government ministries/departments/undertakings. The Bill sets a Code of Integrity (Integrity Pact) which prohibits the procuring entity as well as the bidders from acceptance of bribe, collusion, misrepresentation, coercion or threat.

Apart from the above, the government has taken many other initiatives and measures to strengthen its fight against corruption15.

Conclusion


"Corruption is a hydra-headed monster and governments have to make efforts to tackle it from all sides. This can only happen if all stakeholders work together"16.

Despite numerous laws and measures aimed at combating and preventing corruption and bribery in the public sector; and implementation through multi-layered investigation and enforcement agencies and UN conventions, India continues to witness corruption at all levels in the public space. Over the last few years, corruption as an issue has captured the imagination of the public citizen movements which have brought the menace of corruption to the forefront. While the legislature appears to be making efforts to introduce new laws and measures to regulate corruption, there is still a lot which needs to be done. Lack of extraterritoriality of laws (i.e. to cover bribes to officials outside of India), applicability to private/commercial bribery and protection of whistleblowers are some of the apparent deficiencies in the present system.

Today, apart from the enactment of pending/proposed legislations, what is the real need of the hour is to identify and monitor reasons for failure of effective implementation of existing laws, and to plug the lacunae therein and this is the biggest challenge which Indian policy faces today.

 

Footnote:
1 Secretary general of United Nations; 2 Corruption Perception Index scores and ranks countries/territories based on how corrupt a country's public sector is perceived to be. 3 Section 161 to 165A of the IPC, which were repealed by Prevention of Corruption Act, 1988; 4 Section 2(c); 5 Section 2(b); 6 Chapter III, Section 7 to Section 16; 7 Mahmoodkhan Mahboobkhan Pathan v. State of Maharashtra (1997) 10 SCC 600 at para 7, and State of Andhra Pradesh v. C. Uma Maheswara Rao and Anr (2004) 4 SCC 399 at para 20; 8 Sections 8 and 9 and Section 12 for abetment 9 Section 2 (u); 10 The All India Service (Conduct Rules), 1968 passed pursuant to the All India Services Act, 1951. Directorate of Personal Services, Discipline and Welfare, 2006 (Regulations for the Air Force, 1964). 11 Vide an administrative order of Government pursuant to the recommendation of the Santhanam Committee on prevention of corruption; 12 AIR 1998 SC 889; 13 Vide a resolution passed on 21.04.2004; 14 prohibits fraudulent and unfair trade practices and has investigative powers relating to all security/stock market and related issues; 15 National Anti-Corruption Strategy, Vigilance Awareness Week is held every year by public authorities to create awareness as to new anti-corruption measures and strategies. National E-governance Plan approved by the government in 2006, Project Vigeye launched in December 2010 by the CVC; 16 P S Bawa, Chair of Transparency International India

 

Disclaimer-The views expressed in this article are the personal views of the authors and are purely informative in nature.

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