India's Anti-Corruption Law Must Take Cues From Its Foreign Counterparts

Over the past few years, India has been a host to a variety of scams and scandals, which collectively have not done much either for the country’s image or development. The Economic Times in September 2011 had put a figure of $ 462 Billion as the loss to the country/exchequer post Independence, as a result of tax evasion, crime and corruption. Even after publication of this report, we have witnessed the Coal Gate scam, the Reebok scam to name a few, that are further inflating this figure.

While, over the past year, there has been considerable debate and movement towards the establishment of the Lokpal, very little has been discussed about our Principal Anti Corruption Legislation – the Prevention of Corruption Act, 1988 (PCA) and its inadequacies. Irrespective, of whatever anti corruption enforcement mechanism we bring in, the fact remains that it all stems from absence of substantive legislation in India In the course of this article, we will examine how various facets of anti-corruption legislations in the UK & US could be utilised to make Indian Laws more effective.

The Prevention of Corruption Act, 1988 came as the successor to the colonial law dealing with corruption, which was in the form of the Prevention of Corruption Act, 1947 and the Indian Penal Code 1860. While most definitions under the PCA including those of a public servant and what may be construed as a valuable thing or illegal gratification, are extremely broad and encompassing we still find an extremely poor track record with respect to convictions under the Act. By virtue of this, the Act has failed to stimulate a culture of anti-corruption compliance at an individual as well as a corporate level.

This now brings us to where the PCA, individually, and anti-corruption enforcement, generally, are lacking. To put it simply, it is a blend of poor enforcement, lack of specificity of associated offences and a lack of coordination between all legislations and bodies dealing with anti-corruption, topped by nonexistent political will. Below are some areas where Indian Law ought to incorporate provisions of the US Foreign Corrupt Practices Act and the UK Bribery Act.

Failure to Prevent Bribery:

The UK Bribery Act brought in the offence of failure to prevent bribery and this has resulted in a sea change in attitude in the way corporate entities now view their anti-corruption policies. Companies will be forced to set up proportionate procedures, regularly monitor and review their policies, conduct due diligence and train their employees to ensure they are not in violation of the Act. This has single-handedly enforced a culture of compliance and set the tone right from the top, besides widening the ambit of corporate criminal liability.

Clarity on Associated Forms of Bribery:

Though the PCA makes no exceptions to concepts of facilitation payments or grease payments, as are allowed by the US Foreign Corrupt Practices Act, it does not cater specifically to aspects such as gifts, corporate hospitality and political contributions. All these have become extremely cardinal routes for corruption related activities. At present, policies on gifts and corporate hospitality are left to be determined by the respective conduct rules created by a department or service. This needs to be more centrally streamlined and conveyed.

Books and Accounting Provisions:

The FCPA, besides dealing with the offence of bribery, also lays down certain obligations for maintaining books and accounts. Although in India both the Companies Act as well as taxation laws deal with these elements, they further need to be meshed in and coordinated in a manner through which the corruption aspect can be dealt with more comprehensively.

Bribery of Foreign Public Officials:

The Prevention of Bribery of Foreign Public Officials and Officials of Public International Organizations Bill, 2011 has been brought in to fill this void, but then again, ideally speaking provisions to give effect to the same should be incorporated under the PCA rather than bringing in a separate legislation as conflicts will arise between the two on various counts including terms of punishment which differ under both acts. The UK Bribery Act has dealt with the issue in a similar manner of incorporating bribery of foreign officials under one legislation.

Private Sector Corruption:

The UK Bribery Act brings in the tenets of private sector corruption as well. India has been witness to such action in the form of the Satyam scam and now the Reebok scam. No longer can corruption be dealt with by attacking public officials alone. There has been a move to address private sector corruption by way of an amendment to the IPC. However, this would again need to be streamlined and, ideally, should be brought under the PCA as has been done in the UK Bribery Act, which caters to both active and passive elements of private corruption.

Whistle Blowers Protection:

A strong mechanism of providing protection to whistle blowers needs to be brought into place to complement the PCA. Both the UK and US have an elaborate mechanism for whistle blower protection. In India mere guidelines by the Central Vigilance Commission exist which are not conducive to create a culture wherein honest disclosure is supported. Public Interest Disclosure and Protection to persons making the Disclosure Bill, 2010, which was introduced in Parliament in August 2010 to deal with whistle blowing, is weak on several counts including penalising provisions for revealing the identity of a complainant. Further, the Bill does not even define victimisation or allow for admission of anonymous complaints, and to top it all the Central Vigilance Commission remains a recommendatory body while dealing with provisions of this Act.

Coordination Between Enforcement Agencies:

The enforcement agencies that deal with anti-corruption need to be given greater independence along the lines of what the Department of Justice and the Securities Exchange Commission receive in the US while dealing with the FCPA and the Serious Frauds Office receives in the UK while handling the Bribery Act. Enforcement and investigative agencies cannot function through elaborate sanction procedures, or merely have recommendatory value for their work. Further, these, agencies need to have better intra-agency liaison and coordination. Lastly, they have to be actively involved in communicating and spreading awareness about corruption. The last thing we need is a communication paralysis in anti-corruption policy areas, which are constantly evolving, as the first step to enforcement is awareness.

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