Legal means created to curb corruption in India

By Shardul Thacker, Mulla & Mulla & Craigie Blunt & Caroe
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Corruption is the abuse of entrusted power for private gain and encompasses corrupt practices in both the public and private sectors. It has become imperative to curb the corruption in India and the legislature has introduced some innovative means to do so.

The Right to Information Act, 2005, applies to all central and state government bodies, known as public authorities. The act’s major limitation is the grounds provided to claim exemption from providing information.

Shardul Thacker Partner Mulla & Mulla & Craigie Blunt & Caroe
Shardul Thacker
Partner
Mulla & Mulla & Craigie Blunt & Caroe

Section 8 sets out the following qualified exemptions: national security, contempt of court, parliamentary privilege, trade secrecy, fiduciary relationship, foreign government, safety of informer in law enforcement, investigation, cabinet papers and privacy.

Only information which is not accessible by the parliament and state legislatures can be exempted. Information that would cause more harm to protected interests than benefit to the public interest will be exempted. Section 9 provides absolute exemption for information that would involve copyright infringement.

The act is a tool to curb business corruption because it makes all the public authorities answerable to the general public, thus promoting transparency, accountability and integrity in transactions. To make the act more effective, the grounds for exemption must be reduced.

Pacts and codes

An integrity pact is an agreement between a government agency and the bidders for a public sector contract establishing mutual rights and obligations and providing that neither side will pay or offer bribes, collude with competitors to obtain contracts or engage in such abuses while performing their duties.

To combat corruption in public contracting, Shipping Corporation of India entered into a memorandum of understanding with Transparency International India to implement an integrity pact programme in 2009; Indian Oil Corporation adopted an integrity pact in 2008; and Hindustan Petroleum Corporation implemented a pact for contracts above ₹10 million (US$190,000) in 2007.

A code of conduct creates an ethical environment in an organization. The preparation of such a code is mandated by clause 49(I)(D) of the Listing Agreement regulated by the Securities Exchange Board of India, although implementation is left to the organization. For example, clause 5 of the code of conduct for Tata companies aims at eliminating all forms of bribery, fraud and corruption, and requires full disclosure before any gift is given or taken. Clause 4 of the Indian Oil code of conduct sets ethical standards for all employees.

Whistle-blowing

Whistle-blowing refers to disclosing wrongdoing in an organization to help safeguard the rule of law. Employees of companies and organizations are encouraged to report corruption that they discover through their work although this may cause risk to the job and even the life of the whistle-blower.

In India, no law specifically protects whistle-blowers and witnesses. Section 5 of the Prevention of Corruption Act, 1988, provides powers to a special judge, including awarding a pardon to a person who makes full and true disclosure of an offence. Section 24 of the act provides protection to bribe-givers from prosecution if they provide all details of the bribe and the recipient.

Annexure I-D of clause 49 of the Listing Agreement provides for a whistle-blower mechanism to be established by companies to enable easy detection and reporting of corruption. This provision is a non-mandatory part of the agreement. Companies such as Tata Motors Finance, Maruti Suzuki India and DLF have adopted whistle-blower policies.

The Public Interest Disclosure and Protection to Persons Making the Disclosures Bill, 2010, was introduced in the Lok Sabha in August 2010. The bill is to be discussed in the winter session of the parliament.

Lokpal Bill

The Lokpal Bill, 2011, was introduced in the parliament on 4 August. It provides that people occupying high public offices, including ministers and members of the parliament, can be investigated for corruption. It creates the office of a Lokpal or ombudsman of India, who would receive complaints by people who are not public servants, investigate them and pronounce a judgment within six months of the complaint.

Corruption leads to anarchy in markets and stifles economic growth. It also sharply increases the costs of transactions. Recent scams show that the steps taken by the legislature are inadequate to meet the rising levels of corruption. The current whistle-blower policy, being non-mandatory, has been adopted by very few companies. The legislation on whistle-blowers and the Lokpal is yet to be passed by the parliament.

While integrity pacts are a novel method of curbing corruption, they must be made obligatory to ensure their success. Apart from the statutory measures, companies must take the initiative to adopt methods to curb the rising corruption levels in the corporate sector.

Shardul Thacker is a partner at Mulla & Mulla & Craigie Blunt & Caroe in Mumbai.

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