Whistleblower’s Protection Act, 2011: The Long Road Ahead

In Depth

Whistleblower’s Protection Act, 2011: The Long Road Ahead

Amar Sundram | April 2014

In order to eliminate corruption and protect witnesses, the Indian Cabinet had introduced the Whistleblowers’ Protection Bill, 2011, (hereto referred as the Bill). The Bill was passed by the LokSabha on December 27, 2011, and after remaining pending in the Rajya Sabha for nearly two years, was passed by the House as well recently.

While the timing of the Bill has raised eyebrows in lieu of the upcoming Lok Sabha polls, it is beyond doubt that the step is a welcome provision in more than one way and has been long awaited. It has, however, been felt that certain provisions of the Bill could have been looked into more carefully in order to add clarity to them.

For instance, the provisions related to the protection of a complainant and witnesses under the Bill are worth noting. Significantly, it is for the first time that such a protection has been given under a statute.

What is still not clear is whether the Bill is applicable to a private entity. The objective of the Bill and the preamble confines it to disclosures against public servant. It is evident that this was the intent when theBill was being formulated. However, the provision relating to offences by ‘companies’ does not explicitly states if they can be extended to private companies, even if such disclosures are in the public interest.

Reading the provisions of the new Companies Act together with the Whistle Blowers Protection Bill, 2011 does give a different interpretation. It seems we will have to rely on judicial pronouncements to have more clarity on the matter.

In the meantime, here is a quick glance at the key highlights of the Bill.

WIDE DEFINITION OF COMPLAINANT AND DISCLOSURES

The Act seeks to establish a mechanism to receive complaints from any person relating to disclosure under the same, which should be made in writing or by electronic mail or electronic mail message, against the public servant and includes a public interest disclosure. Disclosure has been defined in the Act to mean a complaint relating to:-

An attempt to commit or commission of an offence under the Prevention of Corruption Act, 1988;
Wilful misuse of power or wilful misuse of discretion by virtue of which demonstrable loss is caused to the Government or demonstrable wrongful gain accrues to the public servant or any third party;
Attempt to commit or commission of a criminal offence by a public servant.

Disclosures are to be made within 7 years maximum from the date on which the action complained against is alleged to have taken place.

FRIVOLOUS DISCLOSURES DISCOURAGED

Every disclosure is to be made in good faith followed by a personal declaration from the complainant stating that he/she reasonably believes that the information disclosed and allegations contained are substantially true.

No action shall be taken by the Competent Authority in such public interest disclosure does not include the identity of the complainant or public servant or if such identity is found to be incorrect. However, the Competent Authority is to maintain the confidentiality of the identity of the complainant which may be disclosed further only with the prior written consent of the complainant.

ACTION POST SUCH DISCLOSURES

On receipt of such disclosures, the Competent Authority shall make a discreet inquiry and if it is prima facie of the opinion that disclosure needs to be investigated, it shall seek comments or explanation or report from the HOD of the organization concerned.

The complainant is to provide all documentary evidence in support of the complaint to the Competent Authority.

If nothing material comes out in the inquiry and the Competent Authority wants to close the case, an opportunity of hearing to be given to the complainant (if complainant so desires).

POWERS OF COMPETENT AUTHORITY

Competent Authority to be deemed to be a Civil Court and every proceedings before it to be deemed a judicial proceeding and shall have powers like:-

Summoning and enforcing the attendance of any person and examining him on oath;
Requiring the discovery and production of any document;
Requisitioning any public record or copy thereof from any court or office;
Issuing commissions for the examination of witnesses or documents;
Such other matters as may be prescribed.

Power of superintendence and direction over the machinery created by the public authority for dealing/inquiry over the disclosures.
For the purpose of making discreet inquiry or obtaining information from the organization concerned, the Competent Authority is entitled to seek assistance from the police or any other authority.
To pass interim orders to prevent immediate stoppage of any corrupt practices during the continuance of the inquiry proceedings.

PROTECTION TO WHISTLEBLOWER

Cannot be victimized by initiation of any proceedings or otherwise merely because such person had made a disclosure or rendered assistance in the inquiry.
If victimized or likely to be victimized, the complainant may file an application before the Competent Authority which shall give direction to the concerned public servant or the public authority to protect such person. Such a direction is binding.
The Competent Authority shall also give an opportunity of hearing to the complainant and the public authority concerned.
Any person not complying with the direction of the Competent Authority shall be liable for a penalty up to Rs. 30,000.
Protection provided to complainant, witnesses, public servant or any other person rendering assistance for inquiry, by police on direction issued by Competent Authority.

OFFENCES UNDER THE ACT

Where the public authority or organisation concerned :-

Has failed to submit a report to the Competent Authority as directed, a penalty of Rs. 2500 each day till report is submitted (subject to maximum of Rs. 50,000) shall be levied.
Has knowingly given incomplete / incorrect / misleading report, penalty to the maximum of Rs. 50,000 levied.

Where the identity of the complainant disclosed by any person negligently or malafidely, he/she shall be punished for an imprisonment up to 3 years and a fine of maximum Rs. 50,000.
False / incorrect / misleading disclosures disclosure by the complainant – malafidely and knowingly – imprisonment up to 2 years and fine up to maximum of Rs 30,000.
Where an offence under this Act has been committed by any Department of Government; the HOD shall be deemed to be guilty of the offence and shall be punished accordingly; unless he/she proves that the offence was committed without his/her knowledge or that he/she had exercised all due diligence to prevent commission of such offence.
Where offence committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and be punished accordingly; except where such person is able to prove that the offence was committed without his knowledge or that he has exercised all due diligence to prevent the commission of such offence.
Where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of or is attributable to any neglect on the part of any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
“Company” means any person, corporate and includes a firm or to the association of individuals.
“Director” in relation to a firm means a partner in the firm

OTHER PROVISIONS

Appeal from the order of the Competent Authority lies before the High Court.
Competent Authority to prepare an annual report of the performance of its activities which shall be laid before the Parliament.
Rules for implementation of the provisions of the Act are yet to be formulated.

CONCLUSION

The Whistle Blowers Protection Bill, 2011 has been the demand of the civil society for a long time. It will indeed go a long way in reinforcing the provisions of the Right to Information Act and the Prevention of Corruption Act.

Yet, some provisions of the Bill must be relooked into when the rules are framed. Conceptually, the identity of a whistleblower is always required to be protected which in turn acts as an impetus for bringing the wrongdoing into the limelight and thus push for further investigation. Under the present Bill, however, not only the identity of the whistleblower is disclosed to the competent authority, any disclosure which is false or misleading has been made punishable for a term of 2 years, including payment of fine.

Further, in case of Public Interest Disclosure, the person making the disclosure is required to make a personal declaration regarding the truthfulness of the allegations and in the absence of such declaration, the Competent Authority may not take any action thereof.

Such provisions may act as a dampener and prevent the whistleblowers from making complaints. It is a matter of record that in most of the high profile scams, cases of corruption have come to light on the whistleblower’s initiative. They are thus important in not only ensuring prevention of fraud but also promoting good corporate governance.

About Author

Amar Sundram

Amar is National Director – Legal / General Counsel, Ernst & Young Services Pvt Ltd. This article is written by the author in his personal capacity and does not reflect an official view of the organisation he serves.