The anti-corruption legal regime in India has always been oriented towards targeting the demand side of corruption. The Prevention of Corruption Act, 1988 (‘PoCA’) focuses primarily on prohibiting corrupt acts by public servants. While bribe givers are also covered within the law by reliance on provisions such as abetment / criminal conspiracy and companies get covered by virtue of judicial precedents on corporate criminal liability, the law seems to be primarily aimed at curbing corruption at the end of the recipient of the bribe. This also reflects in the enforcement of the law, which primarily targets government officials. Bribe givers and in particular, companies are very rarely made the target of enforcement actions. The Prevention of Corruption (Amendment) Bill, 2013 (‘PoCA Amendment Bill’) has been in the pipeline for a while now. The bill is a crucial step towards India conforming to its obligations under the United Nations Convention Against Corruption. In a nutshell, the proposed amendments under this bill seek to target the supply side of corruption by making express provisions for affixing liability on the bribe giver, in general and companies, in particular. Express provisions have also been incorporated for affixing liability on the officers of the company. The amendments also draw significant guidance from the provisions of the UK Bribery Act by enabling a company to take the defence that it had adequate procedures in place to prevent the commission of an offence under the PoCA. The PoCA (Amendment) Bill was scruitinised by the Law Commission of India, which submitted its report on February 12, 2015. Based upon the recommendations of the Law Commission, the Union Cabinet gave its approval to moving certain amendments (‘Cabinet Amendments’) to the PoCA (Amendment) Bill. The Cabinet Amendments would need to be moved in the Indian Parliament in order to become a part of the PoCA Amendment. While the text of these amendments is not available in the public domain so far, the nature of the amendments is reflected in the press release dated April 29, 2015 (‘Press Release’) issued by the Cabinet, Government of India. A few areas of particular interest to commercial organisations are highlighted below.
Guidelines on ‘adequate procedures’
One of the significant inputs provided by the Law Commission was that the PoCA Amendment Bill should introduce a statutory obligation on the government to publish guidance as to the procedures that commercial organisations can take to put in place ‘adequate procedures’ after following a consultation process with all the interested stakeholders. The Law Commission in its report refers to the guidance provided under the UK Bribery Act in order to determine the adequacy of procedures, in particular, the six key principles (i.e. principle of proportionate procedures, top-level commitment, risk assessment, due diligence, communications including training and monitoring and review). The report recommends that similar guidance should also be provided in India. The report emphasizes the importance of such guidance being provided to companies, given that the burden of proof for establishing that the company had in place adequate procedures is on the commercial organisation. This suggestion has been incorporated in the Cabinet Amendments.
Liability on the officers of the company
The PoCA Amendment Bill also provides for affixation of liability on persons in charge of and responsible to the company for the conduct of business at the time of the offence, unless such a person is able to prove that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such an offence. Further provisions were made for affixing liability on such officers who consented to or connived in the commission of the offence. The Law Commission had recommended that the liability of company officers should be limited to situations where it is proved that the offence is committed with the consent and connivance of an officer. However, significantly, based on the Press Release, it appears that this suggestion has not been incorporated in the Cabinet Amendments. The government therefore seems to be taking a stringent view on liability of company officials by holding that liability should, by default, extend to all persons in charge of and responsible to the company for the conduct of its business unless such person is able to establish that the offence was committed without his knowledge or that he exercised the requisite due diligence.
Provisions for reducing undue delay in trial of cases under PoCA
However, bringing in amendments to the letter of the law would not by itself be sufficient. It would have to be coupled with effective enforcement so as to create a better compliance environment. Significantly, the Cabinet Amendments seem to recognize this to an extent by seeking to provide for a speedy trial of corruption cases. The Press Release notes that the average trial period of cases under the PoCA in the last four years has been above eight years. The Cabinet Amendments therefore prescribe a timeline of two years for completing the trail in PoCA cases. It remains to be seen whether the PoCA Amendment Bill, once it comes into effect, is able to radically transform the business environment in India with respect to corruption. However, at the very least, companies doing business in India need to be cognizant of these changes and build adequate safeguards into their compliance culture.