The Prevention of Corruption Bill, 2013 amends the Prevention of Corruption Act 1988, to put it in sync with India’s commitments to the UNCAC. The Bill has been referred sequentially to the Standing Committee on Personnel, Public Grievances, and the Law Commission and latter made its recommendations in 2015. Subsequent to this, the government proposed 31 official amendments to the Bill in 2015. In the process, corporate criminal liability for corruption has been diluted considerably, and in its present form today is a charade of the original proposal.
In the 1988 Act, there was no specific provision to cover supply-side bribery, which could be only tackled under the sections relating to abatement. In the amended Bill, Sections 9 and 10 specifically deal with the supply side of bribery which is criminalised to the extent that it is ‘offered or promised for the purpose of obtaining or retaining a business advantage.’ In the original amendment bill of 2013, if a corporate is held guilty of the offence of bribery, then the person acting for the organisation and the head of the organisation were deemed to be guilty, unless it could be proved that the organisation took adequate precautions, and the head had no knowledge of the act. Thus, the burden of proof was shifted to the corporate to prove it had done its due diligence to prevent the bribery and its head had to prove “ignorance” of the crime or the exercise of due diligence to prevent the bribery, to escape criminal liability.
The Law Commission in its report has taken a very interesting stand on this aspect. In paragraph 4.3.2 of its report it is stated, “Section 10 will operate to deem every single person in charge of, and responsible—thus, every Director on the Board of Directors, who may be sitting in Delhi more than 2,000 kms away—guilty, and the burden on (sic) proof will shift on each of these Directors to prove they had no knowledge or had exercised due diligence.”
Thus, it recommended that Section 10 of the Bill be amended, with sub-section (1) be deleted and sub-sections (2) be modified. The select committee of the Rajya Sabha has accepted the proposed amendments and therefore, in all likelihood the Bill will be passed with a much diluted corporate liability for corruption.
Corruption can be minimised when both supply- and demand-sides are symmetrically criminalised which the Bill does not do, in its present form. Under the Bill, the burden of proof is transferred to the accused person only for the demand-side. But for the supply-side, it would require the prosecution to establish the crime. This will not only undermine the deterrence effect of the amendment but stretch the scarce state resources, both material and men, without concomitant gains.
Surprisingly, the Law Commission’s main standard of reference is the UK Bribery Act, 2010. However, if one is seeking to learn from international best practices in the arena of corruption law, a better option appears to be the FCPA 1977 of the US. The OECD’s June 2013 Annual Report gives the # 1 spot to it. And the FCPA regularly makes CEOs tumble and fall. Indian Law Commission is worried that directors of a commercial organisation sitting in Delhi cannot be held for actions of their employees, 2,000 kms away. This seems archaic in this age of fast communication. The US has regularly even held CEOs and CFOs accountable for bribery in far away countries like Brazil, China, Saudi Arabia and India, to name a few. Cognizant president Gordon Coburn had to resign amidst allegations of the company making illegal payments for facilities in India. In fact, it’s now a regular feature under FCPA to take action against ‘control persons’, which essentially means that any person/s ‘in control’ of the employees who paid bribes, is also held criminally liable for transgressions under the law. Even under traditional principles of respondent superior a company is liable for the acts of its agents, including its employees, undertaken within the scope of their employment and intended, at least in part, to benefit the company. Thus, the effective laws of the world are progressing beyond the limits of proving knowledge, to hold individuals liable for acts within the corporation.
In stark contrast, under the Indian Bill, it will be a junior level staff that will be made the fall guy whereas ultimate perpetrators and beneficiaries will go scot free. On the other hand, if the top management is made culpable, they will not only put compliance systems in place but make sure these are implemented, promoting a clean corporate culture. Prosecuting the ultimate beneficiaries of bribery also has an effective deterring effect on others similarly inclined as well as strengthens Rule of Law.
In a nutshell, if India has to effectively combat corruption, both the supply- and demand-side of corruption has to be addressed symmetrically. For this CEOs and top echelons of the corporate world must be held accountable on the supply-side. Simultaneously, burden of proof should be placed on supply-side just as it is placed, presently and in the amended bill, on the demand-side.
The author is commissioner in Central Board of Excise & Customs (CBEC). Views are personal