Like the UK, India should evolve a framework for entering into Deferred Prosecution Agreements with the process monitored by a court of law.
Due to the changes proposed to the Prevention of Corruption Act, 1988, liability of commercial organisations under POCA and vicarious liability of directors and officer-in-charge has become more serious a concern than ever. It is imperative to provide a framework for voluntary disclosure of violations and a settlement framework in line with the international standards to ensure organisations and those in-charge are not deemed guilty for few bad acts committed by their employees.
Further, the 2015 Amendments moved in Rajya Sabha to the POCA Amendment Bill, 2013 makes an officer-in-charge vicariously liable if it is proved that the offence was committed with the consent or connivance. However, directors and key managerial personnel are not out of the woods yet. Under the Prevention of Money Laundering Act, 2002, offences under POCA are treated as “scheduled offences” and provides for a similar vicarious liability provision as envisaged in the POCA Amendment Bill 2013 in its original form. Hence, in a prosecution under PMLA for violation of POCA against the company, the burden of proof would shift to the top management impleaded therein to demonstrate that they had no knowledge of such practices and hard undertaken all diligence in order to discharge the burden.
On a combined reading of the PMLA and the POCA Amendment Bill, the risk of the board or top management of a large company being held vicariously liable for the acts of a few bad employees under PMLA still remains.
In the UK, DPAs have been created under Schedule 17 of the Crime and Courts Act, 2013, to provide a mode of responding to alleged criminal conduct, the effect of which has resulted in corporate bodies not being subject to a formal prosecution, but rather agree to a course of conduct where any prosecution is deferred for a period of time. At the conclusion of the DPA, if the commercial organisation has complied with all the necessary obligations contained within the DPA, the matter is concluded without prosecution.
In the US, on the other hand, DPAs are often negotiated by prosecutors with limited (if any) judicial involvement. Prosecutors in the US have been criticised for wielding too much power over companies in the DPA process, with the prosecutor having almost sole responsibility for safeguarding the public interest. The UK has chosen to modify this approach by giving the judiciary much more of a role in the DPA process. However, the flip side of this approach is that companies in the UK will lack the certainty they would have in the US of negotiating a DPA with a prosecutor as they would not be absolutely certain of the fact that whether all the terms agreed with the prosecutor will be reflected in the terms of DPA.
Like the UK, India should evolve a framework for entering into Deferred Prosecution Agreements with the process monitored by a court of law. DPA should be a discretionary tool which may be created under the POCA and rules thereunder to provide a way of reacting to alleged criminal conduct specifically violation of POCA by a commercial entity. Prior to entering into a DPA, the prosecuting authorities must be clearly satisfied that there is at least a reasonable suspicion based upon some admissible evidence that a commercial organisation has committed the offence, and public interest would be properly served by not prosecuting the entity, but instead entering into a DPA with it.
In order to determine whether public interest would be best served by entering into a DPA, the prosecuting authorities should take into account the following factors: i) The organisations’ history of similar misconduct including prior anti-corruption, criminal and regulatory actions; ii) Timeliness of the voluntary disclosure; iii) Nature and effectiveness of the anti-bribery and anti-corruption policy, if any; iv) Remedial actions undertaken including any preventive measures put in place to avoid such happenings in the future; v) Code of conduct policy for its employees; and vi) Nature of the wrong doing to be evaluated based on the advantage intended to be achieved from such a wrongful act
Further, once the settlement is arrived, it must be clearly agreed that no additional criminal charges shall be filed against the disclosing entity, or any of their direct or indirect affiliates or subsidiaries, relating to any of the conduct described in the settlement agreement, or the criminal information filed pursuant to the settlement agreement, or information disclosed by the disclosing party prior to the date of the settlement agreement if the conditions prescribed under the DPA are complied with by the commercial organisation.
Cooperation with an investigation and/or a voluntary self-disclosure must be regarded as a mitigating factor while eventually imposing the fine on the disclosing entity.
The person in charge of commercial organisation and who has been actively involved in making the voluntary disclosure may not be held liable if there was active co-operation and disclosure at an early stage of the investigation process by the person concerned with the investigating authorities. Specifically, the criterion as laid down in the Seaboard report may be applied to gauge company’s cooperation in cases of such voluntary disclosure
The DPA model in India must finally provide that an approval of court would be required for DPA to come into effect. The judge will ultimately decide whether the DPA is in the interests of justice and subject it to the standards of judicial scrutiny.
-Bharat Anand & Satish Padhi, Anand is Partner, while Padhi is associate, Khaitan & Co. Views are personal