By: Sharanya Ranga and Akanksha Prakash
With the enactment of the Prevention of Corruption (Amendment) Act, 2018 in late July 2018, India’s principal anti-corruption law, the Prevention of Corruption Act, 1988 (Act), has been amended significantly changing the regulatory framework governing anti-corruption. The amendment expands the scope of the Act considerably and brings it in line with global standards, in the wake of India ratifying the UN Convention against Corruption in May 2011. The key changes brought in by this amendment impacting private businesses are as follows:
1. Applicability to commercial organisations
The amended law applies to all commercial organisations, i.e., an incorporated entity in India, carrying on business in India or outside India as well as any other body incorporated outside India but carrying on a business (or part of a business) in India. Thus, the private sector has been directly brought under the ambit of the amended anti-corruption law in India.
2. Bribe-giving by commercial organisations
Unlike the Act where bribe-givers could only be punished for abetment of bribery, the amendment makes bribe-giving or offering of bribes a stand-alone crime. Thus, any person who gives or promises to give an ‘undue advantage’ to another with the intention to obtain/retain business or obtain/retain an advantage in the conduct of its business shall be punished. The term ‘undue advantage’ has been defined to mean any gratification other than legal remuneration and includes all forms of gratifications estimable in money besides pecuniary gratification. The act of giving an undue advantage to another person (directly or through a third party intermediary), coupled with an intention to induce a public servant to perform a public duty improperly, or to reward such public servant for the improper performance of public duty shall be treated as an offence under the amendment.
3. Liability of directors/officers of commercial organisations
Directors, managers, secretaries or other officers of commercial organisations shall be guilty of the offence and liable to be punished if it is proved that an offence was committed with their consent or connivance. Such offences shall be punishable with imprisonment for a minimum term of 3 years and upto 7 years along with a monetary fine.
4. Defence available for commercial organisations
The amendment expressly provides that commercial organisations can take a legitimate defence that it had adequate procedures in place to comply with the prescribed guidelines to prevent its employees (and other persons associated with the commercial organisation) from undertaking such conduct. Thus, companies doing business in India have to review their internal policies and ensure the general conduct of their business is in compliance with the amended provisions. The Central Government has also been empowered to prescribe such guidelines as may be necessary to bring about compliance for commercial organisations, to prevent persons associated with commercial organisations from bribing a public servant.
With this amendment, India appears to be headed in the direction of the FCPA in the US or the UK Bribery Act with a stringent anti-corruption regulatory framework rolled out. While it is early days yet, it is important for companies – domestic as well as multinationals- to review all their existing anti-corruption/anti-bribery policies and guidelines and revise them as per the amended Act. It is also important to review existing practices and set out accountability standards for third party intermediaries such as consultants, agents, service providers, et al., who remain a ‘high risk’ element for businesses in corruption scandals.