Whistle-blowing against corporate corruption

K. P.SHASHIDHARAN | Updated on August 21, 2011


The Standing Committee on Finance recommends that an internal whistle-blowing mechanism for companies should be inserted in the new Companies Bill.

The Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice presented its report on “The Public Interest Disclosure and Protection of Person Making the Disclosure Bill, 2010”, or The Whistleblower Bill, on June 9, with its recommendations, which are expected to be enacted soon. The Bill seeks to institutionalise a system to register disclosures from whistleblowers on any allegation of corruption by a public servant and to protect the complainants from any consequences arising due to public interest disclosures.

Disclosure in the act is defined as ‘any complaint made in writing or electronic mail against a public servant on matters related to an attempt to or commission of an offence under the Prevention of Corruption Act, 1988; wilful misuse of power which leads to demonstrate loss to the government or gain to the public servant; or attempt or commission of a criminal offence by a public servant.' The bill designates the Central and State Vigilance Commissioners (CVCs) to investigate the disclosures.


The Standing Committee was of the view that the definition of “public servant” in the Indian Penal Code and the Prevention of Corruption Act, 1988, may be adopted for the Bill. The scope could be enlarged to cover offences such as maladministration, human rights violations and accrual of wrongful gain to a third party; the defence forces and intelligence organisations should be covered within the ambit of the proposed law, with reasonable exceptions.

The Bill may also consider inclusion of members of the Council of Ministers and the judiciary and regulatory authorities.

In case the CVC decides not to pursue any complaint, a reasonable hearing ought to be provided to the complainant before dismissal of his complaint and there should also be some mechanism to ensure that the directions of the CVC are not avoided to protect the wrongdoer. The complainant may also be accorded the right to appeal to the High Court.

Though the Second Administrative Reforms Committee's recommendation is to cover the corporate sector also under the Bill introduced in the Lok Sabha, appropriate provisions for whistle-blowing policy for the corporate are expected to be incorporated in the proposed new Companies Bill to be also enacted in the ensuing Parliament session.

The Standing Committee on Finance recommends, after examining the Bill, that an internal whistle-blowing mechanism for companies should be inserted in the Bill.

It is essential that the employees providing information, or assisting in an investigation relating to whistle-blowing, should be protected from victimisation and any retaliation against whistle-blowers treated as a criminal offence, carrying severe penalties.

The Corporate Governance Code in India specifically states that the whistle-blower must have a direct access to the Chairman of the Audit Committee for reporting on wrongdoings by the senior management. What is needed is a well-formulated whistle-blowing policy in every company, encouraging disclosure of unethical behaviour, fraud or violation of the company's code of conduct or ethics policy.

Legislation alone may not be an absolute remedy against corruption; but corruption is bound to diminish when the edifice of the whistle-blowing policy is appropriately legislated on the foundation of protection of the whistle blower.

(The author is Director General, CAG Office)

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Published on August 21, 2011
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