Protecting the whistle-blower

Absence of a comprehensive protection programme acts as deterrent to prospective whistle-blowers

A public interest litigation being heard in the Supreme Court, involving the head of the country's premier investigation agency, has put the spotlight on protection to whistle-blowers.

The provisions of the Whistle Blower Protection Act, 2011, which provides a mechanism for receiving complaints on corruption, misuse of power or discretion by a public servant, aren't applicable to this case. The Act, notified in May this year, is yet to be effective, as its rules haven't been framed.

An overview of the laws governing whistle-blower protection under the Companies Act, 2013, the Lokpal and Lokayuktas Act, 2013, and the Whistle Blower Protection Act, 2011, show the need for a comprehensive whistle-blower protection programme.

The Companies Act, 2013, doesn't spell out the safeguards and legal provisions to protect whistle-blowers. According to section 177 (10) of the Act, read with rule 7(4) of the Companies (Meetings of Board and its Powers) Rules, 2014, the vigil mechanism shall provide for adequate safeguards (protection) against victimisation of a person who uses such a mechanism. "The Act does not go into the details of what should such a mechanism lay down, leaving it to the company to come up with its own mechanism," says Lalit Kumar, partner at law firm J Sagar Associates.

The existence of a vigil mechanism has to be appropriately communicated within the organisation and disclosed on the company's website and the annual report of the board of directors.

The Companies Act, however, states a firm must ensure the name of the whistle-blower is kept confidential, adding there will no prejudice such as termination of job or other unfavourable treatment against the whistle-blower. In exceptional cases, the company must provide the whistle-blower direct access to the chairperson of the audit committee, or the director nominated to play the role of the audit committee, as is the case.

The Securities & Exchange Board of India has made it mandatory for all listed companies to adopt a whistle-blower policy to protect employees in case they expose any wrongdoing by the management.

The Lokpal and Lokayuktas Act, 2013, is silent on protection to whistle-blowers. However, a whistle-blower will not be liable for conviction or penalty when a person makes a complaint in "good faith".

The Whistle Blower Protection Act, 2011, seeks to provide "adequate protection to those reporting corruption or wilful misuse of discretion which causes demonstrable loss to the government or commission of a criminal offence by a public servant". However, no action is taken on a disclosure if it does not indicate the identity of the complainant or public servant or if "the identity of the complainant or public servant is found to be incorrect". This isn't the case in places such as the US, the UK and Canada, which also take cognisance of anonymous complaints.

A COMPARATIVE ANALYSIS

PROVISIONS
Companies Act, 2013

• According to section 177(9) read with Companies (Meetings of Board and its Powers) Rules, 2014,it is mandatory for all listed companies that accept deposits from the public to establish a vigil mechanism for directors and employees to report genuine concerns in such manners as may be prescribed
• According to section 177(10), the vigil mechanism under sub-section (9) shall provide for adequate safeguards against victimisation of persons, and make provision for direct access to the chairperson of the Audit Committee in appropriate or exceptional cases
• It has further been provided that the details of establishment of such mechanism shall be disclosed by the company on its website, if any, and in the Board’s annual report

Lokpal and Lokayuktas Act, 2013

• Lokpal Act does not mention whistle-blower protection
• According to the government, protection for whistle-blowers is being provided through a separate law

Whistle Blowers Protection Act, 2011

• The Act seeks to provide "adequate protection to persons reporting corruption or wilful misuse of discretion which causes demonstrable loss to the government or commission of a criminal offence by a public servant". The Act also seeks to ensure punishment for false or frivolous complaints
• According to the law, a person can make a public interest disclosure on corruption before a competent authority, which is at present, the Central Vigilance Commission (CVC)
• The government, by notification, can appoint any other body also for receiving such complaints on corruption, the Act says

ACTION AGAINST FALSE OR FRIVOLOUS COMPLAINTS

Companies Act, 2013

• In case of repeated frivolous complaints filed by a director or an employee, the Audit Committee, or the director nominated to play the role of Audit Committee, may take suitable action against the concerned, including reprimand

Lokpal and Lokayuktas Act, 2013

• Section 46 of the Lokpal Act states that whoever makes any false and frivolous or vexatious complaint under this Act shall, on conviction, be punished with imprisonment for a term which may extend to one year or fine up to Rs 1 lakh
• Further, such person shall be liable to pay compensation to the public servant against whom he made the false complaint, in addition to bearing the legal expenses for contesting the case

Whistle Blowers Protection Act, 2011

• The Act, however, lays down punishment of up to two years in prison and a fine of up to Rs 30,000 for false or frivolous complaints
• Further, according to sub-section (6) of Section 4, no action shall be taken on a disclosure if it does not indicate the identity of the complainant or public servant or if “the identity of the complainant or public servant is found to be incorrect”

Jagvinder S Brar, partner (forensics), KPMG in India, says this is one of the weakest points in the Act. "In our experience, about half the whistle-blowers prefer to remain anonymous. While the Act mandates the "competent authority" will keep the complainant's identity confidential, it is unlikely all would-be whistle-blowers will trust this provision," he says.

The Act does not protect the complainant from prosecution if that individual was somehow associated to the illegal act. "Whistle-blowers are often insiders who may have played some role in the corrupt acts. These individuals are more likely to make voluntary disclosures when offered legal immunity, protection or leniency from prosecution, which the Act does not provide," says Brar.

Legal experts say it is important to codify in employment-related laws the provisions relating to protection of a whistle-blower against retaliatory action.

Also, there is no provision in the Act for providing guidance and counselling to whistle-blowers.

The Act provides for jail time and fine in cases of false, incorrect or misleading disclosures. "The parliamentary committee that had scrutinised the Bill had observed the quantum of punishment wouldn't only be a major deterrent for prospective whistle-blowers, but also increase the possibility of misuse of this provision," says Chakshu Roy, head (outreach), PRS Legislative Research.

This Act doesn't explicitly define victimisation and acts of victimisation of whistle-blowers.

Brar says though the Act might have the right intentions when it comes to curbing corruption and encouraging whistle-blowers, as of now, its execution is a concern.