Business Standard

Whistleblowers' Protection Bill: the new kid on the block

The Bill does not provide for any penalty for harassing a public servant or any other person making a disclosure

Kumkum Sen 

Who is a whistleblower and why is there a need to act as a whistleblower? Why does he need protection and from whom? It is usually an employee who has been in a position to uncover a financial or any other form of corporate crime, which entitles the employee for specific protection under the law, arising out of various issues and organisational violations in the work place, such as misuse of funds.

Whistleblower protection in India, so far, has been abysmally poor. Basically, such a legislation is required to protect any person, whether employee or otherwise, who seeks to expose any form of corporate fraud and other violations in the work place, whether employee-specific or otherwise.

Eexisting laws in India are inadequate and outdated and require to be overhauled. This is where whistleblower protection gains importance. Many countries have enacted laws for whistleblowers' protection.

The Whistleblower Act that was approved by Parliament of the Republic of Malta on July 16, 2013, provides for an identity change of the whistleblower in exceptional cases.

In the US, whistleblowers' protection is offered through constitutional provisions as well as other statutes. The US Supreme Court has limited the constitutional protections guaranteed to Americans to the areas of national defence and government employment. For dealing with instances of misuse of power and unfair practices, there are statutory laws and regulations that enable whistleblower disclosures.

In the UK, two key pieces of legislation are the Public Interest Disclosure Act, 1998 and the Employment Rights Act, 1996. The UK whistleblower law providing protection to employees reporting on their employers underwent a change due to the June 2013 amendment. The main change to the law is that any disclosure must, in the reasonable belief of the worker, be in public interest.

In India, the issue of protection of whistleblowers caught attention of the nation when Satyendra Dubey, an employee of National Highways Authority of India (NHAI) was killed after he wrote a letter to the office of then prime minister, A B Vajpayee, about corruption in the construction of highways. Dubey's letter to the prime minister, giving details of corruption in the Golden Quadrilateral highway project, was routinely circulated.

Two years later, an Indian Oil Corporation officer, Shanmughan Manjunath, was murdered for sealing a petrol pump that was selling adulterated fuel. In May 2012, S P Mahantesh, was murdered for reporting irregularities in land allotments by societies.

Dubey's murder led to a public outcry at the failure of the government to protect him.

As a result, in April 2004, the Supreme Court pressed the government into issuing an office order, the Public Interest Disclosures and Protection of Informers Resolution, 2004, designating Central Vigilance Commission (CVC) as the nodal agency to handle any complaints on corruption.

The Right to Information Act, 2005, was the legislation for holding the government "accountable" but did nothing for securing the interests of the person seeking information or asking questions in public interest.

The Whistleblowers' Protection Bill, 2011, which was passed recently by the Rajya Sabha after being passed by the Lok Sabha in 2011, is the first law of the country, dealing specifically with whistleblowers and their protection, if a disclosure against a public servant or a public authority is made.

The Bill aims to protect honest officials or persons from harassment but does not provide for any penalty for harassing a public servant/ any other person making a disclosure. Also, the Bill does not provide for admission of anonymous complaints by the competent authority. The CVC and the head of the organisation have to protect the identity of the complainant. However, the Vigilance Commission can reveal the identity of the complainant to the head, if it is of the that it is necessary to do so.

It could have gone a step further in protecting the complainant's identity permanently and ensuring protection.

Other probable flaws in the Bill would be that it differs on many issues with the proposed Bill of the Law Commission and the second Administrative Reform Commission's report.

The Bill is very similar to the resolution that was passed by the government in the year 2004, designating the CVC to receive public interest disclosures.

It applies in cases wherein the provisions of the Prevention of Corruption Act, 1988 are violated or when there is a willful misuse of power or discretion by a public servant.

An attempt to commit a criminal offence by a public servant is also covered under this Act. Judges of the Supreme Court and high courts are, however, not covered by the definition of a public servant as given under the Bill.

The Bill seeks to establish a competent authority to which disclosures can be addressed. All proceedings before the authority will be deemed to be judicial proceedings. The provisions for providing protection to the persons making disclosure are, however, the most significant. Under Chapter IV of the Bill, the central government is to ensure that no person who has made a disclosure under this Act is victimised on the ground that he has made a disclosure.

The Whistleblowers' Protection Bill, 2011 seeks to establish a mechanism to receive complaints relating to disclosure on any allegation of corruption and willful misuse of power against a public servant only.

With a need for greater foreign direct investment, the entry of transnational and multinationals to the country, a need for greater accountability and investor protection has arisen and the outcome is to strengthen the guidelines on corporate governance and promote a Code for Corporate Governance to be adopted and followed by Indian companies, whether in the private sector or the public sector, banks or financial institutions, this later adopted by the Securities and Exchange Board of India through its Listing Agreement.

As such there was no material provision as regards the policy of whistleblowers in the Code, however, in substance, it talked about the reporting of internal audit reports, including cases of theft and dishonesty of material nature to the Board and an Independent Audit committee consisting of non-executive directors.

With the belief that the efforts to improve corporate governance standards in India must continue because the standards were evolving in keeping with the market dynamics, Sebi had constituted a Committee on Corporate Governance in 2002 to evaluate the adequacy of existing corporate governance practices and further improve these practices.

A major breakthrough was achieved by an amendment to Clause 49 of the Sebi's Listing Agreement to include the recommendations of the Committee Report on Corporate Governance. However, some of these mandatory recommendations were made non mandatory in the amendment, which were to be enforced by April, 2005.

In addition to a list of mandatory requirements that a listed company is obliged to comply with, there are a few non-mandatory requirements that have been specified in terms of Annexure I D of the specimenlisting agreement. One such non-mandatory requirement relates to whistleblower policy.

While this is a non-mandatory requirement, the company also has a mandatory requirement to disclose, in its report on corporate governance, the extent of adoption of such non-mandatory requirements.

Numerous companies have adopted the whistleblower policy in their organisations in a quest to uphold the highest governance standards or in the fear of being considered late entrants to the "well-governed companies' club".

The Bill is expected to establish an effective mechanism in checking and eradicating corruption in the country. Only time will prove whether this is possible.

Kumkum Sesn is a partner at Bharucha & Partners Delhi Office Email:

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Sun, March 09 2014. 21:34 IST