By Shanmitha Bhogadi
ABSTRACT
Whistle blowing is defined as an act of disclosing information by an employee or any concerned stakeholder about an illegal or unethical conduct within an organization. A whistleblower is a person who informs about a person or organization engaged in such illicit activity. In India, the Whistle Blowers Protection Act, 2014, as we know it today was enacted to investigate such alleged corruption and misuse, of power by public servants who allege any wrongdoings after many Commission recommendations and PILs. However, ten years on, the status of this Act is ‘Not yet in force’. Several Parliamentary Standing Committees and draft notifications have been put forth but its purpose couldn’t be achieved. This article deals with the many facets of whistle-blowing including its definition, scenario in the government and corporate world, legislations to safeguard them in India and abroad. This study aims to analyze the lacunae in the current system and suggest remedies for the same.
INTRODUCTION
A whistleblower is a person, typically an employee, who divulges information regarding activity inside a private or public institution that is thought to be unlawful, immoral, criminal, dangerous, or fraudulent. Whistleblowers can share information or accusations through a variety of internal or external avenues. In the hopes that the corporation will address and resolve the problems, over 83% of whistleblowers report internally to a supervisor, human resources, compliance, or a neutral third party within the organisation. By contacting other organisations like the media, the government, or law enforcement, a whistleblower can also make allegations public.
Whistleblowers face a significant risk of retaliation since they frequently pay a high price for raising the alarm. The most typical form of revenge is the unexpected termination of a job. However, a number of other behaviours, including as bullying, severely reduced hours, severe workload increases, and job incompletion, may also be viewed as retaliatory. Many nations have laws that aim to both protect whistleblowers and control their activity. These regulations frequently take varied stances on whistleblowing in the public and private sectors.
The goals of whistleblowers are not always met. If they want to "prove" their allegations and hold dishonest businesses and/or government agencies accountable, they must have solid proof to back up their assertions that the government or other regulatory agency may use or look into.
Legal protection for whistleblowers varies from country to country and may depend on the country of the original activity, where and how secrets were revealed, and how they eventually became published or publicized. Over a dozen countries have now adopted comprehensive whistleblower protection laws that create mechanisms for reporting wrongdoing and provide legal protections to whistleblowers. Over 50 countries have adopted more limited protections as part of their anti-corruption, freedom of information, or employment laws.
Whistle Blowers Protection Act, 2011 (renamed as Whistle Blowers Protection Act, 2014 by the second schedule of the Repealing and Amending Act, 2015) is an Act of the Parliament of India which provides a mechanism to investigate alleged corruption and misuse of power by public servants and also protect anyone who exposes alleged wrongdoing in government bodies, projects and offices. The wrongdoing might be in the form of fraud, corruption or mismanagement. The Act will also ensure punishment for false or frivolous complaints.
The Act was approved by the Cabinet of India as part of a drive to eliminate corruption in the country's bureaucracy and passed by the Lok Sabha on 27 December 2011.The Bill was passed by Rajya Sabha on 21 February 2014 and received the President's assent on 9 May 2014.
An Act to establish a mechanism to receive complaints relating to disclosure on any allegation of corruption or willful misuse of power or willful misuse of discretion against any public servant and to inquire or cause an inquiry into such disclosure and to provide adequate safeguards against victimization of the person making such complaint and for matters connected therewith and incidental thereto.
CORPORATE WHISTLEBLOWERS
The corporate sector in India has been through several progressive changes over the last decade. This change in the sector has constantly been overpowered by many controversial corporate scandals. These scandals not only adversely impact the reputation of the company but also hamper the interest of various investors and stakeholders of the company. Over the years controversial scandals like the Satyam Computer scandal, the Kingfisher scandal, the Enron Corporation Scandal have created a chain of corporate failures. Scandals like these shed light on the need for the company to have a strong corporate governance structure.
Corporate governance is essentially the ethical code upon which a company operates. The backbone of corporate governance is determining the best method and mechanism to establish effectiveness, efficiency, and transparency within the company. This would enable the company to take constructive strategic decisions keeping the interest of the shareholders in mind. Corporate whistleblowing plays a pivotal role in corporate governance.
In many cases of corporate whistleblowing, it was observed that the employees of the organization are generally the first ones who have sustainable information in regards to any wrongdoing or any kind of unethical practice happening in the organization or company but due to fear that they would be suspended or that they would be fired from their jobs speak about such activities in the last. This makes it even more important that every organization or company should have a whistleblowing policy that protects the identity of the whistleblower along with this there should also be a legislative statute that gives protection to such employees.
Furthermore, by adopting an efficacious whistleblowing structure an organization or company can ensure to dissuade employees from indulging in unlawful activities, it would also enable the organization or the company to detect any wrongdoing in advance. An efficient whistleblowing structure would also enable the whistleblower to expose any kind of wrongdoing without any fear.
In the light of these controversial scandals companies like “The Heritage Food (India) Ltd”, “Wipro”, “Infosys” and “Tata Motors, Reliance Industries” in recent years have adopted the whistleblower policy to protect the identity of any employee who wishes to expose any kind of wrongdoing that might be happening in the company.
CORPORATE WHISTLEBLOWING POLICIES
Whistleblowing policies adopted by some India corporate companies:
1. “The Heritage Food (India) Ltd limited adopted the whistleblower policy, with the principal intention of providing all their employees with a chance to elevate their apprehensions regarding any unethical and improper practices that may be going on with the company. According to the whistleblower policy of the company all the communications made by the whistleblower would be presumed as communications done in good faith, all the communication would have to be done in written form and the disclosures such made must indicate evidence of any unethical or improper activity. Unless required by the law the company would take all reasonable measures to protect the identity of the whistleblower so as safeguard the whistleblower from any kind of harassment or victimization. Once the company receives any complaints of any wrongdoing the management board would take reasonable steps to conduct a thorough investigation, and if required would authorize an independent individual to conduct the investigation.
2. Wipro Limited had formally adopted its whistleblower policy (also known as the Ombuds Policy) on the 15th of April 2003 to strengthen the company’s corporate governance and discourage any of its employees from indulging in any malpractice or any kind of impropriety. Upon receiving any complaint, the matter would be investigated by a designated Ombudsperson. All the information communicated to the Ombudsperson would be in written form and the company would presume that all the communication made by the complainant is made in good faith. The company would ensure that the identity of the complaint is kept confidential to protect the complainant from facing any kind of retribution or victimization. The whistleblower policy of Wipro Ltd provides a limitation on the period within which a complainant can raise their concerns, the policy states that the complainant shall pass all the relevant information not later than 3 months from the time when they knew of the wrongdoing.
3. The Vigil Mechanism and the Whistleblower Policy adopted by Reliance Industries Limited lays out the procedure that the whistleblower the complainant needs to follow while making any disclosures. The policy further mandates the constitution of an Ethics and Compliance Task Force that would investigate all the complaints made by the whistleblower or the complainant under the supervision of the Audit Committee.
On the analysis of the whistleblower policy adopted by these companies, one can observe that all these companies have set up various platforms for the employees to raise their concerns. In comparison, it can be noted that many international companies such as Delloite and KPMG International encourage their employees to be anonymous complainants whereas Indian Companies do not encourage anonymous complaints. It can also be analyzed that all the companies have a unique structure and procedure for the whistleblower to raise their concerns.
LEGISLATIONS IN INDIA
The legislative framework in India about the protection of a whistleblower is still in a nascent stage as compared to the legislative framework adopted by countries like the United Kingdom and the United States of America. Several pieces of legislation lay down provisions governing the process of whistle blowing and granting protection to the whistleblower. The following are the laws:
· The Whistle Blowing Protection Act, 2014.
· The Companies Act, 2013 read along with “The Companies (Meeting Board and its Power) Rules 2014.
· The SEBI’s Equity Listing Agreement.
The government finally in the light of the murder of Satyendra Dubey introduced the “Public Interest Disclosure and Protection to Persons Making the Disclosures Bill, 2010 which was passed by the Lok Sabha in December 2011 and was also renamed as the Whistleblower Protection Bill, the Rajya Sabha after a lot of deliberation finally approved the bill on 21st February 2014, the bill received the president assent on the 9th of May 2014 yet the Act is not enforced. An Amendment to Act was introduced in the Lok Shaba in the year 2015 through “The Whistleblowers Protection (Amendment) Bill, 2015.”
The intention of the parliament while formulating this legislation was to set up an efficacious and efficient mechanism to protect the identity of the whistleblower along with setting up an efficient mechanism to receive complainants. The scope of the Act is only limited to the public sector thus excluding the private sector. The act lays down to safeguard the identity of the whistleblower thus safeguarding them from any kind of victimization or harassment, thus encouraging employees to raise their concerns against any kind of wronging, fraud, or corruption.
The ministry of corporate affairs to strengthen the practice of corporate governance among the Indian Companies issued an order making it mandatory for all the listed companies to reveal all the whistleblower complaints to the auditor and the same shall be mentioned in the report published by the auditor.
ISSUES
One of the most prominent pitfalls of the whistle-blowing policy in India is that the Whistleblower Protection Act, 2014 while ignoring the recommendation made by the law commission in its 174th report also ignored the recommendation made by second administrative reforms in its fourth report which was published in the year 2007 excluded the private sector from the scope of the Whistleblower Protection Act, 2011.
In furtherance to this, the Whistleblower Protection Act was amended in the year 2014; this amendment restricted any person from reporting the disclosure of any corruption activity if it falls under any of the 10 categories mentioned under it. Disclosures are not permitted, if the same is prohibited under the Official Secrets Act, 1923.
This amendment is modeled around Section 8 clause 1 of the Right to Information Act, 2005, this amendment would nullify the intent of the whistleblower protection act as it would discourage the people to come forward and expose corruption within a company.
The Whistleblower Protection Act, 2014 has certain flaws one of which is that the Act, does not lay down a procedure in case the complainant wants to appeal the order passed by the concerned authorities. In the 2015 amendments, it was proposed made mandatory for the complainant or the whistleblower to reveal their names which meant that under this Act no anonymous complainants would be entertained
One of the major drawbacks of the Whistleblower Protection Act, 2014 is that it excludes the private companies from its ambit which means that clause 49 of the SEBI Equity Listing Agreement is non-mandatory for them. The Whistleblower Protection Act is only applicable to companies that are listed on the stock exchanges.
The Act does not lay down the provision that governs the internal procedure to investigate the complaint. The further amendment that was proposed and passed by the parliament further mandates the whistleblower to reveal their identity. This would leave the whistleblower venerable to victimization and harassment, thus discouraging employees to raise their concerns. The Act further does not have any specific provision that deals with the compensation in case the whistleblower is subjected to any kind of harassment or victimization.
LEGISLATIONS IN OTHER COUNTRIES
United States of America
The first country in the world to recognize the concept of whistle blowing and pass legislation on it was the United States of America. In the year 1863, the United States of America passed the United States False Claim Act, 1863. The U.S. has one of the most inclusive legislations that offer protection to whistleblowers.
The U.S. Securities Exchange Commission has also taken action to encourage employees to alert the regulator of any misconduct a company may be committing. The agency also supports the practice of complete disclosure and transparency.
The Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 passed by the U.S. government also lays down a provision that ensures that the whistleblower is rewarded for the information as provided by them.
United Kingdom
The United Kingdom during the period of 1980-1990 was constantly in the headlights of the scandals surrounding its corporate sector with the collapse of the BCCI Bank and the Herald of Free Enterprise, the parliament decided to formulate legislation to protect the whistleblower and grant them immunity. The United Kingdom formally enacted the Public Interest Disclosure Act, 1988 in the year 1999.
While comparing legislation from all the countries one distinctive feature of the PIDA is that this Act focuses more on the quality of the information that is provided, whether the information provided by the whistleblower is genuine, rather than focusing on the whistleblower.
Over the years many political leaders along with several experts have criticized this legislation and have demanded that this legislation be replaced by a new Act, that primarily focuses on setting up a proper safeguard mechanism that encourages people to elevate their apprehensions and ensure that once a complaint is received the concerned authority thoroughly investigates the complaint while protecting the identity of the whistleblower.
CONCLUSION
The scope for whistle-blowing looks encouraging in India. In the past several years with a lot of scandals coming to light more and more companies are encouraged to implement an efficacious and efficient whistleblower policy. Whistleblower Policy is an integral part of the corporate framework of the coming, if the companies are successful in implementing a strong whistleblowing framework it could help detect any kind of wrongdoing and would also discourage the employees from indulging in any kind of malpractices.
“The top-level management shall ensure that every employee must be aware of the whistle-blowing policy and there shall be workshops that are conducted to make all the employees aware of the same. The companies shall also make the complainants liable in case they file a frivolous complaint. A strong Whistle Blowing Framework helps a company to implement the practice of accountability efficiently, it could further encourage the employees to elevate their concerns to the concerned authorities and prevent any wrongdoing or malpractice, corruption, or fraud in the early stages thus maintaining their reputation.
The scope of the Act needs to be changed and it needs to include the private sector companies within its ambit, as under the current Act only covers those whistleblowers only who expose corruption, fraud, irregularities in the government sector.The Regulators and Concerned Authorities should take all reasonable steps to implement an efficient whistleblower policy to protect the identities of the whistleblower to prevent them from being subjected to victimization or harassment.The legislation in an effort to strengthen the whistleblower policy should insert whistleblowing provisions within specific Acts.
The world over the last couple of decades has witnessed scandals like the Harshad Mehta Scam, the Satyam Computer Scam, the Satyendra Dubey murder Scam, the Ranbaxy Scandal, these scandals harm many people’s lives, thus the ordinary people must be protected from being victims to such scams.
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