This Article is written by Anshita Agarwal, a Fourth-Year Law Studentof University of Petroleum and Energy Studies (UPES), Dehradun

ABSTRACT

In corporate governance by reporting misconduct within organizations, whistleblowers play a crucial role. Hence, it is essential to maintain transparency, responsibility, and integrity in the corporate sector for protection of whistleblowers. This article critically analyzes the existing framework for “Whistleblower protection in India,” by focusing on the “Whistleblower Protection Act 2014”, the “Whistleblower Protection (Amendment) Bill 2015”, and the “Companies Act 2013”. The existing laws are inadequate due to the exclusion of the private sector and insufficient powers given to oversight bodies like the Central Vigilance Commission (CVC). Although listed companies have a vigil mechanism for reporting unethical behavior, but mechanisms are insufficient and failed to protect whistleblowers' identities efficiently. This article also reviews Famous whistleblower cases in India, highlighting instances of retaliation and violence against whistleblowers. Moreover, also provide a comparative analysis to assess whether international whistleblower protection laws can be applied to Indian legislation.

Keywords: Whistleblower Protection Act, 2014, Companies Act, 2013, Vigil Mechanism, International Whistleblower Protection Law, Comparative Legal Analysis.

INTRODUCTION-

Corporate governance is a set of guidelines that help companies and organizations make strategic decisions that are efficient, effective, transparent and respect the interests of stakeholders.

Analyzing Indian management scenarios has led to many cases where the organization could not implement excellent corporate governance, which led to many scammers and companies in the past two years. Here, the new concept of the information provider has been introduced in the Corporate Governance. A gut is one who willingly reports on misconduct, such as corruption, fraud, etc. As part of the organization.

An effective policy of informants can be very useful in the fight against fraud, restraining unlawful behavior and providing early intervention. This allows the problem to be resolved internally while avoiding reputational damage.

WHISTLEBLOWER PROTECTION IN INDIA

WHISTLEBLOWER PROTECTION ACT OF 2014:-

1.FORMATION AND BACKGROUND-

“The Whistleblower Protection Act of 2014” in India is the result of several amendments from 2001-2011. The law was recommended by the law commission in 2001, following the NHAI scam and Satyendra Dubey's murder (2003). Even, the mechanism was established by the government, for addressing whistleblower complaints, on the direction of the Supreme Court. The Public Interest Disclosure and Protection of Informer Resolution (PIDPIR) was also established in 2001, and finally, the Whistleblower Protection Bill was passed in 2011, leading to the formation of “The Whistleblower Protection Act of 2014”.

2. OBJECTIVES-

The Act has several key objectives:

· Provide a platform for employees and directors to report information related to any act, violating law.

· Protect whistle-blowers from discrimination or victimization.

· Establishing regulation for reporting, investigation, and settlement of incidents.

· Safeguarding the Interest of the Public.

· Protection of whistleblowers from harassment or threats.

· Maintaining high ethical and professional standards in public service

· Ensuring the security of whistleblowers making disclosures.

· Promoting public awareness about the Act and its protections.

· Fostering a corruption-free society with efficient institutions.

3. KEY FEATURES-

· Whistleblower protection prioritized, encouraging reporting of wrongdoing within organizations.

· Anonymous complaints are not allowed.

· Robust mechanism for receiving and investigating corruption or misuse of power complaints by public servants.

· Authorities can provide whistleblowers with police protection and security.

· Complaint filing time frame is seven years.

· Penalties for falsely disclosing the whistleblower's identity.

4. PROS AND CONS-

The Act offers several advantages:

· Increases perception of whistleblowers.

· Strengthening existing whistleblower protection laws.

· Empowering employees to expose corruption and illegal practices.

· Helping identifies potential threats within the system.

However, the Act also has some Limitations-

· Limited Jurisdiction- It applies only to central government officials and agencies, excluding state government employees.

· Private sector Exclusion- A major Drawback of this act is that this act does not apply to the private sector.

· Lack of public consultation: The act’s formulation without substantial public consultation has been criticized.

· Narrow Definition: The Act’s definition of “disclosure” is considered to fail to define “victimization.”

· Absence of Financial Incentives: the lack of financial rewards for whistleblowers is another point of criticism.

· No penalty for whistleblower attacks: the absence of specific penalties for harming whistleblowers creates vulnerabilities.

“WHISTLEBLOWER PROTECTION AMENDMENT BILL OF 2015”:

To amend The Whistleblower Protection Act of 2014, the government of India on 11th May 2015 introduced “the Whistleblower Protection Amendment Bill 2015” in the Lok Sabha, which was passed by Lok Sabha on 13th May 2015, but was not in Rajya Sabha and ultimately lapsed to the dissolution of the 16th Lok Sabha. Following are the important amendments proposed under the bill-

“PUBLIC INTEREST DISCLOSURE”- SECTION 4(1)

Public servants and NGOs are allowed to disclose information for the public interest, according to existing acts, even if it contradicts the official Secrets Act. Ten categories of information cannot be disclosed under the proposed amendment, including information that poses a threat to national security, economic interests, or foreign relations. Furthermore, it prohibits the disclosure of confidential information from foreign governments, commercial secrets, and personal information without a public interest.

“POWERS OF COMPETENT AUTHORITY”- SECTION 5:

· The competent authority’s ability to investigate disclosures containing information from the 10 categories listed in section 4(1) is restricted according to in Amendment.

· The Competent Authority must refer such disclosures to a specially authorized body to determine if they fall under these categories.

· The authorized body’s certificate on the nature of information is binding on the competent Authority.

“EXEMPTION FROM FURNISHING INFORMATION”- SECTION 8(1):

· This provision exempts individuals from providing information, answering questions, or producing documents if it could jeopardize or against national security, public order, etc. A government–issued certificate confirms this exemption.

· The amendment broadens this exemption to cover information falling under the 10 categories in Section 4(1).

· The authorized body’s certificate now becomes confirmed in such cases.

VIGIL MECHANISM UNDER COMPANIES ACT OF 2013

According to the Indian Companies Act, 2013, listed companies are required to establish whistleblower policies so that employees and directors can report ethical concerns, fraud, or misconduct. There are safeguards against retaliation, direct access to top management or the Audit Committee, and a prohibition on baseless complaints. Employees are still bound by confidentiality and cannot make false allegations. Different regulations apply to whistleblowing in the public service and private sectors in India.

Public Servants:

· The WBPA (Whistle Blowers Protection Act of 2014) enables public servants to report corruption and misuse of power.

· Establishes a mechanism for receiving as well as investigating complaints, with the aim to safeguard whistleblowers from retaliation.

· The Amendment Bill of 2015 also added safeguards against disclosures impacting national security but was not passed.

Listed Companies:

· “The Companies Act of 2013” and “SEBI regulations” mandate listed companies to establish a vigil mechanism/whistleblower policy.

· This allows directors and employees to report frauds or misappropriations.

· The aim is to balance legal obligations with ethical considerations and encourage responsible employee behavior.

Applicability:

· All listed companies, companies accepting public deposits, and those borrowing over Rs. 50 crores from banks/institutions must comply.

· The Companies Act specifies how to establish and operate the vigil mechanism/whistleblower policy.

· It includes safeguards against victimization and allows for direct access to the audit committee chairperson in exceptional circumstances.

· Companies must disclose details of the mechanism on their website and annual reports.

SEBI Regulations:

· SEBI mandates whistleblower policies for listed companies to report leaks of price-sensitive information and disclose material events to stock exchanges.

· SEBI also requires companies to have a whistleblower policy for reporting misconduct and grant employees’ access to the audit committee for reporting fraud.

· Listed companies must disclose adherence to these regulations in annual reports.

· SEBI introduced a reward mechanism in 2019 and increased rewards in 2021 for reporting insider trading violations.

Private Companies:

· There's no specific law protecting whistleblowers in private companies.

· As part of their global policies, some progressive companies may have whistleblower policies.

1. SATYENDRA DUBEY CASE[1]-

Facts of the case-.

· This is the first case on whistleblower protection in India, concerning Satyendra Dubey, who was an IIT Kanpur graduate along with an IES officer who is working for NHAI (National Highway Authority of India) while working on a national project “GOLDEN QUADRILATERAL” by highlighting forged documents, sub-letting the contract to the local mafia along with widespread misuse of public funds.

· Despite of writing numerous letters to the project director of NHAI and the supervisor of the contract and even to the prime minister requesting anonymity while considering the threat and trouble he may face in the second letter.

· Following his murder in 2003, public outrage resulted in approaching to Supreme Court requesting to establish a legal mechanism for dealing with whistleblower protection.

· In response to this, the government issued PIDPIR (Public Interest Disclosure and Protection of Informers Resolution) and empowered CVC (Central Vigilance Commission) to investigate the matter related to whistleblower protection. Although, the jurisdiction of CVC was limited to central government employees and entities.

2. ICICI BANK AND CHANDA KOCHHAR CASE[2]-

Recently, the ICICI bank and the business dealings of the Kochhar family came under the regulatory glare of SEBI and other government agencies following a report submitted by a whistleblower. The main issue was that the Kochhar family had some "quid pro quo" in its dealings, with the now-bankrupt Videocon group.

Facts of the case-

· ICICI Bank CEO Chanda Kochhar approved a Rs 1,875 crore loan to the Videocon Group in violation of banking regulations.

· Whistleblower Arvind Gupta has accused Kochhar of profiting from bankrupt companies that received ICICI loans.

· Mr. Gupta filed an FIR against Kochhar for irregularities, leading to an investigation by law enforcement agencies including the CBI.

· In 2020, Chanda Kochhar resigned amid a controversy over loan approvals.

· The loan involved a quid pro quo arrangement in which Kochhar's company received Rs 64 crore of the loan amount.

3. SUN PHARMA CASE[3]-

Facts of the case-

A whistleblower from a significant pharmaceutical company filed a complaint with SEBI about financial irregularities inside the company. SEBI eventually observed these claims to be unjustifiable.

The whistleblower's charges additionally influenced a few different organizations, including private banks, monetary foundations, bookkeeping firms, and counseling firms.

This is all in the public area and likely a hint of something larger. In a progression of filings, the Protections and Trade Leading body of India said Sun's administration, driven by extremely rich person founder Dilip Shanghvi, would pay a sum of 2.36 billion rupees ($323,886) "without conceding or keeping any discoveries from getting truth or finishes of regulation." Shanghvi himself would pay 62 million rupees.

4. SHANMUGAM MANJUNATH CASE-

Facts of the case-

· Manjunath, a sales officer at the Indian Oil Corporation (IOC), was murdered on November 19, 2005, for exposing corruption at a petrol pump in Lakhimpur Kheri, UP.

· Manjunath, exposed the Mittal’s' adulteration of fuel.

· Despite many previous attempts to expose, Manjunath was shot multiple times. In 2007, all eight accused were found guilty by the Lakhimpur Kheri Sessions Court. The convicts challenged the conviction in the Allahabad High Court, which commuted Mittal's death sentence to life in 2009 and acquitted two of the accused. The Supreme Court upheld the life sentences of the six convicted in 2015.

· Manjunath's murder sparked a national campaign for the protection of whistleblowers, culminating in the passage of the Whistleblowers Protection Act in 2011.

· The case highlights the ongoing challenges faced by whistleblowers in India and the need for stronger laws and safeguards to protect them from retaliation and victimization.

INTERNATIONAL FRAMEWORK AND ITS APPLICABILITY

CANADA

Canadian whistleblower regulations are strong compared to other nations but still have gaps. The Public Servants Disclosure Protection Act (PSPDA) is a prominent law protecting federal whistleblowers with limitations. This legislation allows federal employees to report concerns confidentially and securely without facing retaliation. The Criminal Code's section 425.1, introduced in 2004, also shields whistleblowers from employer repercussions.

Since the PSDPA covers a wider range of activities, most federal whistleblowers who report an incident or practice to their supervisors or others "further up the ladder" within the organization can avoid retaliation even if they choose not to report it to law enforcement. Employees in the provincial public and private sectors lack complete statutory safeguards because Parliament has not gone nearly far enough in its attempts to provide national legislative protection to whistleblowers, except the PSDPA.[4].

Certain provinces have since attempted to close this gap by enacting legislation, but only six have thus far extended these protections to the provincial public sector. The existing regime of protection for private sector workers is even weaker. At present, only 2 provinces have granted broad, sweeping legislative protections to private-sector whistleblowers: Saskatchewan and New Brunswick.[5].

They protect whistleblowers from being fired or discriminated against if they report, or intend to report, to a lawful authority any activity that is or is likely to result in an offense. Provinces lacking federal laws that protect the private sector have fragmented laws that target specific industries.

Ontario is one province that appears to be in support of offering stronger incentives for whistleblowers to come forward. Most notably, the Ontario Securities Commission (OSC) has recently implemented a cutting-edge program modeled after its sister program in the United States.[6] Comparing the OSC program to many other whistleblower systems in Canada, it offers highly robust mechanisms for confidential or anonymous disclosure.

Additionally, the OSC rewards whistleblowers financially (up to 5 million dollars) if their information leads to enforcement action. Section V discusses the relative uniqueness of this program.

Ontario government legislation includes whistleblower provisions to protect private sector employees but is limited to specific violations, with weak provisions failing to protect whistleblowers' identities, among other flaws.

UNITED STATES

Following a series of corporate fraud scandals in the 2000s, various pieces of legislation aimed at preventing corruption and corporate malfeasance were introduced at both the federal and state levels in the United States. The most widely recognized of these are the Sarbanes-Oxley Act of 2002 (SOX) [7]And the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).[8] One salient feature of both federal acts is the promotion of whistleblowing as a means of curtailing corruption.

With the enactment of the SOX Act, publicly traded companies were compelled to establish a code of ethics and whistleblowing procedures, such as anonymous internal hotlines. When Dodd-Frank was enacted several years later, it built on SOX by providing whistleblowers with financial incentives to come forward. Both SOX and Dodd-Frank have had relatively positive effects since their respective enactments. They have not only provided a means to fight corporate fraud and corruption, but they have further extended whistleblower protections to a considerable segment of the private sector in the United States. For whistleblowers who are not covered under these acts, there are other federal and state legislative protections available to them.

CONCLUSION

Canadian whistleblower protection currently creates a patchwork system that discourages employees from reporting wrongdoings. In line with other countries with more comprehensive whistleblower protection laws, like the UK and Japan, Canada should enact similar legislation.

Such legislation would offer several key benefits. Firstly, it might lead to more whistleblowers coming forward. Clear and consistent legal protection would empower employees to report misconduct without fear of retaliation.

Secondly, stronger whistleblower protection would probably boost internal compliance programs. By creating internal reporting channels, companies would have a stronger incentive to create legal avenues for employee concerns. As a result, wrongdoing could be detected earlier and potential harm reduced. In addition, robust internal reporting mechanisms demonstrate the company's commitment to ethics.

Enhancing whistleblowing activity and legal protections can significantly reduce corporate corruption in Canada. Whistleblowers play a crucial role in exposing wrongdoing, so empowering them can have a wide-reaching impact. Implementing a comprehensive whistleblower protection act, along with strategies like deferred prosecution agreements, can serve as a strong deterrent against misconduct. Similar legislation in India could also revolutionize the fight against corruption nationally.

Implementing a unified whistleblower protection act in India could lead to increased reporting of wrongdoing, exposing corruption in both public and private sectors. This would be supported by stronger legal protections for whistleblowers, prompting companies to establish internal compliance programs like those in Canada. Such measures would not only deter future misconduct but also foster a culture of transparency and ethical behavior, benefiting the Indian economy in the long run. Looking at successful examples in other countries, enacting comprehensive whistleblower legislation in India has the potential to combat corruption and establish good governance practices, paving the way for a more prosperous and transparent future.

REFERENCES

[1] Three Convicted in Satyendra Dubey Murder case, The Times of India (Mar. 22, 2010), https://www.timesofindia.indiatimes.com/india/Three-convicted-in-Satyendra-Dubey-murder-case/articleshow/5712476.cms (last visited 24 March2024).

[2] Chanda Deepak Kochhar v. ICICI Bank Ltd., 2020 SCC OnLine Bom 374: (2020) 5 Mah LJ 219,

[3] Jayshree p. Upadhyay, Ashwin Ramarathinam, Sun pharma shares plunge over 12% on whistleblower complaint, LIVEMINT (19 Jan 2019, 08:47 PM), https://www.livemint.com/Money/qXOKBGC82bg2QD8i19IPIK/Sun-Pharma-shares-slump-to-sixyear-low-on-report-of-fresh-a.html.

[4] See e.g. Canada Labour Code, RSC 1985, c L-2; Competition Act, RSC 1985, с С-34.

[5] See Saskatchewan Employment Act, SS 2013, c S-15.1, ss 2-8; Employment Standards Act, SNB 1982,

[6] The Ontario Securities Commission also published the Whistleblower Program, OSC Policy 15-601 (14 July 2016) [OSC Policy 15-601]. The US Securities and Exchange Commission whistleblower program was implemented in the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub L-No 111-203, § 922, 124 Stat 1376 (2010) [Dodd-Frank] following the 2008 financial crisis. It is widely believed that the scale of financial fraud would have been reduced if better whistleblower protections had been put in place before the crash.

[7] Pub L No 107-204, 116 Stat 745 [SOX].

[8] Pub L No 111-203, 124 Stat 1376 (2010) [Dodd-Frank]