Whistleblowing in India: Are we there yet?With the rise in whistleblower complaints in India, the need for a robust legal regime for protection of whistleblowers has gained importance. Publicly-known attempts to grapple with whistleblower complaints in listed multi-national companies and banks have made it to the front page of every leading newspaper and channel. In this context, we examine whether the existing legal regime provides adequate clarity and support to companies and whistleblowers alike in the management and resolution of whistleblower complaints. Who is a whistle-blower:Generally speaking, a whistleblower is considered as any individual who makes a ‘disclosure’. Broadly, a disclosure refers to a concern, usually raised by an employee or group of employees of the Company or even a third party, in writing and in good faith, which discloses or demonstrates information about an unethical or improper activity with respect to the Company and based on actual facts and which complaint is not speculative. The intent has always been to give the terms ‘whistleblower’ and ‘disclosure’ the widest possible amplitude. Legal Regime in India:Public Servants:
Law applicable to Listed Companies:
Private Employers:
Practical Implementation:
Recent Examples:Lately, there have been several whistleblower complaints in listed companies. In this section, we have examined how one of India’s largest multi-national company in the IT sector dealt with disclosures pertaining to a whistleblower complaint to the Bombay Stock Exchange. In September 2019, the company received a whistleblower complaint signed by ‘Ethical Employees’ alleging that its CEO and CFO, inter alia, were not adhering to accounting standards pertaining to revenue recognition.In October 2019, the company released a statement wherein it noted that these complaints were placed before the Audit Committee, which retained a law firm and an independent internal auditor to investigate into the allegations. The Bombay Stock Exchange sought a clarification for not making a disclosure pursuant to Regulation 30 of the LODR with reference to receiving a whistleblower complaint. Subsequently, the company released a statement in response to the request by BSE stating that before the conclusion of the investigation of the generalized allegations in the complaints, a disclosure under Regulation 30 of the LODR was not required. In January 2020, the IT giant issued issued a statement that the Audit Committee has concluded a rigorous investigation and found no wrong doing by the company and its executives, including the CEO and CFO. In this statement, a summary of the scope of investigation and key findings was also provided. Further, several other large listed companies have received and handled whistleblower complaints which made it to the headlines in the recent past. Recently a leading private bank was struck by a whistleblower complaint addressed to the Prime Minister and the Finance Minister alleging that its then Chairman, granted a loan to a company, whose Chairman had business connections with her husband.09 This has been one of the most talked about complaints in the country leading to initiation of several civil and criminal proceedings against the then Chairman by multiple law enforcement agencies including Enforcement Directorate, Central Bureau of Investigation and income tax authorities.10 In another instance, a whistleblower in a leading pharmaceutical company approached the SEBI complaining about alleged financial irregularities in the company.11 Eventually, SEBI did not find any merit in the allegations. However, the stocks of the company witnessed several fluctuations due to the complaint. Similarly, several other institutions including private banks, financial institutions, audit and consultancy services have grappled with whistleblower complaints. All of this is what is available in the public domain and is, quite probably, the tip of the iceberg. Lacunae in the Law?
Interestingly, a former employee of Tata Consultancy Services made a complaint to SEBI questioning the robustness of the vigil mechanism itself.12 Such instances go to show that there is a need for further clarity on the manner of implementation of whistleblower policies and the manner of investigation into whistleblower complaints. ConclusionWhile employee vigilance is increasing, and whistleblower complaints are on the rise, the law on the manner of handling such complaints and protecting whistleblowers is unclear and still being developed. To that end, having a robust whistleblower policy in place is critical. Companies should be cognizant of the several nuances involved in framing whistleblower policies. On the one hand, while companies need to have a robust mechanism in place for investigating and resolving whistleblower complaints, the companies must ensure adequate protection to whistleblowers in the form of non-retaliation policies and anonymity (if the whistleblower prefers to remain anonymous). The policy should also take into account the various jurisdictions in which today’s global companies operate and ensure compliance with laws in each of such jurisdictions. These may impinge on the effectiveness of the investigation itself e.g. privacy laws are consistently being tested by the regulators during the course of investigations. It is understandably difficult to balance the whistleblower policies as there also exists a possibility of frivolous or malicious whistleblowing to harm the company or its executives. There is a need to create a compliance culture and focus on importance of reporting and strengthening anti-retaliation policies. The need of the hour is to make employees “FEEL SAFE.’ Needless to state, it may take some time to develop a mature whistleblower protection regime in India, which is responsibly utilized by companies and employees alike. India may not be ‘there yet’ – but is certainly getting there quickly, with amendments in the law such as the recent CARO 2020, and an increased awareness in companies to address whistleblower complaints and the protection of whistleblowers with sensitivity and seriousness. For a further understanding of how internal investigations may be conducted in India, please refer to our paper on the “Contours of Internal Investigation in India”. – Bhavana Sunder, Payel Chatterjee & Sahil Kanuga You can direct your queries or comments to the authors 1 Preamble, Whistle Blowers Protection Act, 2014. 2 A disclosure is defined as: (i) an attempt to commit or commission of an offence under the Prevention of Corruption Act, 1988(49 of 1988); (ii) wilful misuse of power or wilful misuse of discretion by virtue of which demonstrable loss is caused to the Government or demonstrable wrongful gain accrues to the public servant or to any third party; (iii) attempt to commit or commission of a criminal offence by a public servant, made in writing or by electronic mail or electronic mail message, against the public servant and includes public interest disclosure. 3 The Whistleblowers Protection (Amendment) Bill, 2015. 4 Statement of Objects and Reasons, The Whistleblowers Protection (Amendment) Bill, 2015. 5 Section 177, Companies Act, 2013; Rule 7, Companies and (Meetings of Board and its Powers) Rules, 2014. 6 Regulation 9A (6), Securities and Exchange Board of India (Prohibition Of Insider Trading) Regulations, 2015. 7 Chapter IIIA, Securities and Exchange Board of India (Prohibition Of Insider Trading) Regulations, 2015. 8 Regulation 30, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. 9 https://www.business-standard.com/article/news-ians/the-fall-of-chanda-kochhar-how-it-began-from-whistleblower-s-complaint-119012401277_1.html 10 https://economictimes.indiatimes.com/industry/banking/finance/roc-files-prosecution-plaint-against-4-companies-of-chanda-kocchars-husband/articleshow/69404937.cms?from=mdr 12 https://economictimes.indiatimes.com/tech/ites/tcs-vigil-mechanism-is-under-sebi-watch/articleshow/70442467.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst |