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INDIA: Significant Amendment to Anti – Corruption Regulations; Commercial Bribery made an offence.

The Government of India has passed the Prevention of Corruption (Amendment) Act, 2018 (“Amendment”) amending the current Prevention of Corruption Act, 1988 (“Act”), the primary anti-corruption statute in India. One of the major changes to the Act is the recognition of commercial organizations along with criminalizing bribery by commercial organisations in India.

Srijoy DAS - 17.09.18
Country expert

The Amendment criminalizes bribe-giving by commercial organizations and provides that ‘Commercial Organisation’ shall include any entity which is incorporated in India and which carries on business, whether in India or outside India, or any entity which is incorporated outside India and which carries on business, or part of a business, in any part of India. This includes partnership firms or any association of persons, which is formed outside India and conducts business, or part of a business, in any part of India.

This means that any multinational corporations doing business in India would be subject to the regulations, including those operating through distributors, franchisees, agents, contractors and licensees, thereby, making it crucial for entities doing business in India, directly or indirectly, anti-bribery related compliances.

The Amendment also provides penalties for cases where any person associated with a commercial organization (which will include consultants, service provides, vendors, etc.) gives or promises to give any undue advantage to a public servant to (a) obtain or retain business; or (b) obtain or retain an advantage in the conduct of business for such commercial organization. In cases where a bribe is given or offered on behalf of a commercial organization with the knowledge of or in connivance with any director, manager, secretary or other officer of the commercial organization, such director, manager, secretary and officer could also be punished with imprisonment of not less than three years, which may extend to seven years.

The Government has also been empowered to prescribe guidelines aimed at preventing persons associated with commercial organizations from bribing any public servant. The defence available to a commercial organization, alleged to have committed an offence under the Act, is to prove that the commercial organization had in place, adequate procedures in compliance of Guidelines to prevent persons associated with it from giving bribes.

The other key changes brought about by the amendment include -

Bribe-Giving made a specific offence: The Amendment criminalizes the act of offering bribes to public servants. Prior to the Amendment, offering a bribe to a public servant was not an offence per se. Bribe-givers were earlier prosecuted for “abetment”. As per the Amendment, offering of bribe is an offence punishable with imprisonment up to 7 years or monetary penalties or both.

Inducement of a public servant by another public servant has been made an offence: Inducement of a public servant by another public servant to improperly or dishonestly perform public duties or to forbear performance of such duty in anticipation of or in consequence of accepting an undue advantage from any person, is now a punishable offence.

Prior permission from Government before commencing investigation against public servant: Until now, investigating authorities did not require prior permission of appropriate Government to commence investigation into a complaint of bribery against most public servants. However, the Amendment now requires investigating authorities to mandatorily seek prior approval from the appropriate Government department to commence an investigation against any public servant, irrespective of their position.

Completion of trial in bribery cases within a certain time: With the Amendment coming into effect, all cases involving bribery under the Act are required to completed within 4 years. 

Comments

While India has gained a reputation for being one of the fastest growing economies in the world, it is also perceived as one of the most corrupt countries in the world, being ranked 81 on the 2017 Corruption Perception Index[1].  In order to tackle the issue of corruption and to curb the massive reserves of black or unaccounted money in India, the Government of India has taken radical legislative and administrative measures over the last few years.

The Amendment is the latest in a long line of measures taken, and aims at curbing the issue of widespread corruption in India. While earlier anti-corruption regulations dealt specifically with persons, the changes aim to bring commercial organisations within its ambit. This puts an increased onus on any multinationals doing business in India or with Indian companies, and requires them to have adequate anti-corruption measures in place. Further, the Amendment also puts an onus on the key managerial personnel (including but not limited to directors, managers, secretaries, etc) of a commercial organisation to take measures to avoid any such corrupt activities.

Lastly, acts of associated persons of commercial organisations may also be seen as corrupt activities, and thereby, punishable under the Act. Hence, there is an increases importance on commercial organisations to have specified and clear anti-corruption policies, along with set procedures for avoiding  any corruption related activities.

 

Srijoy Das, IDI agency & distribution expert for India, Harsahib Chadha, lawyer at Archer & Angel​

 

 

[1] As per Transparency International

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