This country-specific Q&A provides an overview to bribery & corruption law in India.
It will cover the definition of bribery, regulation, compliance, liability and enforcement as well as insight and opinion and any upcoming legal changes planned for their respective country.
This Q&A is part of the global guide. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/bribery-corruption/
What is the legal framework (legislation/regulations) governing bribery and corruption in your jurisdiction?
The Indian legislative framework governing bribery and corruption in India is largely codified in the Indian Penal Code, 1860 (‘IPC’) and the Prevention of Corruption Act, 1988 (‘PCA’).
The PCA is a special legislation enacted to combat bribery and corruption amongst public servants. The said Act penalizes offences committed by public servants in relation to acceptance or attempted acceptance of any form of illegal gratification (i.e., anything of value other than a legal entitlement) as a reward for doing or forbearing to do an official act.
Under the PCA, a person or a corporate body who facilitates payment of illegal gratification can also be prosecuted for abetment of a punishable offence committed by a public servant.
The IPC on the other hand, governs offences such as criminal conspiracy, criminal misappropriation, criminal breach of trust, cheating and fraud, which can be interpreted to cover offences of bribery and corruption, including those committed in the private sector. Chapter IX of IPC specifically detail offences by or relating to public servants.
In addition to the IPC and PCA, the following Acts also govern / stipulate offences of corruption and bribery in India:
Prohibition of Benami Transactions Act, 1988
A ‘benami transaction’ is construed to mean any transaction in which property is transferred to one person for a consideration paid or provided by another. Such benami transactions have often been used to camouflage proceeds of corruption This Act seeks to prohibit benami transactions and provides for imprisonment or fine (or both) for any person found to have entered into such a transaction. The Act also carves out certain exceptions, listing transactions which do not qualify as benami and details the procedure adopted by the Competent Authority (under the Act) for attaching and confiscating benami property which is the subject matter of a benami transaction.
Prevention of Money – Laundering Act, 2002
This Act seeks to prevent money laundering, including laundering of property derived from ‘proceeds of crime’. It makes money laundering a criminal offence inter alia leading to confiscation of property acquired from corrupt means. Under this Act, whosever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money – laundering.
The term ‘proceeds of crime’ has been defined to mean any property derived or obtained, directly or indirectly, by any person as a result of certain identified crimes which are specified under Part A of the Schedule to the Act. A person can be charged with the offence of money laundering only if he has been charged with committing a scheduled offence. For purposes of checking or preventing money laundering, the Act imposes obligations on banking companies, financial institutions, intermediaries, etc., to maintain a record of all transactions in such manner as to enable them to (1) reconstruct individual transactions, and (2) ascertain the identity of their clients or beneficial owners.
The Central Vigilance Commission Act, 2003
The Central Vigilance Commission constituted under the Central Vigilance Commission Act, is conferred with the powers of exercising general superintendence and control over vigilance matters in administration and probity in public life. The Commission is governed by the Central Vigilance Commission Act, 2003, which provides for the constitution of a Central Vigilance Commission to inquire or initiate inquiries into offences alleged to have been committed under the PCA by certain categories of public servants of the Central Government, corporations established by or under any Central Act; government companies; societies and local authorities owned or controlled by the Central Government and for matters connected therewith or incidental thereto.
The Foreign Contribution Regulation Act, 2010
The Foreign Contribution Regulation Act regulates the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals, associations or companies and prohibits acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to the national interest.
Under the Act, receipt of foreign contributions requires prior registration with or approval of the Ministry of Home Affairs. In the absence of such registration or approval, receipt of foreign contributions may be considered illegal and punishable.
The Lokpal and Lokayuktas Act, 2013
The Lokpal and Lokayuktas Act set up nodal ombudsman for the Central Government (Lokpal) and State Governments (Lokayuktas). The Lokpal and Lokayuktas have been accorded relevant powers under the Act to receive complaints and investigate cases of corruption in the public sector involving public servants.
The Companies Act, 2013
Under the Companies Act, express provisions for punishment of fraud and giving false statements have been codified. The said provisions have been enacted with a view to prevent corruption and fraud in the corporate sector. The Act also stipulates a duty on statutory auditors of a company to disclose any instances of fraud (which cover instances of corruption and bribery) committed by company employees.
The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax, 2015
This Act covers within its ambit ‘undisclosed foreign income and assets’ and lays down the procedure for imposition of tax and penalties on the said undisclosed foreign assets and income held outside India. The Act defines ‘undisclosed foreign income and asset’ as the total amount of undisclosed income of an assesse in his name or in respect of which he is a beneficial owner, and has no explanation about the source of investment in such asset or the explanation given by him is in the opinion of the Assessing Officer unsatisfactory. An assesse has also been defined under the Act.
Which authorities have jurisdiction to investigate and prosecute bribery in your jurisdiction?
Considering the multiple legislations inter-alia dealing with aspects of corruption, there are different authorities who have jurisdiction to investigate and prosecute cases of bribery and corruption in India. The said authorities (as stipulated under each of the Acts) are summarized herein below:
- Under IPC, the jurisdictional local police register and investigate cases relating to offences such as criminal conspiracy, criminal misappropriation, criminal breach of trust, cheating and fraud. The Court of the jurisdictional Magistrate has power to try the cases registered for the said offences.
- Chapter IV of PCA lists the persons authorized to investigate cases under the Act. Usually the Central Bureau of Investigation (established under the Delhi Special Police Establishment Act) and the Anti-Corruption Bureau (established under notifications issued separately by every State Government) investigate cases of corruption under the PCA. The cases are then tried by jurisdictional Special Courts presided over by Special Judges appointed by the Central Government.
- Under the Prohibition of Benami Property Transactions Act, there are four authorities exercising power over cases involving Benami transactions. The said authorities are (a) Initiating Officer, (b) Approving Authority, (c) Administrator and (d) Adjudicating Authority. Under the Act, the Central Government is also empowered to establish an Appellate Tribunal to hear appeals against the orders passed by the Adjudicating Authority. Presently the Income Tax Authorities exercise powers and functions of the ‘authorities’ under the Act .
- An Adjudicating Authority consisting of a Chairman and two members is appointed by the Central Government under the Prevention of Money Laundering Act. The Adjudicating Authority is empowered to receive complaints and try cases under this Act. Presently the Enforcement Directorate, established under the Ministry of Finance investigates and prosecutes cases under the Prevention of Money Laundering Act, 2002 as well as the Foreign Exchange Management Act, 1999.
- The Central Vigilance Commission (consisting of a Chairperson and two members) is appointed under the Central Vigilance Commission Act, 2003, for supervising investigation of corruption cases (under PCA) in central government departments, government companies and local government bodies.
- Investigation into cases under the Foreign Contribution (Regulation) Act, 2010 may be conducted by such authority as the Central Government may specific and the authority so appointed has all powers which an officer-in-charge of a police station has while investigating a cognizable offence .
- Under the Lokpal and Lokayuktas Act, 2013, Lokpal comprises of a chairperson and up to eight members. Lokpal has jurisdiction to investigate and prosecute cases of corruption involving, the prime minister, ministers, members of Parliament, public servants and other central government employees, other than members of armed forces. Lokayuktas function at the state-level and perform similar duties, like the Lokpal.
- The Serious Fraud Investigation Office (‘SFIO’) is a multi-disciplinary organization set up under the Ministry of Corporate Affairs, for detecting and prosecuting or recommending for prosecution white-collar crimes/frauds. SFIO is empowered to investigate the affairs of companies based on an order from the Central Government which may be issued under certain circumstances specified under the Companies Act.
How is bribery defined?
Section 171B of the Indian Penal Code, defines bribery as follows:
171B. Bribery — (1) Whoever—
(i) gives a gratification to any person with the object of inducing him or any other person to exercise any electoral right or of rewarding any person for having exercised any such right; or
(ii) accepts either for himself or for any other person any gratification as a reward for exercising any such right or for inducing or attempting to induce any other person to exercise any such right, commits the offence of bribery:
Provided that a declaration of public policy or a promise of public action shall not be an offence under this section.
(2) A person who offers, or agrees to give, or offers or attempts to procure, a gratification shall be deemed to give a gratification.
(3) A person who obtains or agrees to accept or attempts to obtain a gratification shall be deemed to accept a gratification, and a person who accepts a gratification as a motive for doing what he does not intend to do, or as a reward for doing what he has not done, shall be deemed to have accepted the gratification as a reward.
Does the law distinguish between bribery of a public official and bribery of private persons? If so, how is ‘public official’ defined? Are there different definitions for bribery of a public official and bribery of a private person?
Concept of bribing a private person not discharging public functions/duty is unknown to Indian Law. Dealings between private individuals having a flavour of criminality can be covered under IPC depending upon the nature of the transaction. While the term ‘bribery’ has been defined in Section 171B IPC, there is no separate definition of bribery of a public official and bribery of a private person.
The term ‘public servant’ has been defined in Section 2(c) of the PCA as:
“2(c) “public servant” means—
(i) any person in the service or pay of the Government or remunerated by the Government by fees or commission for the performance of any public duty;
(ii) any person in the service or pay of a local authority;
(iii) any person in the service or pay of a corporation established by or under a Central, Provincial or State Act, or an authority or a body owned or controlled or aided by the Government or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);
(iv) any Judge, including any person empowered by law to discharge, whether by himself or as a member of any body of persons, any adjudicatory functions;
(v) any person authorised by a court of justice to perform any duty, in connection with the administration of justice, including a liquidator, receiver or commissioner appointed by such court;
(vi) any arbitrator or other person to whom any cause or matter has been referred for decision or report by court of justice or by a competent public authority;
(vii) any person who holds an office by virtue of which he is empowered to prepare, publish, maintain or revise an electoral roll or to conduct an election or part of an election;
(viii) any person who holds an office by virtue of which he is authorised or required to perform any public duty;
(ix) any person who is the president, secretary or other office-bearer of a registered co-operative society engaged in agriculture, industry, trade or banking, receiving or having received any financial aid from the Central Government or a State Government or from any corporation established by or under a Central, Provincial or State Act, or any authority or body owned or controlled or aided by the Government or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);
(x) any person who is a chairman, member or employee of any Service Commission or Board, by whatever name called, or a member of any selection committee appointed by such Commission or Board for the conduct of any examination or making any selection on behalf of such Commission or Board;
(xi) any person who is a Vice-Chancellor or member of any governing body, professor, reader, lecturer or any other teacher or employee, by whatever designation called, of any University and any person whose services have been availed of by a University or any other public authority in connection with holding or conducting examinations;
(xii) any person who is an office-bearer or an employee of an educational, scientific, social, cultural or other institution, in whatever manner established, receiving or having received any financial assistance from the Central Government or any State Government, or local or other public authority.
Explanation 1.—Persons falling under any of the above sub-clauses are public servants, whether appointed by the Government or not.
Explanation 2.—Wherever the words “public servant” occur, they shall be understood of every person who is in actual possession of the situation of a public servant, whatever legal defect there may be in his right to hold that situation.”
Moreover, the Supreme Court of India also expanded the ambit of the definition of ‘public servant’ (under the PCA) to include all officials of private banks, as their duties are public in nature.
What are the civil consequences of bribery in your jurisdiction?
As such bribery is considered to a criminal offence in India, however, the courts and other authorities have been granted discretion to impose fine instead of imprisonment once the offence is proved to have been committed. Such a fine is usually imposed in lieu of imprisonment. The amount of fine to be levied varies under different Acts. The Prohibition of Benami Property Transactions Act and Prevention of Money Laundering Act also provide for attachment of property of the accused in addition to fines.
What are the criminal consequences of bribery in your jurisdiction?
Criminal consequences of bribery involve imprisonment for a defined number of years depending upon the offence and the Act under which the Accused is prosecuted.
For example, under PCA a public servant found guilty of prescribed offences or any person found guilty of abetting a crime under the Act, will be subject to a prison term which may range between three and seven years (depending upon the offence committed) along with fine (as decided by the Court).
Similarly, under Prevention of Money Laundering Act, the accused can be sentenced to undergo a prison term of between three and ten years along with an amount of fine which is imposed depending upon the offence committed by the accused.
In case of commission of fraud by a Company, the Companies Act provides for punishment of a prison term between six months and 10 years and a fine of up to three times the amount involved in the offence.
Does the law place any restrictions on hospitality, travel and entertainment expenses? Are there specific regulations restricting such expenses for foreign public officials?
Under the PCA, any public servant accepting or attempting to accept any form of illegal gratification as a reward for doing or forbearing to do an official act is an offence. The Act specifically explains that the term ‘gratification’ is not restricted to pecuniary gratifications or to gratifications estimable in money.
In addition to the specific provisions of PCA, public servants are also governed by their rules of service stipulated in the Central Civil Services (Conduct) Rules 1964 and the All India Services (Conduct) Rules 1968. These Rules prohibit a government servant or any member of his or her family or any other person acting on his or her behalf to accept gifts which include services like free transport, boarding, lodging or other hospitality services. In case such gifts are accepted by a government servant in conformity with any prevailing religious and social practice, then the official is duty bound to report the same to the Government. These Rules lay monetary thresholds for certain public servants regarding the acceptance of gifts, business courtesies and hospitality received in accordance with prevailing religious or social practice.
Are political contributions regulated?
As per the provisions of the Representation of People’s Act, 1952, political parties in India are allowed to receive contribution offered by any person or company other than a foreign source of government company. The Companies Act, 2013 and the Income Tax Act further regulate the manner in which such political contributions are made.
Are facilitation payments regulated? If not, what is the general approach to such payments?
Facilitation payments made to a public servant (unless permitted under their rules of service) are considered as gratification, attracting prosecution and penal provisions under PCA and other anti-corruption legislations (as detailed above) depending amount the nature of the offence and the transaction involved.
Are there any defences available?
There is no defence to an act of corruption in India. No exceptions or protections are provided under the Indian law for ‘grease’ or facilitation payments as well. So long as money is paid, with the criminal intent of bribing a public servant, prosecution follows irrespective of the quantum of money paid. However, under the PCA the ‘bribe giver’ may be granted immunity from prosecution for deposing against the public servant.
Are compliance programs a mitigating factor to reduce/eliminate liability for bribery offences in your jurisdiction?
Under domestic economic laws, various compliances are put in place for an individual and a corporate entity. Such compliances act as a deterrent in facilitation of bribes. Ranging from tax compliances, to internal and statutory audits, the compliances under domestic economic laws are comprehensive preventing a person / entity from committing an overt act. However, compliance measures per se do not mitigate the risk of prosecution but may be helpful in demonstrating a lack of mens rea.
Who may be held liable for bribery? Only individuals, or also corporate entities?
Under the PCA, an individual as well as a corporate body who facilitate payment of gratification can be prosecuted for having abetted an offence committed by a public servant punishable under PCA.
However, since the corporate body cannot per se be imprisoned, the Courts in India usually levy monetary penalties on commission of an offence. The persons in charge of or responsible for the conduct of the company’s business at the time that such offences were committed may however face imprisonment.
Has the government published any guidance advising how to comply with anti-corruption and bribery laws in your jurisdiction? If so, what are the elements of an effective corporate compliance program?
Currently there is no such guidance published by the government advising how to comply with anti-corruption bribery laws in India. However, penal provisions of anti-corruption laws (as mentioned above) act as a deterrent in preventing corruption. Usually corporate entities follow a strict code of ethics and mandatory policy regime discouraging its officials to indulge in any such activity.
Does the law provide protection to whistle-blowers?
A special legislation namely the Whistleblowers Protection Act, 2011 provides protective measures for anyone who exposes corruption or willful misuse of power by a public servant. The Act establishes a mechanism for receiving complaints of corruption, willful misuse of power / discretion against any public servant and to enquire into such complains. The Act also provides for adequate safeguards against victimization of the complainant and requires the relevant authorities to ensure the complainant’s anonymity as well.
How common are government authority investigations into allegations of bribery?
Once an allegation of bribery is received by a government authority, necessary investigations are carried out after obtaining necessary sanctions / approvals (as required under PCA and the rules of service governing the concerned public servant.). Upon completion of investigation, the matter is referred to the court for further proceedings in accordance with the governing enactment. In the recent past the investigative authorities have adopted a rather stringent approach so far as cases of corruption and bribery are concerned. The manifest intention behind the said approach is to act as a deterrent and regulate the accountability public officials as well as large corporations which would necessitate the implementation of adequate compliance measures to avoid offences of similar nature.
What are the recent trends in investigations and enforcement in your jurisdiction?
The most recent trend of investigations and enforcement can be traced back to announcement of demonetization of certain currency notes by the Government for fighting the menace of black money, tax evasion and illicit / counterfeit currency. This was followed by the enactment of the Finance Act, 2017 which amended certain provisions of the Prevention of Money Laundering Act and brought in stringent checks and balances to curb corruption.
Is there a process of judicial review for challenging government authority action and decisions?
Government authority and actions are subject to judicial review in India. In case of bribery and corruption (under PCA) the jurisdictional Special Court has the power to entertain appeals against government orders/decisions. Orders passed by the Special Courts can further be assailed before the jurisdictional High Court.
Are there any planned developments or reforms of bribery and anti-corruption laws in your jurisdiction?
Some of the recent planned developments / reforms in anti-corruption laws are as follows:
- The Fugitive Economic Offenders Bill, 2017 (approved by the Union Cabinet, pending parliamentary approval)
- This Bill aims to stop economic offenders who leave the country after commission of an offence and avoid due process. The Bill seeks to cover within its ambit offences involving amounts of rupees hundred crore or more. This proposed law also seeks to cover those economic offences which are defined under IPC, PCA, and the Companies Act including other economic laws.
- The Whistleblowers’ Protection (Amendment) Bill 2015 (pending presidential assent)
This Bill aims to prohibit the reporting of corruption-related disclosures (by a whistleblower) if it falls under any of the prescribed categories.
- The Prevention of Corruption (Amendment) Bill 2013, (pending parliamentary approval)
Among other reforms, this Bill seeks to amend PCA to primarily incorporate specific provisions for prosecuting ‘bribe giver’ and to include corporate entities within the scope of bribe giver.
To which international anti-corruption conventions is your country party?
A few international anti-corruption conventions to which India is a signatory / member are as follows:
- United Nations Convention against Corruption 2003 (UNCAC)
UNCAC facilitates international co-operation and mutual legal assistance in investigating cases of corruption and recovery of assets. UNCAC requires state parties to the treaty to implement several anti-corruption measures that focus on five main areas: prevention, law enforcement, international cooperation, asset recovery, and technical assistance and information exchange.
- United Nations Convention against Transnational Organized Crime
This Convention is an international instrument to fight organized crime and to adopt crime control measures such as money laundering, corruption, extradition laws etc.
- India-Brazil-South Africa Cooperation Agreement
This agreement is an international tripartite group agreement to promote international cooperation between the countries and combat various issues such as social responsibility, ethic, corruption etc.
- United Nations Convention against Corruption 2003 (UNCAC)
Do you have a concept of legal privilege in your jurisdiction which applies to lawyer-led investigations? If so, please provide details on the extent of that protection.
Lawyer-led investigations are unknown to Indian law. While the accused is at liberty to seek legal advice and exercise appropriate legal remedy, the accused cannot be allowed a lawyer-led investigation. The Evidence Act, 1872 however recognizes certain communications between an attorney and a client as privileged. Such privileged communication cannot be used as evidence during the course of a trial.
How much importance does your government place on tackling bribery and corruption? How do you think your jurisdiction’s approach to anti-bribery and corruption compares on an international scale?
Indian Government gives utmost importance to cases of corruption and bribery and passes laws, amends existing laws to tackle the menace of corruption within the country. Compared to an international scale, India’s anti-corruption laws are well spread and involve a robust mechanism for prosecuting corruption cases.
Generally how serious are organisations in your country about preventing bribery and corruption?
Mere allegation of corruption typically impacts the brand reputation of an organization owing to the negative publicity. Since India recognizes the principle of corporate criminal liability, most entities have internal policies to ensure gratifications are neither offered nor given to public servants in order to avoid any potential liability.
What are the biggest challenges enforcement agencies/regulators face when investigating and prosecuting cases of bribery and corruption in your jurisdiction?
Recently, the biggest challenge faced by the investigating agencies is when the accused leaves the country and resort to delaying tactics so as to frustrate the purport of the investigation. With enormous delay, securing sufficient evidence becomes a difficult task for the agencies, leading to prolonged proceedings resulting in acquittal of the accused. Another roadblock to effective and speedy justice in India is the large pendency of cases before the Courts.
What do you consider will be the most significant corruption-related challenges posed to businesses in your jurisdiction over the next 18 months?
In the recent past, the enforcement agencies have been extremely proactive in monitoring compliance under the anti-bribery laws in India. Even the courts in India (especially the Supreme Court of India) have been adopting a rather stringent approach so far as the quantum of penalties for companies / corporations is concerned. The Courts have not shied away from acting against the directors / senior officials of a company once it is established that the said officials were responsible for the crime in addition to imposing a fine on the company per se. Accordingly, corporate liabilities and the approach of the courts towards the same is steadily gaining importance in the spheres of social concerns such as consumer protection, environment law, health and safety norms as well as in the areas of countering corruption and exploitation. The same trend is expected to continue which may lead to rapid changes in the anti corruption landscape in India. However, currently Indian laws do not provide any guidance on compliance programmes for businesses and accordingly most business houses must develop a robust monitoring and reporting mechanism to identify and mitigate risks.
How would you improve the legal framework and process for preventing, investigating and prosecuting cases of bribery and corruption?
Tackling of corruption in India is an uphill battle which requires a wide ranging legislative agenda. Technological advancement in services provided by the government and reducing interface with the authorities as well as middlemen may be one way to curb the menace of corruption. India also has a massive backlog of cases. From a practical perspective, the delay in conduct of trial owing to pendency of cases in Courts acts a major hurdle in effective implementation of anti-corruption laws. The time between initiation and final disposition of a case can at times be up to 20 years which leads to a weak law and order enforcement system, prolonged trials and delayed judgments. Swift implementation of laws coupled with improvement in judicial infrastructure is one the many ways in which deter the spread of corruption in India.