Protection of Whistleblowers and the Leniency Regime in India

23rd February, 2024 - 12:35 pm Categories: Company Law News & Updates 0 Comments

Introduction

Whistleblowers in India are protected under the Whistle Blowers Protection Act, 2014 and the Companies Act, 2013. A Whistleblower is a person who files a complaint, reporting the illegal or illegitimate activities which are being carried out by the members of a company. Whistleblowing is the act of filing such a complaint to any authority who is legally entitled to act on such a complaint. Since these corrupt and illegitimate activities are carried out in utmost secrecy it becomes hard to gain information about such activities and punish those who are involved in it. Whistleblowing has become one of the most important sources of information for gaining information of these activities and the protection of these whistleblowers is of utmost importance to prevent victimization as a result of their complaint.

There have been many instances where upon filing a complaint regarding the illegitimate activities carried out by companies, the whistleblowers have been harmed and victimized. Some major cases involve the case of Shanmugam Manjunath where an Indian Oil Corporation was murdered after he reported adulterated fuel being dealt in two petrol pumps in Uttar Pradesh. Another case involves the murder of IPS Narendra Kumar after he exposed illegal mining in Madhya Pradesh. There have been many similar cases which puts the protection of these whistleblowers is at question. Let us first look at the provisions of the Whistle Blowers Protection Act, 2014.

PROVISIONS GRANTED UNDER THE WHISTLE BLOWERS PROTECION ACT OF 2014:

1. The Act was passed to investigate alleged illegitimate activities and to protect the Whistleblowers.
2. Its main aim is to combat corruption and misappropriation of assets.
3. It provides provisions related to who can be a whistleblower, how a report can be made and when report can be made.
4. It also states that no report can be made for acts which may be cause harm to the national security.
5. The Act also has provisions for keeping the identity of the complainant a secret so as to protect them or their relatives from being victimized.

Despite the fact that the Whistle Blowers Protection Act, 2014 has been passed by both the houses of the parliament, there have been no such provision for the enforcement of the Act till date. The Act, however only applies to the public servants, listed companies or Public Sector Undertaking. There are currently no provisions for protection of whistleblowers from private or unlisted companies. Since the enactment of the Act in 2014, no amendments have been made to bring it up to the required level. The Act does not allow anonymous complaints and no action is taken on the same. The complainant must reveal his identity to the competent authority. There are also no rewards granted to the whistleblowers for their help in a successful investigation.

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The Companies Act, 2013 and the SEBI regulations allows for incorporation of whistleblower policy in listed companies and governs all complaints as of now. The SEBI also grants rewards up to Rs. 1 crore for information and successful information against insider trading. The Competition Act also grants some compensation as a reward for reporting of illegitimate activities being carried out by the members of the company.

COMPETITION ACT AND THE LENIENCY REGIME:

The Competition Act, 2002 under Section 3 prohibits Anti-competitive agreements among different companies to control market prices, production or distribution. Such anti-competitive agreements include Cartels and other illegitimate organizations who carry out illegal activities as mentioned above. The Competition Commission of India as established by the Competition Act, governs all cases arising against the provisions of the Act. The Commission has adopted a leniency programme under the lesser penalty regulations which grants whistleblowers immunity up to some extent. Whistleblowers, who while being part of the illegitimate organizations report of any such activities which are prohibited by the Competition Act, can be seek immunity from penalties by filing a leniency application. The CCI grants up to 100% immunity on first leniency application, 50% on the second application and 30% on all subsequent leniency applications.

The leniency regime as adopted by the CCI has been a huge success in encouraging people to come out and report such acts. Since cartels and other collusions are carried out in utmost secrecy it becomes hard to identify it. This regime has allowed people to report any anti-competitive practices without the fear of punishment and victimization. It keeps the identity of the informant private to protect him from other harm. Since the policy was adopted, there has been a considerable increase in the amount of cases reported and the leniency applications filed. Still there is lack of awareness regarding these policies which makes people hesitant to approach the authorities out of fear.

CONCLUSION

Both of the policies (Whistle Blowers Protection Act and the Leniency Regime under the Lesser Penalty Regulations) work towards the same fundamental goal that is eradicating corruption and misappropriation of assets and also to curb anti-competitive practices in the market. The leniency regime however has had a greater success due to proper enactment and enforcement. There have been many instances of cartels being reported and the whistleblowers being granted 100% immunity on their leniency applications. On the other hand, the Whistle Blowers Protection Act does not grant any rewards to the whistleblowers. The lack of reward and the increased sense of danger due to improper enforcement stops people from acting towards public benefit. There is no proper legislation for governing whistleblowers except for the Whistle Blowers protection Act, 2014, which was last amended in 2015 and has not been amended since. Upon major observations it can be made certain that the current legislation is clearly not up to the standards which are required. Many improvements can be made starting from bringing the existing structure to required standards, proper competent authority for governing such instances as may arise, granting proper security and rewards, and spreading awareness about the policies and legislation to encourage people to step up.

Author: Aaditya Khandelwal, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

REFERENCES

1. Barman, Arup. (2015). System of Whistle Blowing in India.
2. https://www.iasparliament.com/current-affairs/whistle-blowing
3. Panchal, S., Nair, S., Feb 2023, Analysing Anti-Competitive Agreements and Cartels Under Competition Commission of India, ISSN 0972-1983