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Photo: Bloomberg
Photo: Bloomberg

Just how safe are whistleblowers under Indian law?

Whistleblowers can blow the lid off corporate and financial scams, but does India have enough laws to protect them?

Whistleblowers are back in focus after the accusations against Infosys CEO Salil Parekh and other senior officials of indulging in irregular accounting. Whistleblowers can blow the lid off corporate and financial scams, but does India have enough laws to protect them?

How’s whistleblowing defined in India?

According to the Companies Act, 2013, whistleblowing is an action aimed at drawing the attention of stakeholders to instances of unethical practices in an organization. Under central law concerning allegations against public servants, it is a mechanism to receive complaints relating to alleged corruption or wilful misuse of power or discretion. A whistleblower can be anyone who chooses to expose wrong practices and has evidence to support the allegations. They can be either from within or outside the organization—such as current and former employees, shareholders, external auditors, and lawyers.

How does the law protect them?

In India, whistleblowers are protected by the Whistle Blowers Protection Act, 2014. The law provides for the protection of their identity and also has strict norms to prevent their victimization. For instance, an organization cannot initiate proceedings against a whistleblower pending a probe into allegations. The same sections have been adopted in the Companies Act, which applies to listed companies, and are a part of the Securities and Exchange Board of India’s governance norms. All listed and public sector firms need to have a whistleblower policy that outlines procedures and recourses available to complainants.

Graphic: Mint
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Graphic: Mint


What happens in case of frivolous complaints?

Whistleblowing may sometimes be used to settle personal vendettas or manipulate the stock market. To prevent this from occurring, the audit committee that investigates the allegations will examine them for their merit. If a complaint is proven to be frivolous, the complainant can face a jail term of up to two years.

What is Infosys’ track record on this?

In October 2013, Infosys agreed to an $8 million settlement offer by a US federal court after a former IT manager with the firm filed a whistleblower lawsuit against it. The manager alleged that he was sidelined and victimized by the firm’s top bosses after he refused an internal settlement offer. The episode showed the need for strict rules to protect whistleblowers. Subsequently, in 2014, Parliament approved the Whistle Blowers Protection Act. The Infosys board then amended its vigil mechanism in line with the new law.

What provisions does Sebi have?

India has a poor track record in dealing with insider trading. To improve success rates, the market regulator recently introduced a tipping mechanism. Sebi will award up to 1 crore for information and successful action against insider traders. It has also created a “cooperate and confidentiality" mechanism. This means that if someone guilty of violating securities law is willing to assist in the larger probe, the person will be given exemption from penal action and their identity will be kept confidential.

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