Whistleblowing incorporates two words that are ‘Whistle’ and ‘Blowing’ which, means that blowing a whistle or getting some information in front of everyone. The etymological meaning of ‘Whistleblower’ is to disclose a matter in the public platform and to let people know the affairs. This term can be helpful to reveal some wrong-doing of people, companies, institutions, etc. The people who do such things as disclosing the faults and flaws of people, institutions, or any other body are known as ‘Whistleblowers.’
This paper attempts to explain the definite meaning of whistleblowers and the different types of whistleblowers and the need for laws for them. Further, it elucidates the background and evolution of the legislation of whistleblowers. Subsequently, it mainly focuses on elaborating the different laws related to whistleblowers followed by the challenges of practical implementation of these laws. This research also tries to explain some of the corporate frauds that happened in India with the improvements required in the legislation and practical implementation. The scope of this research will be within the context of Indian laws.
Introduction
Whistleblower by its term only explains the meaning of it. The term comprises of two words which are ‘Whistle’ and ‘Blower’ which theoretically means that any person who unveils some illicit work in front of the public and the needed law enforcement officers. The whistleblower is said so with regard to the umpire or the judging person who points out a foul or fault in the game. Considering this logic, the same work is being done by the whistleblowers; they expose the people, organizations, institutions, or any other public or private body indulged in any of the wrongdoings to the community at large along with the governmental authorities who should be aware of such illegitimate or dishonest work. This whistleblowing practice concerns raising a voice against the mala fide intentions and doings of a specific body. Considering the increase in corruption and illegal work these days, whistleblowing lets the government note such activities. However, this term is not fresh as people have been doing this work since the ancient and medieval period and referring to the ‘Shuchakas.’
There have been different kinds of whistleblowers which are broadly categorized in two segments: –
Internal Whistleblowers
These are whistleblowers who inform or report to the higher authority of the organizations only where the wrongful act is to carry out and the discretion of checking that act is on the superior of the company or the organization only. Usually, the government is not involved with the inquiry and procedure to rectify the illicit work. It is taken care of by the organization itself without any interference from an outside party. Nevertheless, the organization or company willfully let the government indulge in the matter in a few cases to avoid further issues. It is understandable from the term itself that it is done internally, i.e., within a company or organization.
External Whistle-blowers
External Whistle-blowers refer to the people who report or reveal the illegitimate ongoing work in a specific organization or company to the outsiders or the external people, including the media reporters, the concerned governmental officers, etc. It ideally contains the type of information that might be unfavorable to the public at large and public good and safety is the chief purpose of reporting it to the external authority. Another reason for accounting it to external authority could be the negligence in the redressal of such fraud or illicit activity within the organization.
Apart from these two, there are other types of whistle-blowers like Alumni whistle-blowers and Cybersecurity whistle-blowers. The USA establishes cybersecurity whistle-blowers and their work is to protect the people from insecure surfing, hacking, etc. Alumni Whistle-blowers are the ones who are no longer working in a specified company or institution and are then disclosing the illegal and wrongful acts observed by them during their employment in the same.
What’s the necessity of Laws for the protection of Whistleblowers?
With the category of work the whistleblowers do of divulging the truth out in public or in front of an authorized person, there can be resistance and even retaliation involved to impede such revelation. The kind of work done by the whistle-blowers is palpable as they are pointing out the flaws and fraudulent activities of some institutions and companies, which in return might see vengeance for the same. Despite knowing this, they are valiant enough to do so the whistleblowing. However, some whistle-blowers like to conceal their identity because of the same stated reasons. Rules and laws are present to protect the whistle-blowers from the mala fide intentions of people taking revenge and harming them.
Peeking from behind the Curtains
Since 2001, the laws for the safety and protection of whistle-blowers started to generate. It had been recommended in 2001 by the Law Commission of India that for the eradication of corruption and illicit work, there should be laws for the safeguard of the whistle-blowers. After the Law Commission of India’s recommendation, a bill was drafted to deal with this issue. Later, the protection issue of whistle-blowers came to the public’s attention when NHAI engineer Satyendra Dubey was murdered after he wrote letters to Prime Minister’s Office about conspired corruption by contractors, Govt. Officers and Politicians in the Golden Quadrilateral project in 2003. To this incident, a petition was filed in 2004 before the Supreme Court of India and SC ordered the Central government to enact the complaints filed by the whistle-blowers when laws are enacted. In reply to the SC’s order, the government notified in 2004 a resolution called ‘Public Interest Disclosure or Protection of Informer’s resolution’, which gave the Central Vigilance Commission authority to act upon the complaints filed by the whistle-blowers.
Later, India became a signatory party to the UN Convention against Corruption in 2005 which talked about the reporting of corruption done by the public or private entities and protecting the spectators and whistle-blowers from the retaliation faced by them. This convention further talks about safeguarding against the persecution of the complainant. The report of the Second Administrative Reform Submission in 2007 recommended that stringent laws be endorsed for the protection of whistle-blowers. To kowtow with the recommendations and regulations provided, Whistleblower Protection Bill was propositioned in 2011 and finally it became an act in 2014. Apart from this, on the instruction of the convention The Companies Act, 2013 and SEBI to note complaints registered by the whistle-blowers.
Legislations for Protection of Whistleblowers
Following are the different legislations enacted for the whistle-blowers applicable to some listed companies as well as some private employers: –
Companies Act, 2013
One of the more likely platforms to have frauds and scams is a company, be it private or public. To address this issue, a vigilant mechanism is being established and enacted where people can report their concerns regarding any ongoing illegal activity. This mechanism also protects the victimization of the people who are using this mechanism i.e. whistle-blowers. Various sections in the Companies Act, 2013 talk about the inspection and inquiry matters included from section 206 to section 229. Section 208 of Companies Act, 2013 authorizes an Inspector to look through the records and suggest for further investigation in the situation of doubt.
Further, section 210 empowers the central government to investigate any suspected illegal matter either by the intimation of the inspector or registrar of the company or in case of a special resolution passed for the investigation or in the public interest. Similarly, section 211 of companies act sanctions and escorted the Special Fraud Investigation Officer (SFIO) to arrest any person dealing with fraudulent activities inside such a company. Additionally, The Companies and (Meetings of Board and its Powers) Rules, 2014 provides that in case of frequent waggish complaints being filed by a director or an employee, the audit committee or the director assigned to play the role of the audit committee may take suitable action against the director or the employee including a warning.
SEBI’s take on Whistleblower protection legislation
Securities and Exchange Board of India also mandated that every company listed under SEBI must have a whistle-blower policy and have a responsibility to make every employee aware of such policy so that they may report any frivolous activity to the same. Under clause 49 of the listing policy mentions the whistle-blower policy. From December 2019, SEBI has also introduced a reward mechanism as a kind of inducement to ‘Informants‘ who report a violation of insider trading laws to SEBI. Listed companies are required to make an exposé of material events to the stock exchange(s) according to Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR). Ministry of corporate affairs has issued Companies (Auditor’s Report) Order, 2020 to strengthen the corporate governance framework under the Companies Act, 2013. It applies to every company, be it an Indian or foreign company.
Whistleblowers Protection Act, 2014
The objective behind passing this act is to ensure that there is a podium for the whistle-blowers to report the ongoing malpractices in any company or any fraud or misuse of power by public officials to the appropriate authority. This act also provides an adequate safeguard against the victimization of whistle-blowers. It allows any person counting the public officials to disclose any information for the public welfare and interest to the competent authority. Here the competent authority has been defined in the definition clause i.e. section 3 of the Whistleblowers Protection Act. Another important part of this act is that it does not allow the whistle-blower to hide his/her identity or to report any issue anonymously. This act empowers Central Vigilance Commission to act upon the issues and frauds reported by the whistle-blowers.
By the name of the act itself, it is evident that the prime motive of the act is to protect the whistle-blowers from the revenge of the powerful people indulged in ill practices. The Whistleblowers Act supersedes the Official Secrets Act, 1923 and permits the whistle-blower to make public interest disclosure before competent authority even if they are detrimental of the later act but not impairing the sovereignty of the nation. This act does not apply to the Special Protection Group (SPG) which constitutes personnel and officers as mentioned in the Special Protection Group Act, 1988. This act further provides a time duration of 7 years to report for the fraud or scam happened from the date of occurrence of such act. Any person who negligently or with mala fide motives reveals the identity of the whistleblower will be punishable with imprisonment for a term extending up to 3 years and a fine which may extend up to Rs 50,000. If the disclosure is done with erroneous motives that it was inaccurate or misleading, the person will be punishable with imprisonment for a term extending up to 2 years and a fine extending up to Rs. 30,000.
In 2015, the Whistleblowers Protection Amendment Bill was moved that propositioned and whistleblowers must not be allowed to reveal any confidential documents under the Official Secrets Act, 1923 even if the purpose is to disclose acts of corruption, misuse of power, or criminal activities. This amendment weakens the very subsistence of the 2014 act.
Practical Application and Lacunae in the Whistleblower Protection Act
There are required numbers of laws for the protection of whistleblowers, yet its practical application does seem to be a big issue. Considering the issue under the companies act, there is no procedure provided under Indian law for companies when faced with such situations. It is determined by the policy, where such policy exists. However, when a whistleblower complaint is received, it is generally weighed up and investigated depending on the issues raised.
Another drawback felt is the mandate system of not submitting the issue as an anonymous person. Being a whistleblower might be life-risking work and although there is an act stating the protection of such people, as seen in the murder of Satyendra Dubey for doing the same work. The act’s sole purpose is to provide safety to the whistleblowers, but there are no specific sections pertaining to the criminal activities against the whistleblowers. There are legislations punishing the officers who reveal the identity of a whistleblower but no such law is there to look after the punishment once any person tries to harm any whistle-blower physically. However, there is the term victimization used in the act but there is a lack of penalty with regard to the same.
Frauds in Corporates
- The Ranbaxy Company Fraud
This fraud came to the public attention by a whistleblower named Dinesh Thakur who was an employee of that company. He doubted that the company he worked for was involved in something illegitimate and thus he heaved this matter to appropriate authority. But soon after that, he was strained to resign from the company as his issues had some grave allegations like drug development, manufacturing, and testing data. After resigning he started working for the US food and drug administration and then he was able to expose the illicit practices present in the Ranbaxy Corporation. It was possible only because he took the protection of the US whistleblower protection program.
- The Infosys Saga
Here, a group of employees filed a complaint against the company’s top management stating that the company is using unethical and illegitimate practices to increase the profits and the short-term revenue. They sent that complaint to the board of directors of Infosys and the US Securities and Exchange Commission because the company is registered in the US and allows filling confidential complaints. However, the complainants did not reveal their identity in the said complaint as doing that would make them face retaliation with regard to the same. The accusers also assured that they have evidence, including call recording and a copy of the email that will prove the stated allegations. The complaint alleged that the CEO, Mr. Salil Parikh, directed them to influence the documents and make erroneous assumptions.
Further, they stated that the CEO of Infosys is to be based in Bangalore itself and asked about the reason for not forcing the CEO to begin his work from Bangalore and not from Mumbai. They subsequently stated that the funds used in the visits of the CEO to Bangalore belong to the company. If the CEO wants to work from Mumbai, then all the traveling expenses to Bangalore were covered by his salary. But after all the examination and investigations carried out by the company’s audit committee, they granted a clean chit to the CEO of the company stating that they did not find any substantial evidence confirming the same. The SEC also gave a fresh go to the company in this matter.
There are many other corporate and government frauds as well.
Conclusion and Recommendations
It is evident from the laws and the lacunae present that there have been major issues in the practical implementation of the laws upheld for the whistleblowers. It takes a lot of courage to be a whistleblower and go against any organization and bring the truth out and being that needs to be protected by correct implementation of the laws made. These days, corruption and dishonesty lie in almost every company or organization, private or public.
Thus, the Whistleblower Protection Act, 2014 tries to protect the whistle-blowers even from victimization but penalizing such act is the one main thing lacking in the act. Down with that, there was an amendment bill which was passed in 2015 with regard to the Whistleblower Protection Act stating that the whistle-blowers should not be allowed to reveal any confidential documents under the Official Secrets Act, 1923 even if the purpose is to disclose acts of corruption, misuse of power or criminal activities. The passing of such a type of bill will destroy the whole motive of the 2014 act and thus the bill must be declined. To work on the effective implementation of the Whistleblowers Protection Act, the employees and the directors, and stakeholders of the companies should also be supported with it. There should be transparency and veracity practiced in corporate governance to reduce fraud and illegitimate activities.
Hence, the laws and legislation for whistleblower protection are stringent but the proper application along with certain amendments related to penalization of people victimizing the whistleblowers should be there. The proper implementation is moreover dependent on the sincerity of companies and organizations. Considering whistleblowers as a significant part of our society, the whistleblowers’ protection mechanism should be strengthened followed by the integrity of democracy which is to be safeguarded and appreciated.