Why It's Important For Companies Not To Ignore India's Anti-corruption Laws

Published date07 July 2022
Subject MatterCorporate/Commercial Law, Criminal Law, Corporate and Company Law, White Collar Crime, Anti-Corruption & Fraud
Law FirmMajmudar & Partners
AuthorNeerav Merchant

Since the advent of globalization, enterprises have started engaging in increasingly complex cross-border transactions. In many cases, such mandates involve dealing, interfacing and obtaining approvals from government entities in foreign countries. So as to ensure transparency and fair play, governments the world over have enacted anti-bribery and anti-corruption legislations, many of which are extraterritorial in nature. Prime examples are the Foreign Corrupt Practices Act, 1988 (FCPA) and the United Kingdom Bribery Act, 2010. As a result, it has become very important for businesses to ensure that they are in compliance with the anti-corruption laws of not only their own country but also of countries where they do business.

Widespread corruption can be cancerous for the economic well-being of a country. It can encourage monopolies, disrupt fair competition and, most importantly, disincentivize fair market conduct. India was ranked 85 among 180 countries in the 2021 Corruption Perception Index. The country's rank has more or less remained stagnant over the years, signaling that no significant improvement has been undertaken to improve India's anti-corruption policies.

Since the beginning of 2022, India Inc. has seen the unfolding of several high-profile corporate scams and scandals. In January 2022, the Supreme Court ruled on the Devas Multimedia-Antrix deal and called it a "fraud". February saw the AGB Shipyard scam, which can easily be regarded as India's biggest bank fraud. In the same month, the Central Bureau of Investigation (the "CBI") revived its probe on NSE's co-location scam after the Securities and Exchange Board of India issued its order implicating the former National Stock Exchange CEO, Ms. Chitra Ramakrishna. Further, the proceedings against Rana Kapoor, founder of Yes Bank, for his role in the DHFL scam have been ongoing.

India's anti-corruption legislation

In India, the primary anti-graft legislation is the Prevention of Corruption Act, 1988 (as amended in 2018) (the "PC Act"). It applies to Indian and foreign companies operating in India through subsidiaries or associated entities.

The PC Act was amended in 2018 to criminalize bribe-giving, as well as bribe-taking. Section 8 of the PC Act which deals with the offence of bribing a public servant, provides for a punishment of imprisonment for a term which may extend up to seven (7) years or with a fine or both. However, when the offence is committed by a commercial organization, it is...

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