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STUDY OF THE PROTECTION AND SUPPORT AVAILABLE TO WHISTLEBLOWER IN INDIA AND THEIR ROLE IN EXPOSING CORPORATE VEIL
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STUDY OF
THE PROTECTION AND SUPPORT AVAILABLE TO WHISTLEBLOWER IN INDIA AND THEIR ROLE
IN EXPOSING CORPORATE VEIL
AUTHORED BY
- SAUMYA PRATIBHA TIRKEY
Student,
Faculty of Law, NUSRL Ranchi
ABSTRACT
An employee who exposes any unethical
or illegal activity within the company is known as a whistle-blower. A
sufficient safeguard against unjust treatment by the alleged violator is
provided by the whistleblower policy. Even though “whistleblower policy” is new
in India “The Securities and Exchange Commission in the United States and the
Financial Conduct Authority in the United Kingdom” have both implemented
whistleblower policies since long. The policy aims to bring transparency in the
running of huge corporations and to protect the individual who comes forward
and disclose unfair practices or violation of law by these corporations. Still
even in those advanced countries, the laws relating to whistleblower are
prevalent with certain limitations. As per experts, India must provide
protection to corporate whistle-blowers and expand the scope of a surveillance
mechanism to include major private enterprises. This paper tries to study
statutory protection which a whistleblower is entitled to in India and analyses
the features, meanings, and these Whistleblower policies are crucial for Indian
corporate governance.
INTRODUCTION
The concept of whistleblower has
originated from United Kingdom. It was first mentioned by Justice Dogget in the
case “Winters v. Houston Chronicle Publishing Co” as attributed to the action
of the ‘English Bobbies (police constable)’ who blew whistle when they spotted
crime happening.[1]
Definition of whistleblower stands as the disclosure by organisation members
who may be present or past, of unlawful, immoral, or illegitimate acts
controlled by their employers to individuals or groups that have the authority
to take appropriate action. Whistleblower can also be therein defined as a
“deliberate non-obligatory act of disclosing to an external entity with the
potential to legitimate the wrong doing, non-trivial illegality or other
wrongdoings, whether actual, suspected, or anticipated, that is under the
control of that organisation and that goes onto public record the disclosure
here is made by a person with privileged access to data or information of that
organisation.
Whistle Blower refers one who reveals
wrongdoing within an organization to the public or to those in positions of
authority. In one way or another, the person against whom the whistle is blown
may retaliate against the person who blows it. The whistleblower policy seeks
to protect those who disclose wrongdoing from retaliation.
Peter B Jubb in his paper titled
“Whistleblowing: A Restrictive Definition and Interpretation” mentions that it
is an act of dissent, which publicly implicates a company by externally
disclosing wrong doing. In response to scandals an increasing number of
companies have adopted whistleblowing policies that should make external
disclosure unnecessary by solving the problem internally. The whistleblowing
mechanism had proved out to be a useful tool to bring to fore any wrongdoing by
a particular organisation. Talking about securities market, the securities
regulators have capitalised over this mechanism to prosecute any company/firm
engaged in illegal activities.
The word whistleblower was coined by
Ralph Nader, a civil activist as “basic interpretation of the word is a
disclosure made in the public interest in mind. Whistleblowers are endowed with
a keen understanding of right and wrong as well as the ability to look beyond
themselves and consider the larger welfare of society.” Ironically,
Whistleblowers are often disliked and viewed as being dishonest, so it is not
always easy to carry out an act as ethical and genuine as this. This frequently
puts them in a situation where they must decide whether to risk losing their
job, their reputation, or their social standing. While it is crucial to protect
whistleblowers from such adverse conditions, all countries must also assume
responsibility for attempting to preserve the practice of whistleblowing to
keep a close check on both the government and people.[2]
WHO IS A
WHISTLEBLOWER?
In its simplest form, whistleblowing
is the act of one person or a group of people informing the public or law
enforcement authorities about the wrongdoings of a government agency or private
business. Whistleblowing in the corporate context refers to the actions of an
employee reporting any misconduct, legal violation, or unethical business
practices. Many times, informers with a negative reputation are associated with
whistleblowers. The liability of the person revealing the information is
possibly the most significant difference. Informants frequently engage in
unethical activities themselves and use information disclosure to lessen the
risk, either freely or under threat.[3]
To handle whistleblower complaints,
the Companies Act currently only mandates the establishment of surveillance
mechanisms for listed corporations, businesses that accept deposits from the
public, and businesses with bank or public financial institution debts
exceeding Rs 50 crore. Corruption and fraud in an organization's internal
transactions can be prevented by developing clear and effective policies and
ensuring that they are implemented The A company's internal transactions can be
protected against the threat of fraud and corruption by implementing effective
policies that are precisely formulated.
TYPES OF
WHISTLEBLOWERS
There are several kinds of
whistleblowers. There are two primary classifications, “internal and external,”
depending on reporting authority. Internal whistleblowing is when an employee
informs their immediate supervisor or another senior official about improper
behaviour or illegal activity carried out by another staff member in their
department or another. Whereas, the act of disclosing information about illegal
activities within a department or organization to external parties such as law
enforcement agencies or the media is known as external whistleblowing.
Therefore, when a company employee reports disobedience to upper management,
this is known as an internal whistleblower. When the public and regulatory
bodies learn about the company's wrongdoings through traditional or modern
media outlets, such as social media apps like LinkedIn or newspapers, this is
known as an external whistleblower.
INSTANCES
OF WHISTLEBLOWING IN INDIA
We know of prominent Indian examples
like Satyendra Dubey. Although Dubey was killed, he was a trustworthy worker
during his working life. Due to his objections to irregularities and suspension
of individuals engaging in malicious work, he was removed from projects. He had
told the then-prime minister Atal Bihari Vajpayee about the project he was
managing in the position of a project manager for the National Highway
Authority of India. He observes several errors and irregularities in the
project's financial department. Despite his request in the letter to remain
unidentified, the “Ministry of Transport and Highways” received the letter. He
faced criticism for his devoted efforts at exposing a fraud. Though it was
connected to the robbery, he was murdered. There was not enough evidence to
link it to the scam he had tried to expose.
Ranbaxy, a well-known pharmaceutical
company, was compelled to give 48 million dollars to Dinesh Thakur, a devoted
and honest worker. In 2003, Mr. Thakur became a member of the company. After
discovering in 2015 that the company was still engaging in unlawful
manufacturing practices, he had been dismissed from his position, which he had
held from 2003 to 2015. He gathered each piece of evidence and record pertaining
to the wrongdoings and forwarded it to US regulators because he was determined
to expose it. After being found guilty of all charges, the Ranbaxy accepted a
500-million-dollar settlement. Dinesh Thakur was granted 48 million dollars in
acknowledgment of the honesty and suffering that resulted in the discovery.
WHISTLE-BLOWING
LEGAL FRAMEWORK IN INDIA
In India, corporate whistleblowing is
still in its early stages, despite being widely recognized as one of the best
instruments for ensuring sound corporate governance. When it comes to
whistleblowing, India has been far behind. With the President's assent on May
09, 2014, the Whistleblower Protection Act, 2011 (the WP Act) was limited to
public entities and excluded private corporations from its scope. [4]In
the past, the Code contained no significant provisions pertaining to the
treatment of whistleblowers. The recommendation that was made by “Narayan
Murthy Committee Report on Corporate Governance, 2003” issued an obligatory
advisory regarding whistleblowing. The subsequent dimensions were included in
the recommendation:
Ø Employees
may approach the audit committee without having to notify their superiors if
they witness an unethical or improper practice (which need not necessarily be a
legal violation).
Ø Businesses
must take action to guarantee that all staff members are informed of this right
of access via internal circulars and other channels. Provisions shielding
whistle blowers from wrongful termination and other unjust and discriminatory
employment practices must be included in the company's employment and other
personnel regulations.
Ø The company
must reaffirm each year that it has protected "whistleblowers" from
unjust termination and other unfair or discriminatory employment practices, and
that it has not prevented any employees from accessing the company's audit
committee (about issues involving alleged misconduct)
Ø The
declaration will be included in the Corporate Governance report that the board
must prepare and submit with the annual report.
As a result of intense corporate
lobbying pressure, the mandatory recommendation was previously changed to
non-mandatory in the Listing Agreement's Amendment to Clause 49. For now, the
company is advised to establish a mechanism for employees to report to the
management concerns about unethical behaviour, actual or suspected fraud, or
violation of the company's code of conduct or ethics policy according to Clause
49 of the Listing Agreement. Additionally, this mechanism might offer
sufficient protections against unfair treatment of workers who utilize it, as
well as direct access to the Audit Committee Chairman in extraordinary
circumstances. After the mechanism is in place, it can be properly disclosed to
all members of the organization.
A SEBI Circular dated the 26th of
August 2003, modified the corporate governance principles found within the standard
listing agreement. The companies were
mandated according to the amended principle to have a whistleblower policy.
This procedure allows employees to report any irregularities that they see in
the company so that management can take appropriate action. In August 2003,
SEBI amended Clause 49 of the Listing Agreement” to include these guidelines
for companies. Regulation 18 of the SEBI (LODR) Regulations currently includes
the ingredients of Clause 49.
SEBI (LODR)
Regulation, 2015
All publicly traded companies are
obligated by the Listing Agreement to accept a whistle-blower policy. Employees
may report any type of fraud, misappropriation, or illegal conduct to the Board
by using this clause. The Listing Agreement necessitate all publicly traded
companies to establish a whistleblower policy. This provision allows employees
to notify the board about instances of fraud, misappropriation, and unethical
behaviour. The objectives of SEBI LODR, a consequential legislation in India,
is to encourage disclosures to improve the transparency of listed companies
within India.
According to Regulation, 4(2)(d)(iv)
of SEBI (LODR), it is essential for Indian listed companies to have a system
established to allows stakeholders, employees, and their representatives to feel
comfortable sharing their concerns in the company. As per the SEBI (LODR), 2015
Regulation 30, listed companies are required to provide immediately to the
stock exchange every significant detail.
The Whistle-Blowers Protection Act,
2014 (Whistle Blowers Act), provides a way for examining cases of public
servant corruption and abuse of power also safeguarding individuals who reveal
wrongdoing in government agencies, initiatives, and offices. It was passed with
the purpose of creating a system to:
1)
Get
information about accusation of corruption or deliberate misuse of authority or
discretion made against any public official.
2)
Investigate
or order an investigate into such disclosure; and
3)
Ensure
that the person filing the complaint has adequate safeguards against being
victimized.
Under the Whistle-Blowers
Act, a person can make any divulgence of information for the sake of public
interest. Section 211 of the Act, empowers the Serious Fraud Investigation
Office (SFIO) to arrest anyone suspected of fraud in the corporation.5 If the
auditors have grounds to believe a fraud has been committed or has been
perpetrated against the company, they must report it to the central government.[5]
The
Companies Act, 2013
The Companies Act, 2013, under its
Section 177, makes it compulsory for the companies-
1.
who
are listed,
2.
or
companies who accept deposits from the public or
3.
who
has borrowed an amount from banks/financial institutions which exceeds Rs. 50
crores are required to have a mechanism in place to take note of whistleblowing
concerns”.
Section 177 of the Companies Act,
2013 when read with Rule 7(4) of the Companies (Meetings of Board and its
Powers) Rules, 2014, provides mechanism to protect the employees against any
harm or from being victimized. The primary difficulty in implementing this law
comes from the word’s vigil mechanism, which are mentioned in the
"Companies Act, 2013," having no clear definition. The procedure that
appears to be the focus of this legislation is up to the company's discretion,
which could have an impact on how well the law is implemented overall. While
mechanisms exist to safeguard employees against any form of victimization,
including removal or unfair treatment, the ambiguous nature of the protections
promised by this act makes the protections available to individuals inaccurate
and untrustworthy.
In 2003, the Securities and Exchange
Board of India (SEBI), rationalised the Corporate Governance Principles wherein
clause 49 of the Listing Agreement requires the formulation of a Whistle-blower
policy in Indian companies. Workers can use a reporting system to report
suspected or genuine fraud as well as violations of the organization's code of
conduct or ethical standards. Under Regulation 7D, the whistle-blower is
entitled to a monetary reward of up to 10% of the proceeds collected, capped at
Rs. 1 crore.
Whistle-blower
protection act 2014
The Whistle-blowers Protection Act of
2014 was enacted to safeguard whistle-blowers. The law protects their
identities and establishes strict guidelines to prevent them from being
victimized. A company, for instance, is not permitted to take legal action
against a whistleblower until after it has investigated the claims. The
identical sections are included in the Securities and Exchange Board of India governance
guidelines and have been adopted into the Companies Act, which is applicable to
listed companies. A whistleblower policy outlining the steps and recourses
available to complainants must be implemented by all publicly traded companies.[6]
The identical sections that are a part of SEBI governance norms have been
formalized in the Companies Act, that is applicable to publicly traded
companies. Few drawbacks of the act are:
Ø Requirement
for the whistleblower to disclose the identity at the time of disclosure.
Ø It
restricts disclosure to a specific group of public employees, while private
companies are exempt from checks and balances and are not entitled to any kind
of policy protecting whistleblowers.
Laws applicable to Listed Companies:
“The Companies and (Meetings of Board and its Powers) Rules, 2014”, states that
the audit committee or a director nominated to serve on the audit committee may
take appropriate action against the director or employee in question, including
reprimand, if the director or employee files multiple frivolous complaints. A
whistleblower policy is required for every listed company and ensure that all
staff members are aware of it. This permits the employees to report instances
of unpublished sensitive information leaks. With effect from December 2019, the
SEBI has also implemented an incentive structure to embolden Informants to
disclose insider trading violations. Listed companies are required to disclose
material to the stock exchange pursuant to Regulation 30 of the Securities and
Exchange Board of India (Listing Obligations and Disclosure Requirements)
Regulations, 2015 ("LODR").
Laws applicable to Private Employers:
In India, there is no explicit whistle-blower statute that applies to private
employers. Some progressive corporations (in particular, MNC subsidiaries) have
included a whistle-blower policy against the backdrop of expanding their global
policies to encompass individual employees or groups of employees, as well as
third parties in certain circumstances. The key purpose of any whistle-blower
policy is to encourage employees to expose problems without fear of being
victimized or penalized. Whistle-blowing hotlines are available in India from
accounting firms like Deloitte and specialized organizations such as Navex
Global and Integrity Matters.9 These institutions are merely communication
channels, and ultimate decision-making remains with the company.
THE WHISTLE-BLOWING
REGIME IN INTERNATIONAL SPHERE
UNITED KINGDOM
In the history employees were never
granted a right to reveal information relating to their profession.
Additionally, disclosure of non-private information could be viewed as
violating the implied duty of trust and may result in breach of contract. In
the case “Initial Services Ltd v. Putterill”[7] the
Queen’s bench opined that law has allowed an exception to the principle of
non-disclosure of confidential information where there is any misconduct of
such a nature that it ought to be in the interest of public shall be disclosed
toothers’ However, the disclosure must be to someone who has an interest in
receiving it. Referring “Lion Laboratories Ltd v Evans,” two employees gave a
national daily copy of some internal documents doubting the reliability of
Breathalyzers manufactured by the employer. The company sought an injunction to
prevent publication of the information on the grounds of breach of confidence.
The action by the company failed because the employees were found to have ‘just
cause or excuse, for disclosure. Following that, in A Company's Application, the
High Court declined to issue an injunction prohibiting the financial services
industry employee from giving a regulatory body private information about his
company, even though the disclosure might have been made with malicious intent.
Even though Justice Scott upheld the general disclosure injunction. He
concluded that an employee's duty of confidence did not stop them from
providing regulatory bodies with information related to their investigations.
Therefore, apart from the circumstance in which an employee notifies a relevant
regulatory body of a breach of statutory duty, the common law has not offered
solid guidance regarding what could be revealed and to whom. The
"Employment Rights Act, 1996" (also known as the "ER Act")
and the "Public Interest Disclosure Act, 1998" (also known as the
"PID Act") are the two laws that define the conditions under which
whistleblowers are protected in the United Kingdom. In case of Public Interest
Disclosure Act, employees who make a qualifying disclosure are protected.
Regardless of whether the report turns out to be true or not, the whistleblower
is protected as long as they a reasonable belief. It is a duty of employees to
act in good faith, and disclosures made of dislike or self-interest are not
protected. The disclosure is usually made to the employer, but it can also be
made to a prescribed person or a responsible third party, such as the bodies listed
by Parliament, which include the FCA, the Serious Fraud Office, and the
Fair-Trade Office. A "disclosure" is not defined under the PID Act,
but the court's decision in Kraus v. Penna Plc indicates that it includes both
written and oral submissions. Employees can report anonymously, and there is no
legal requirement in the United Kingdom for the identity of whistleblowers to
be kept confidential. The PID Act in the United Kingdom protects disclosures
made both internally and externally from punishment, but it does not push
businesses to institutionalize whistleblowing.
In July 2003, the current FCA,
formerly known as the “Financial Services Authority” , introduced the Combined
Code on Corporate Governance to achieve this goal which is primarily meant to serve
as guidance, offers recommendations for best practices, and includes a
provision about whistleblowing.
Under U.K. “Employment Rights Act,
1996”, Individuals who qualifies the requirements to be considered
whistleblowers are granted legal protection. The “ER Act (as amended by Public
Interest Disclosure Act, 1998)” lays out the requirements for evaluating
whether an employee qualifies. When a disclosure is made by an employee that is
"protected" and "qualifying," based on those assessment the
employee has the option to not be either:
Ø dismissed,
with the main reasons being that he made a confidential disclosure
Ø liable to
harm because he disclosed information that was protected.
The six types of misconduct that fall
under the legislation are “criminal offenses; injustices; breach of legal
obligations; damage to the environment; threats to one's health or safety; and
wilful concealment of facts about these crimes. A new requirement has also been
added, as stated in Section 17 of the Enterprise and Regulatory Reform Act,
2013 which is the disclosure must be made "in the public interest."
UNITED STATES
The United States is the first and
oldest nation in the world to have passed legislation protecting
whistleblowers. Benjamin Franklin the first whistleblower in American history
revealed in 1773 that the governor of Massachusetts, who was appointed by the monarchy,
had purposefully misled Parliament to support a military buildup in the
Colonies. When we examine the laws
pertaining to whistleblower protection in the United States, we discover that
there are numerous state and federal laws that offer protection to
whistleblowers, as well as several inserted clauses that aim to accomplish
health and safety goals.
In 2010, the Dodd-Frank Wall Street
Reform and Consumer Protection Act was passed by the US Congress as an
amendment to the Sarbanes Oxley Act. This was done in response to multiple
corporate scandals that had defrauded countless investors and damaged investor
confidence. The Securities Exchange Act of 1934 was amended by Section 922 of
the act, which added Section 21F, titled "Securities Whistleblower
Incentives and Protections." According to the new section 21F, the SEC had
to establish a whistleblower program that would compensate people for informing
the agency about potential securities violations. In May 2011, the SEC approved
Regulation 21F, the final regulations pertaining to the new whistleblower
program. As per the new rules, “an individual who voluntarily provides the SEC
with original information resulting in a successful enforcement action in which
the SEC collects over 1 million$ in sanctions will be eligible for a financial
reward of between 10% to 30% of the amount collected, depending on various
factors”. The program acknowledges that for law enforcement to enforce the
market effectively and efficiently, they need the assistance of the public. It
is an unfortunate truth that schemes involving securities fraud often prove
difficult to identify and bring to justice without insider knowledge or support
from scheme individuals or associates. Even if the whistleblower learned of the
potential violation only later, the relevant securities violations had to have
happened or been ongoing within the previous five years for the SEC (“U.S.
Securities and Exchange Commission”) be awarded a monetary civil penalty.
Financial fraud is one of the most
prevalent categories of securities violations that whistleblowers report, which
can be defined as submitting to the SEC fraudulent or false financial
statements, and the use of manipulative business transactions, which usually
have no practical purpose other than to changes earnings, costs, profits,
and/or losses for a given reporting period. Another fraud is offering fraud, in
which a person deceives investors who are interested in new companies by making
false statements and/or omitting important information. Next is insider
trading, which is followed by price and trading irregularities, market
manipulation, and events in the market, which are problems or irregularities in
the trading of securities.
The Dodd Frank Act of 2010 provided
whistleblowers with strong protections against retaliation from their
employers. The Act greatly enhanced the current whistleblower protection laws
in effect in the United Kingdom, particularly the highly acclaimed
Sarbanes-Oxley Act, 2002, which was crucial in establishing the whistleblower
landscape in the United States. The principal objective of the “Sarbanes-Oxley
Act” was to safeguard investors by ensuring that publicly traded companies and
individuals involved in corporate misconduct are held responsible.
The “Sarbanes Oxley Act” provides
protection for any of the following types of violations:
1. Fraud in
general- when a business commits fraud against people, the government, or
another business. According to the Sarbanes Oxley Act, employees who reasonably
believe that fraud is occurring based on the information available may come
forward even if they are unsure of the specific violation
2. Securities
fraud- When an organization participates in activities that are prohibited for
brokers, dealers, and securities issuers. The securities regulations that are
most relevant to this discussion pertain to the obligation that a business
provide its shareholders with certain information about the company's financial
standing, including accurate financial statements and any other information
that a potential investor would likely consider when making an investment. Sarbanes-Oxley prohibits discrimination
against an employee who reports or offers information regarding the
nondisclosure of such information; the employee need not be certain that the
nondisclosure of the information is against the law. It would be sufficient for
the employee to have a reasonable belief that the information was required to
be disclosed.
3. Any federal
law relating to fraud against shareholders-Complaining or reporting fraud
committed against stockholders is also safeguarded. Sarbanes-Oxley merely
stipulates that the federal law that was broken had to do with stockholder
fraud. Employees do not need to be certain; they only need to have a reasonable
belief that the company's misconduct will sufficiently affect shareholders.
The U.S. First Circuit Court decided
in Lawson v. FMR LLC that, according to a "more natural"
interpretation of Section 1514A, only employees of the defined public companies
are covered by the law and that contractors of public companies who report
suspected fraud are not protected by the anti-retaliation provisions of the
Sarbanes-Oxley Act. The decision is currently under appeal before the United
States Supreme Court.
The United States uses three primary
acts that are prevalent:
The whistle blower protection act
1989”: Whistle blowers have very little protection under the Whistle Blower
Protection Act because the rights granted by the act were not sufficient to
safeguard the whistle blower. A new law known as the Whistle Blower Protection
Enhancement Act of 2012 was introduced to address this deficiency. Federal
employees were not entitled to whistleblower protection under the WPA if:
1. revealed
something to my coworkers.
2. While
performing my job, I blew whistle.
3. Disclosed
something to the supervisory.
4. Revealed
the effects of a policy choice.
5. You were
not the first to report the specific misconduct.
However, the whistle blower
protection enhancement act section 101 and 102 of the WPEA Whistleblower Protection
Enhancement Act of 2012 restore the whistle blower protection act's original
intent to sufficiently protect whistle blowers by making it clear that a
disclosure does not lose protection simply because of the reason that “The
disclosure was made to a person, including a supervisor, who participated in
the wrongdoing disclosed or the disclosure revealed information that had
previously been disclosed or the disclosure revealed information that had
previously been disclosed or the employee or applicants motive for making the
disclosure or the disclosure was made while the employee was off duty or the
amount of the time which has passed since the occurrence of the events
described in the disclosure”. Furthermore, section 101(b)(2) makes it clear
that just because a disclosure was made while an employee was performing their
regular job duties, it does not mean that it is not protected.
The Sarbanes-Oxley Act, 2002: To
combat corporate criminal fraud, this act was passed in 2002. The effect of
this act is limited to financial concerns. The “Sarbanes-Oxley Act” gives
publicly traded companies improved financial disclosures and independent
auditors. Certain protections and support are offered by this act to the
whistleblowers.
The False Claim Act 1863: To prevent
fraud against the government, the False Claims Act was passed during the Civil
War in the United States, during Abraham Lincoln's presidency. It is also known
as Lincoln’s law. In 1986, this act was modified to provide protection for
whistleblowers and to safeguard them from threats of death, harassment, and
assault. The first instance in which the False Claims Act was applied to
prosecute private companies that submitted bills for treatments that the FDA
had never approved was in the 1996 Franklin v. Parke Davis case. Since then,
all forms of healthcare fraud have been aggressively targeted by this statute,
including overbilling, paying kickbacks, and promoting pharmaceutical products
off-label. Since 1987, the healthcare sector has accounted for more than half
of all whistleblower recoveries.
CONCLUSION
The International Labour Organisation
(ILO) defines whistleblowing as “the reporting by employees or former employees
of illegal, dangerous, or unethical practices by employers.” A corporation is
made up of several different parties, including the government, society,
vendors, investors, customers, and staff. Corporate governance is the study of
moral behaviour in the business world, which includes moral principles and
ideas that allow one to decide what is right or wrong. From a broader
perspective, the market requires ethical business practices, not just the
corporation's stakeholders. In addition,
conflicting interests of the parties involved give rise to ethical dilemmas. In
this sense, the values, environment, and culture of the organization all play a
role in the decisions that managers make. Since the company is perceived as
conducting its operations in accordance with the expectations of all
stakeholders, ethical leadership is helpful to business. As per David Banisar, around the world,
whistleblowers have been hailed as heroes for revealing corruption and fraud in
organizations and preventing potentially harmful mistakes from leading to
disasters.
Concerning corporate governance,
stakeholder investments help modern corporations raise capital. The management
of the company is responsible for safeguarding the interests of these
stakeholders. Therefore, corporate governance focuses on how to coordinate
manager and investor interests and make sure that businesses are operated in
the best interests of investors. Thus,
the corporate whistleblowing culture is not only something that international
regulatory bodies have promoted, but it is also a trend that most corporations
operating in India are starting to catch up with. Strong corporate
whistleblowing policies prevent significant harm to an organization's
reputation by actively preventing reported misconduct. They also serve as an
incentive for the development of a transparent and trusting work environment.
Even though the Whistleblower Protection Act
of 2014 has addressed the issue to some degree, it still lacks the authority to
hear cases involving the corporate sector. It is only with an efficient
management system and robust policies. Transparent governance is only possible
with strong policies and an effective management system. Such policies must be
designed so that instances of fraud, corruption, and other unlawful activity
within the organization are quickly identified and brought to a minimum. Before
the Whistleblower Act was passed, similar laws were already in place in the
form of legislative acts. This was acknowledged by Section 199(9) of the
Companies Act of 1956, which mandates that all publicly traded corporations set
up a watchful mechanism. But since there is not a strong legal framework in
place to prevent corporate whistleblowing, corporate governance standards need
to be raised and established, and whistleblowing policies need to be made
mandatory for private businesses as well for their senior executives and
employees. Absence of provisions pertaining to the definition of a
whistleblower, allowing anonymous complaints, enacting comprehensive
legislation involving the private corporate sector, protecting whistleblower
mechanisms and systems for their safety, providing rewards, etc., is a common
factor among the cases, laws, and regulations mentioned above. Discouragement
provisions include the inability for a person to file a complaint anonymously
and through legal representation for their own and their family's safety. More
people would come forward if they could remain unidentified. In addition to a
reward system for reporting legitimate issues, there should be a way to impose
a fine or other punishment if the complaint is untrue. To facilitate successful
corporate whistleblowing, India requires a universal law and regulation
pertaining to both public and private companies
[1] Richard Winters v. Houston
Chronicle Publishing Co., 795 S.W.2d 723 (Tex. App. 14th Dist. 1990).
[2] Arup Barman, System of Whistle
Blowing in India (2015).
[3] Arjumand Bano & Dr. Sanjay
Baijal, Whistleblowing in India- Introspection (2019).
[5] National Found for Corporate
Governance, Discussion Paper on Corporate Governance in India: Theory and
Practice (Sept. 2004)
[6] F. Mayer, Corporate Governance,
Competition, and Performance,’in Enterprise and Community: New Directions in
Corporate Governance, ed. S. Deakin & A. Hughes (Blackwell, Oxford,
1997).
[7] Initial Services Ltd. v. Putterill
& Another [1967] 3 All ER 145 (C.A.).
Article Information
STUDY OF THE PROTECTION AND SUPPORT AVAILABLE TO WHISTLEBLOWER IN INDIA AND THEIR ROLE IN EXPOSING CORPORATE VEIL
Authors: SAUMYA PRATIBHA TIRKEY
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/05/10
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
- Access Open Access
- License CC 4.0
All research articles published in International Journal for Legal Research and Analysis are open access and available to read, download and share, subject to proper citation of the original work.
Disclaimer: The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of International Journal for Legal Research and Analysis.