Anti-graft Act: How will the amendments impact businesses in India?

Experts share their insights on implications for businesses following changes in the anti-graft Act

Why was there a need to amend the anti-graft law?

The Prevention of Corruption Act was enacted three decades ago in 1988. Since then, several major socio-economic changes have taken place. During this time the international stance on bribery and corruption has also become way more stringent. In May 2011, India ratified the United Nations Convention Against Corruption. In this context, the 1988 Act was being considered a bit archaic, if not completely obsolete. Therefore, a need for amending the Act was felt so as to widen its scope, strengthen its effect and to bring it in line with the international anti-graft laws.

Would this Bill be applied retrospectively?

Statutes of penal/criminal nature are not amen­ded retrospectively, nor the Bill seeks to do so.

What are the most significant changes brought about by this Bill?

Giving of a bribe by individuals and organisations has been criminalised. The erstwhile amnesty provided to a whistle-blowing bribe giver has been done away with. The requirement of prior sanction for prosecution of former public officials has been inserted. Provisions for attachment and forfeiture of property have been added.  The Bill makes a differentiation between honest and dishonest public officials. This comes as a relief to public bank officers, who may, in good faith, sanction loans which subsequently turn into non-performing assets. The Bill also makes it compulsory for police to take prior approval of the Lokpal or the Lokayukta before conducting a probe against a public official. It will be interesting to see how this plays out since a Lokpal has still not been established. 

How will the amendments impact businesses?

Bribing a public servant by a commercial organisation has been expressly made an offence. Earlier, such organisations could be charged only for abetment of corruption. Commercial organisations have been defined in a very broad manner to include all companies, corporations, partnerships or associations, whether incorporated in India or abroad. This amendment will have an immediate and significant impact on the corporate sector.  The Bill exempts a commercial organisation if it has put in place “adequate procedures” designed to prevent its officers from bribing a public servant.

How does a company ensure that it has “adequate procedures” in place?

The Bill requires the central government to prescribe guidelines about “adequate procedures” that commercial organisa­tions should put in place. Corpo­rate India will have to wait until the govern­ment lays down such guidelines. It would, therefore, be desirable that the provisions against commercial organi­sa­tions are brought into force after such guidelines are notified by the government.

Given this ambiguity, what immediate steps should corporations take to mitigate any potential risks?

This is obviously a tricky situation for businesses. There is no clarity so far and organisations will not even know if the procedures and processes they adopt now would turn out to be in compliance or in possible breach. One may look towards the UK Bribery Act for some possible guidance. In similar provisions, the UK government has based its guidelines on six principles — principle of proportionate procedures, top-level commitment, risk assessment, due-diligence, communications (and training), and monitoring and review.

What are the major amendments that could have been brought in, but were not?

The Bill does not cater to international corruption and bribery. There are still no provisions against bribing of foreign public servants. Bribery and corruption in private sector entities also continue to remain out of scope. This was perhaps an opportune time for the government to bring in such amendments to build a more holistic anti-graft regime. 


Ashish Bhan is partner, Trilegal; Mohit Rohatgi is senior associate with the firm

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