Whistleblower Protection in India – Explained, pointwise

Introduction

Two Whistleblowers, associated with ‘Panama Papers’ and ‘Uber Files’ revelations, have recently done interviews with media outlets. Whistleblowing incorporates two words: ‘Whistle’ and ‘Blowing’ which means blowing a whistle or revealing some information in front of the public. The information can be about public or private organizations/institutions about activities which are deemed to be illegal, immoral or fraudulent. The people who disclose the wrong-doings are known as ‘Whistleblowers.’ The Panama Papers leak disclosed information about tax evasion by the Global Rich through offshore entities and shell corporations in tax havens. The Uber Files disclosed the unethical practices of Uber in order to achieve global dominance in the ride-hailing segment. Experts lament that revelations of this scale are not possible in India. They argue that the Whistleblower Protection law in India is inadequate to give a significant degree of protection to the whistleblowers. This calls for taking robust measures to improve whistleblower protection framework in India.

What are different types of whistleblowers?

Internal Whistleblowers: These are whistleblowers who inform or report to the higher authority of the organizations where the wrongful act is being done. 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.

External Whistleblowers: They refer to the people who report illegitimate ongoing work in a specific organization to the external people including the media reporters, the concerned Government officers, etc. 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.

What is the Whistleblower Protection Framework in India?

In 2004, the Government introduced the Public Interest Disclosure and Protection Of Informers (PIDPI) Resolution for the logging of complaints against alleged corruption or misuse of office by a Government officer or Department. The Central Vigilance Commission (CVC) was designated as the agency to administer complaints, which it continues to routinely route to its relevant section after masking the name of the whistleblower.

India became a signatory to the UN Convention against Corruption in 2005. The Convention talks about the reporting of corruption done by the public or private entities and protecting the spectators and whistleblowers from the retaliation faced by them.

Companies Act, 2013: Various Sections (Section 206-229) in the Companies Act, 2013 talk about the inspection and inquiry matters. 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 Union Government to investigate any suspected illegal matter either by the intimation of the inspector or registrar of the company.

Securities and Exchange Board of India: It mandated that every company listed under SEBI must have a whistleblower policy and have a responsibility to make every employee aware of such 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.

Whistleblowers Protection Act, 2014: The Act aims to protect people who bring to the notice of the authorities concerned allegations of corruption, misuse of power or commission of a criminal offense against a public servant. Under the Act, every complaint has to include the identity of the complainant. The Vigilance Commission shall not disclose the identity of the complainant except to the head of the department if he deems it necessary. The Act penalizes any person who has disclosed the identity of the complainant.

What is the need to strengthen Whistleblower Protection Framework?

Augmenting Transparency and Accountability: A strong framework would ensure that the government and its organizations work as per the prescribed code of conduct. It will allow upright employees to come forward and reveal any corrupt activity in the organization. Further, Whistle-blower protection can go a long way to enable good corporate governance and provide an early warning system for potential crises, such as the one at IL&FS in India.

Protecting Citizen Rights: Ensuring whistleblower protection will mean that the State is unable to undermine citizen rights. For instance, robust protection laws in the U.S gave Edward Snowden the confidence to expose numerous illegal global surveillance programs, many run by the National Security Agency. This prompted a cultural discussion about national security and individual privacy.

Preventing Hardships to whistle blowers: Under the current regime, whistleblowers tend to face multiple hardships which restrain many honest individuals to blow the whistle. These include: (a) Livelihood Loss: Whistleblowers are sometimes cornered in an organization and in extreme situations are forced to quit their job. Further, future employers may be reluctant to hire them as they fear that information about their organizations might be revealed; (b) Death Threats: The powerful people whose scams are about to get exposed often resort to giving death threats to whistleblowers and their families. In some extreme cases, the whistleblowers have also been killed e.g., Satyendra Dubey was murdered in Gaya, Bihar, allegedly for his anti-corruption related actions in the Golden Quadrilateral highway construction project. A study by Accountability Research Center (2015) revealed that 50 RTI activists had been murdered between 2007-14 and numerous other faced assault and harassment.

Source: Accountability Research Center. Attacks on RTI Activists.

Legislative Lacunas: Both the Companies Act and the SEBI rules cover listed companies. Unlisted companies such as Unicorns and the small and medium enterprise sector  remain outside the purview of any whistle-blower rules

The internal mechanism mandated under the Company Act remains subordinate to the management of the company. A whistle-blower will remain completely prey to the management’s whims.

Further, the Whistle Blowers Protection Act 2014 is limited to public servants and doesn’t cover private companies. There are several other shortcomings: (a) Under the Act, the competent authority to whom any complaint on victimization can be made is usually the senior official in the hierarchy. This makes it difficult for the informant to complain against retaliation or receive any protection; (b) The Act does not allow anonymous complaints to be submitted and any anonymous complaints received are not investigated; (c) Transparency activists criticize the Government for its failure to operationalize the Whistleblowers Protection Act by framing the Rules. Instead, the Government had tried to dilute the Act through a proposed Amendment Bill in 2015, although the Bill lapsed in 2019; (d) The Act does not provide for any reward being granted to a whistleblower upon successful investigation of his claims. 

What should be done to strengthen the Whistleblower Protection Framework?

First, the Government should amend the Whistleblowers Protection Act to provide universal protection to the whistleblowers in India. Many States in the US (like Florida, Hawaii, Minnesota) have considered both public and private sector employers to be included under the whistleblower’s protection acts.

Second, a robust reward mechanism must be created under the Whistleblowers Act for incentivisation. At the same time, fines against false and frivolous complaints also need to be enhanced.

Third,  the Government must formulate the Rules necessary to operationalize the Whistleblower Protection Act. 

Fourth, the whistleblowers should be given freedom to report their complaint to independent authorities rather than senior officials. For instance, in the U.S, there are separate offices established under different laws with neutral investigators who are responsible for investigating any claims submitted to them by a whistleblower. They are specifically designed to receive and investigate whistleblower complaints.

Conclusion

The Government needs to ensure that whistleblowers are given an enabling ecosystem wherein they are incentivized and not threatened to disclose the illegal practices carried on in any organization. Strengthening the Whistleblower Protection mechanism is necessary to enhance transparency and accountability in public institutions.

Source: Mint, Indian Express, Mondaq