Whistle blowing policy in India: The law and the challenges

Last Updated at: November 04, 2019
2260
Whistleblowing policy in india- The law and challenges

Introduction

Eminent physicist Albert Einstein was of the view that the world will not be destroyed by those who do evil, but by those who watch them without doing anything. Individuals in their pursuit of fulfilling their wants, at times end up committing wrongs. Such wrongs, although can neither be checked or corrected nor a permanent stop can be put to it. But it can definitely be prevented by the conscious effort from those of us who can stand up to it.

Whistleblowing is the act of reporting illegal acts, frauds within an organization to the appropriate authority, that is to say, the organization or the Government. Such a person who reports the fraud or illegal act is the whistle-blower. A whistle-blower who reports the fraud to the management of the organization are internal whistle-blowers while those who do it at the media, public or law authorities are external whistle-blowers. A whistle-blower doesn’t have to necessarily be an employee of the organization, an ex-employee can also be a whistle-blower.

Be it any organization, a private company or any PSU, the fraud or the illegal acts will directly or indirectly affect the general public. Thus, the onus is on the organizations to promote and encourage such work environment which invigorates a sense of ethical conduct, commitment to the values and in consonance with the law of the land. It is pertinent to ensure that within the organisation, the employees can report potential violations safely and anonymously without any fear of retaliation.

Whistleblowing policy

In keeping with the welfare of the general public, laws have been brought into effect but they are inadequate in keeping with the growth rate. The Whistle-blower Protection Bill, 2011 which replaced the Government Resolution, 2004 aims to create a balance between protecting honest employees from becoming a subject of stigma and persons making public interest disclosure. Whistleblowing has been dealt under Sections 206 to 229 of the Companies Act, 2013 with regards to inspection, inquiry, and investigation. Section 208 provides for an inspector to inspect company records and to present recommendations in conducting such an investigation. Section 210 of the Act empowers the Central Government to conduct an investigation into the affairs of the company in the following cases:

  1.      On receipt of a report by Registrar or the Inspector of the company,
  2.      On being communicated that a special resolution has been passed by the company to investigate the affairs of the company,   
  3.      In public interest.

Under Section 211 of the Act, the Serious Fraud Investigation Office (SFIO) that is created under the said Act, is also empowered to arrest any person for fraud in the company.

Ask a Free Legal advice

As it is already mentioned that the organization should create an environment which encourages commitment to values and conforming to the law of the land. An organization should form a whistle-blower system wherein one can report potential frauds or violations both safely and anonymously without the fear of retaliation. Draft Rule 12.5 and Section 177(9) of the said Act requires listed companies, companies accepting deposits from public and the companies borrowing more than fifty crores from the financial institutions to have a whistleblowing policy and a mechanism for the directors and employees to report their concerns. Further, the amendment made by the Securities and Exchange Board of India (SEBI) which included Clause 49 also provides that a whistleblowing system should be existent in an organization.

Challenges facing whistleblowing

It must be conceded that existence of a whistleblowing is stressed by the legislation because only such mechanism or systems can provide answers to the questions that the employees are seeking or reporting of the same. However, whistleblowing as such is neither encouraged nor it is taken up.

The fact that plays an essential role in whistleblowing is the individual coming up to report instances of potential fraud or abuse. But the fear of social stigma and losing their job makes it difficult for even those who are aware of such frauds to come up. Further, such whistleblowers are shunned by management and as such, it becomes very difficult for them to make a choice between professional responsibility and organizational responsibility.

Conclusion

In a society where confronting illegal acts and frauds makes one the subject of social stigma, not many people remain motivated to bring such wrongdoers into the limelight. However, policies can ensure that there are more instances of reporting of such acts. A company should have an ethical compliance program to encourage such acts.

Whistle blowing policy in India: The law and the challenges

2260

Introduction

Eminent physicist Albert Einstein was of the view that the world will not be destroyed by those who do evil, but by those who watch them without doing anything. Individuals in their pursuit of fulfilling their wants, at times end up committing wrongs. Such wrongs, although can neither be checked or corrected nor a permanent stop can be put to it. But it can definitely be prevented by the conscious effort from those of us who can stand up to it.

Whistleblowing is the act of reporting illegal acts, frauds within an organization to the appropriate authority, that is to say, the organization or the Government. Such a person who reports the fraud or illegal act is the whistle-blower. A whistle-blower who reports the fraud to the management of the organization are internal whistle-blowers while those who do it at the media, public or law authorities are external whistle-blowers. A whistle-blower doesn’t have to necessarily be an employee of the organization, an ex-employee can also be a whistle-blower.

Be it any organization, a private company or any PSU, the fraud or the illegal acts will directly or indirectly affect the general public. Thus, the onus is on the organizations to promote and encourage such work environment which invigorates a sense of ethical conduct, commitment to the values and in consonance with the law of the land. It is pertinent to ensure that within the organisation, the employees can report potential violations safely and anonymously without any fear of retaliation.

Whistleblowing policy

In keeping with the welfare of the general public, laws have been brought into effect but they are inadequate in keeping with the growth rate. The Whistle-blower Protection Bill, 2011 which replaced the Government Resolution, 2004 aims to create a balance between protecting honest employees from becoming a subject of stigma and persons making public interest disclosure. Whistleblowing has been dealt under Sections 206 to 229 of the Companies Act, 2013 with regards to inspection, inquiry, and investigation. Section 208 provides for an inspector to inspect company records and to present recommendations in conducting such an investigation. Section 210 of the Act empowers the Central Government to conduct an investigation into the affairs of the company in the following cases:

  1.      On receipt of a report by Registrar or the Inspector of the company,
  2.      On being communicated that a special resolution has been passed by the company to investigate the affairs of the company,   
  3.      In public interest.

Under Section 211 of the Act, the Serious Fraud Investigation Office (SFIO) that is created under the said Act, is also empowered to arrest any person for fraud in the company.

Ask a Free Legal advice

As it is already mentioned that the organization should create an environment which encourages commitment to values and conforming to the law of the land. An organization should form a whistle-blower system wherein one can report potential frauds or violations both safely and anonymously without the fear of retaliation. Draft Rule 12.5 and Section 177(9) of the said Act requires listed companies, companies accepting deposits from public and the companies borrowing more than fifty crores from the financial institutions to have a whistleblowing policy and a mechanism for the directors and employees to report their concerns. Further, the amendment made by the Securities and Exchange Board of India (SEBI) which included Clause 49 also provides that a whistleblowing system should be existent in an organization.

Challenges facing whistleblowing

It must be conceded that existence of a whistleblowing is stressed by the legislation because only such mechanism or systems can provide answers to the questions that the employees are seeking or reporting of the same. However, whistleblowing as such is neither encouraged nor it is taken up.

The fact that plays an essential role in whistleblowing is the individual coming up to report instances of potential fraud or abuse. But the fear of social stigma and losing their job makes it difficult for even those who are aware of such frauds to come up. Further, such whistleblowers are shunned by management and as such, it becomes very difficult for them to make a choice between professional responsibility and organizational responsibility.

Conclusion

In a society where confronting illegal acts and frauds makes one the subject of social stigma, not many people remain motivated to bring such wrongdoers into the limelight. However, policies can ensure that there are more instances of reporting of such acts. A company should have an ethical compliance program to encourage such acts.

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