The Whistle Blowers Protection Act 2014 (Whistle Blower Protection Act). This Act provides a legal mechanism for the reporting of illegal, unethical and illegitimate practices by members of an organisation. However, the scope of the Act is limited to public servants and public sector undertakings. Further, please note that as of the time of writing, despite the Whistle Blower Protection Act being passed by both houses of the Indian parliament, it has not yet been enacted by the central government and the Companies Act 2013 (Companies Act), which mandates the incorporation of a whistleblower policy, but primarily only by listed companies. Till date, there are no specific laws dealing with the protection of whistleblowers applicable to private, unlisted companies or unincorporated entities and their employees. Employers are free to formulate and adopt a whistleblower policy to encourage employees (or any other person for that matter) to report matters without the risk of subsequent victimisation, discrimination or disadvantage, economic or otherwise. Accordingly, for private establishments, the whistleblowing regime remains largely discretionary and policy-driven.
India has not yet adopted laws to improve the protection of whistleblowers across sectors or levels in the economy and establish adequate secure channels or mechanisms to enable whistleblowers to report without fear of disclosure, retaliation or victimisation.
Current Situation In India
Agencies like the Securities and Exchange Board of India (SEBI), the Directorate of Enforcement (ED), and the Central Bureau of Investigation (CBI) have ramped up efforts against corporate and individual wrongdoers. Since joining the Financial Action Task Force in 2006, India has amended key laws, including the Prevention of Money Laundering Act (PMLA) 2002, the Prevention of Corruption Act 1988 (amended in 2018), and the Companies Act 2013, to improve transparency and strengthen corporate governance. Statistically, reports of financial crimes have surged dramatically, from 2.62 lakh in 2020-21 to 6.64 lakh in 2022, reflecting a 150% increase. Notably, the ED has issued provisional attachment orders for properties worth over ₹1 lakh crore under the PMLA.
Regarding whistleblower rewards, only SEBI’s Prohibition of Insider Trading Regulations 2015 provides monetary incentives, but this is limited to cases of insider trading and market manipulation. The effectiveness of this system is clear, with SEBI increasing the reward to ₹10 crore for whistleblowers. However, the lack of a broader, more comprehensive reward system has drawn criticism. Countries like the US and South Korea have demonstrated the positive impact of financial incentives in encouraging disclosures. The only prominent reward given in India is the 2015 Ramon Magsaysay Award to Sanjiv Chaturvedi, an Indian Forest Service officer, for exposing corruption in a public office. In fact, some Indian whistleblowers have even used US laws to report illegal activities to US regulators, earning rewards in return.
Inspired by the US Department of Justice’s (DoJ) pilot whistleblower program, India could consider adopting a similar model that extends rewards beyond insider trading cases. India’s need for a robust whistleblower reward system is highlighted by the critical role whistleblowers play in revealing misconduct across both public and private sectors. Despite the rise in financial crimes, whistleblowers in India face significant challenges, including retaliation, hostility from those exposed, institutional barriers, and a lack of confidentiality in reporting mechanisms. For example, the Competition Commission of India requires whistleblowers to disclose personal details, compromising anonymity.
A reward system could address these issues by incentivizing individuals to provide credible information while safeguarding their identity. Financial rewards would not only encourage employees to report wrongdoing but also lend credibility to whistleblower efforts.
To ensure the program’s effectiveness and integrity, a set of checks and balances must be established. First, whistleblowers should be required to report through internal compliance channels before escalating the matter to external authorities, giving organizations a chance to address concerns internally. Second, stringent penalties for false reporting must be introduced to deter malicious or frivolous claims. These could include hefty fines or legal action against those found guilty of intentionally misleading authorities. Third, to maintain the program’s credibility, private companies must be mandated to adopt standardized whistleblower policies and establish independent vigilance committees free from internal influence.
As India continues to emerge as a global economic leader, strengthening whistleblower mechanisms is crucial. Implementing a reward system based on global best practices could be a significant step toward combating white-collar crime and promoting ethical corporate governance.
The concept of Protected Disclosure is fundamental in the context of whistleblowing legislation, particularly within the Indian legal framework, as defined by the Whistle Blowers Protection Act, 2014. This law outlines the legal safeguards provided to whistleblowers who report wrongdoing, including corruption, misuse of power, and other forms of misconduct in public service. The primary goal of the Act is to create a secure channel for reporting such issues, minimizing the risk of retaliation against whistleblowers and promoting a culture of transparency and accountability. The Act also specifies the procedures for making such disclosures.
The Whistle Blowers Protection Act, 2014, outlines specific procedures for submitting complaints to safeguard both the whistleblower and the efficient handling of the complaint. These procedures include, but are not limited to:
- Submission to the Designated Authority: A key requirement is that the whistleblower must submit their complaint to an authority specifically designated under the Act. This authority is responsible for receiving and processing complaints related to corruption and other misconduct by public officials.
- Provision of Supporting Evidence: The Act encourages whistleblowers to provide credible evidence to support their allegations. This can include various forms of evidence such as documents, emails, or audiovisual recordings, ensuring the reliability and potential for investigation of the claims
- Confidentiality Assurance: A key aspect of the Act is its commitment to maintaining the confidentiality of the whistleblower’s identity. This measure is crucial in reducing the fear of retaliation, thus encouraging individuals to come forward and report misconduct.
- Prohibition of Anonymous Complaints: To prevent the submission of frivolous or malicious complaints, the Act requires the whistleblower’s identity to be disclosed. This helps to ensure the credibility of the complaint and enables a thorough investigation.
- Key Provisions of the Whistle Blowers Protection Act, 2014:
The Whistle Blowers Protection Act, 2014, marks a significant legislative achievement in safeguarding individuals who expose illegal activities in the public sector. Originally proposed in 2011 and enacted in 2014 in response to a rising number of whistleblower cases - Whistleblower Identity Protection: The Act emphasizes the critical importance of protecting the whistleblower’s identity, ensuring they are shielded from retaliation.
- Safeguards Against Victimization: The legislation strengthens the whistleblower’s position by implementing safeguards to protect against harassment, threats, and other forms of victimization.
- Prohibition Against Frivolous Complaints: By requiring whistleblowers to disclose their identity and disallowing anonymous complaints, the Act aims to prevent frivolous or malicious allegations, while ensuring that legitimate disclosures are given proper attention and investigation.
- Penal Provisions for Retaliation: The Act includes penal provisions for those found guilty of retaliating against whistleblowers, reinforcing the protective measures in place for their safety.
In conclusion, the Whistle Blowers Protection Act, 2014, stands as a landmark piece of legislation in India, vital for promoting transparency and accountability. It plays a crucial role in safeguarding those who expose corruption and abuse of power in public service, fostering a culture of integrity.