Since the beginning of globalization, businesses have participated in more intricate cross-border transactions. Such requirements frequently entail communicating with, approaching, and receiving approval from authorities in other nations. Governments all across the world have passed anti-bribery and anti-corruption laws, many of which are extraterritorial in character, to promote openness and fair play. The UK Bribery Act of 2010 and the US Foreign Corrupt Practices Act of 1988 (FCPA) are two prominent examples. As a result, it is now crucial for firms to make sure they are abiding by the anti-corruption legislation of both their home country and the nations with whom they do business.

A nation’s economy can suffer greatly from widespread corruption. It can promote monopolies, stifle legitimate competition, and, most crucially, disincentivize ethical behavior in the marketplace. India placed 85th out of 180 nations in Transparency International’s 2021 Corruption Perception Index. The fact that the nation’s ranking has mostly stayed stable over time indicates that no significant steps have been taken to enhance India’s anti-corruption policies.

Beginning in 2022, the Devas Multimedia-Antrix partnership Several high-profile corporate scandals and frauds have developed in India. The Supreme Court issued a decision on the Devas Multimedia-Antrix merger in January 2022, labeling it a “fraud.” The AGB Shipyard scam, which may be considered India’s largest bank fraud, occurred in February. The National Stock Exchange’s co-location scandal, in which the Securities and Exchange Board of India issued an order implicating the former CEO of the National Stock Exchange, Chitra Ramakrishna, and others, was the subject of a renewed investigation by the Central Bureau of Investigation (CBI) in the same month. Additionally, Rana Kapoor, the founder of Yes Bank, has been the subject of continuing legal action for his alleged involvement in the Dewan Housing Finance Corporation Ltd scandal.

The Anti-Corruption Laws of India

The Prevention of Corruption Act (PC Act), 1988 is the main anti-corruption law in India (amended in 2018). It applies to businesses from both India and abroad that have affiliates or subsidiaries operating in India.

In 2018, the PC Act was amended to make both providing and taking bribes illegal. The offense of bribing a public official is covered by Section 8 of the PC Act, which carries a penalty of up to seven years in prison, a fine, or both. However, when a commercial organization commits the crime, Section 9 of the PC Act only allows for a fine. If, however, the crime was committed with the knowledge or complicity of any director, manager, secretary, or other officer of the commercial organization, then all of these individuals can be found guilty and may receive a sentence of three to seven years in prison in addition to a fine.

Only if the incident is reported to the appropriate authorities under the PC Act within seven days can accused parties defend themselves by demonstrating that they were forced to grant the excessive benefit.

Habitual offenders may be punished under Section 14 of the PC Act, and if a person previously convicted under the PC Act then commits another violation under the PC Act, they may be sentenced to five to ten years in jail as well as a fine.

Even though the PC Act covers all of India and even Indian individuals living abroad, it only has limited extraterritorial application because it does not apply to bribes paid to foreign officials. The Corporate Anti-Bribery Code, 2017, which tackles the bribery of foreign public officials and can be voluntarily adopted by businesses, was released in this context by the Institute of Company Secretaries of India.

Therefore, a body corporate, partnership firm, or any other association of persons that is incorporated or formed outside of India and conducts business in India is included in the PC Act’s definition of a commercial organization. Due to the aforementioned circumstances, Section 9 of the PC Act, read in conjunction with Section 10, may result in the imposition of liability on foreign directors, managers, secretaries, and other executives of a commercial organization.

For instance, in the Louis Berger International Inc. case, which involved bribes paid to Indian public officials to secure water projects in Goa and Guwahati, the corporation and the US Department of Justice reached a deferred prosecution deal in 2015. In India, the Guwahati High Court received a Public Interest Litigation (PIL) requesting an investigation under the PC Act (Bhaben Handique v. State of Assam, 2017 SCC Online Gau 713) and ordered the CBI to look into the situation. The police in the State of Goa also filed a chargesheet against and detained numerous people, including a vice president, while the CBI has been looking into the subject since 2017. This case serves as proof that despite the PC Act’s limited extraterritorial applicability, directors and officials of foreign businesses must be aware of the possibility of facing legal action.

Key takeaways

It can be difficult to navigate the depth and features of the numerous domestic and international anti-corruption laws, and any misstep can have serious reputational and financial repercussions. Companies should take the following actions to reduce these risks:

• A comprehensive anti-bribery policy should be adopted by businesses, and it should, among other things, contain provisions to: Ensure full compliance with the PC Act and other applicable anti-bribery laws;
• Address concerns submitted anonymously in good faith, petty cash disbursements, contributions even to legitimate charity, effective internal accounting management, and
• Dealings with independent contractors;
• To report any non-compliance, businesses should set up a hotline.
• Companies should implement yearly anti-bribery training initiatives for their workforce, including employees, contractors, and other staff.
• Companies should conduct routine audits and senior management interviews.