CORRUPTION LAWS

INTRODUCTION 

When the Indian Penal Code was enacted it also defined and provided punishment for the offence of bribery and corruption amongst public servants. But later on, i.e. during the World War II it was realized that the existing law in Indian Penal Code was not adequate to meet the exigencies of the time and imperative need was felt to introduce a special legislation with a view to eradicate the evil of bribery and corruption and thereby the Prevention of Corruption Act, 1947 was enacted which was later on amended twice; once by the Criminal Law Amendment Act, 1952 and later in 1964 by the Anti-Corruption Laws (Amendment) Act, 1964 based on the recommendations of the Santhanam Committee. To make the anti-corruption laws more effective by widening their coverage and by strengthening the provisions the Prevention of Corruption Bill was introduced in the Parliament

Corruption

Corruption is dishonest behaviour by those in positions of power, such as managers or government officials. Corruption can include giving or accepting bribes or inappropriate gifts, double dealing, under-the-table transactions, manipulating elections, diverting funds, laundering money and defrauding investors.

The following actions qualify as key corruption and bribery offences under Indian law:

• a public servant taking illegal gratification as a reward or motive for undertaking (or forbearing to undertake) an official act, or for showing (or forbearing to show) any favour or disfavour to any person in the exercise of his or her official functions, or for rendering any service or disservice to any person;
• an individual taking illegal gratification to influence a public servant for the abovementioned actions;
• an individual taking illegal gratification to exercise personal influence over a public servant, to induce such public servant for the abovementioned actions;
• a public servant obtaining a valuable thing without consideration from a person in connection with business dealings with such person;
• a public servant dishonestly or fraudulently misappropriating or converting for personal use any property entrusted to him or her or under his or her control, or any public servant allowing another person to do as such;
• a public servant obtaining a valuable thing or monetary advantage for himself or herself or any other person by corruption, abuse of his or her position of authority or any other illegal means;
• a public servant holding property or resources disproportionate to his or her known sources of income;
• an individual giving or promising to give another person an undue advantage with the intention of inducing a public servant to perform a public duty improperly or to induce a public servant to perform a public duty improperly; and
• any person associated with a commercial organisation that gives or promises to give an undue advantage to a public servant.

Crime	Example
Asking for or getting money or gifts, in addition to your salary, in return for doing your official duty.	Ravi gifts Mukesh, a public servant, a house in Andheri in return for Mukesh giving fast approval to Ravi's building construction project.
Asking for or getting money or gifts, in addition to your salary, in return for not doing your official duty.	Mukesh is a tax assessment officer. Ravi gives Mukesh's sons admission for free in the school run by Ravi's family. This is so that Mukesh does not fine Ravi for failing to pay his income tax.
When doing your official duty, being partial to the person who paid you.	Mukesh, a municipality officer is paid Rs. 10,000 by Ravi so that Mukesh will award the project for building a road in the locality to Ravi's company
Doing some service for the person who paid you, during your official duty.	Mukesh is a teacher at the Howrah Railway School. Ravi pays him Rs. 1000 so that he gets a job in the Sealdah Railway Station.

Indian Penal Code, 1860: 

• The IPC defines “public servant” as a government employee, officers in the military, navy or air force; police, judges, officers of Court of Justice, and any local authority established by a central or state Act.

 • Section 169 pertains to a public servant unlawfully buying or bidding for property. The public servant shall be punished with imprisonment of upto two years or with fine or both. If the property is purchased, it shall be confiscated.

 • Section 409 pertains to criminal breach of trust by a public servant. The public servant shall be punished with life imprisonment or with imprisonment of upto 10 years and a fine. 

The Prevention of Corruption Act, 1988 

• In addition to the categories included in the IPC, the definition of “public servant” includes office bearers of cooperative societies receiving financial aid from the government, employees of universities, Public Service Commission and banks. 

• If a public servant takes gratification other than his legal remuneration in respect of an official act or to influence public servants is liable to minimum punishment of six months and maximum punishment of five years and fine. The Act also penalizes a public servant for taking gratification to influence the public by illegal means and for exercising his personal influence with a public servant.

 • If a public servant accepts a valuable thing without paying for it or paying inadequately from a person with whom he is involved in a business transaction in his official capacity, he shall be penalized with minimum punishment of six months and maximum punishment of five years and fine.

 • It is necessary to obtain prior sanction from the central or state government in order to prosecute a public servant. 

Criminal misconduct is defined under Section 13 of Prevention of Corruption Act 1988, and includes a person taking gratification ( who habitually accepts/asks to procure valuable articles free or at low cost in return for official favours, who misappropriates/allows others to misappropriate public assets and resources and who has money and/or property disproportionate to known sources of income. The punishment shall be imprisonment for a period not less than 1 year and up to 7 years and may include a fine.

 Offences and penalties under this act

The following are the offences under the PCA [Prevention of Corruption Act] along with their punishments:- Taking gratification other than legal remuneration in respect of an official act, and if the public servant is found guilty shall be punishable with imprisonment which shall be not less than 6 months but which may extend to 5 years and shall also be liable to fine.

• Taking gratification in order to influence public servant, by corrupt or illegal means, shall be punishable with imprisonment for a term which shall be not less than three year but which may extend to seven years and shall also be liable to fine.
• Taking gratification, for exercise of personal influence with public servant shall be punishable with imprisonment for a term which shall be not less than six months but which may extend to five years and shall also be liable to fine.
• Abetment by public servant of offences defined in Section 8 or 9, shall be punishable with imprisonment for a term which shall be not les than six months but which may extend to five years and shall also be liable to fine.
• Public servant obtaining valuable thing without consideration from person concerned in proceeding or business transacted by such public servant, shall be punishable with imprisonment for a term which shall be not less than six months but which may extend to five years and shall also be liable to fine.
• Punishment for abetment of offences defined in Section 7 or 11 shall be punishable with imprisonment for a term which shall be not less than six months but which may extend to five years and shall also be liable to fine.
• Any public servant, who commits criminal misconduct shall be punishable with imprisonment for a term which shall be not less than one year but which may extend to 7 years and shall also be liable to fine.
• Habitual committing of offence under Section 8, 9 and 12 shall be punishable with imprisonment for a term which shall be not less than two years but which may extend to 7 years and shall also be liable to fine.

Previous Sanction:-

The previous sanction of the GoI is required for Central Government employees, of the State Government concerned for state government employees, and in the case of any other public servant the sanction of the authority empowered to remove him from office is required to prosecute a public servant for offences committed under sections 7, 10, 11, 13 and 15 of the Act. This provides safeguards against criminal prosecution on the basis of false or malicious complaints against public servants.

Investigation

Investigation shall be done by a police officer not below the rank of :

• In case of Delhi, of an Inspector of Police.
• In metropolitan areas, of an Assistant Commissioner of Police.
• Elsewhere, of a Deputy Superintendent of Police or an officer of equivalent rank shall investigate any offence punishable under this Act without the order of a Magistrate of first class, or Metropolitan Magistrate, or make any arrest therefore without a warrant.

Provided further that an offence referred to sec 13 (1) (e) shall not be investigated without the order of a police officer not below the rank of a Superintendent of Police. And the investigation which is made without the order of a SP (Superintendent of Police) of above rank will be dismissed.

If a police officer not below the rank of an Inspector of Police is authorized by the State Government in this behalf by general or special order, he may investigate such offence without the order of a Metropolitan Magistrate or Magistrate of First class or make arrest therefore without a warrant.

Recent Amendment

In July 2018 the Prevention of Corruption (Amendment) Act 2018 was passed by Parliament, which amended and brought about significant changes to the extant Prevention of Corruption Act 1988. Among other changes, the Amendment Act has made bribe giving a specific offence and has introduced the concept of corporate criminal liability for acts of bribery. Corporates may claim a defence if it can be proven that adequate procedures were in place to prevent persons associated with it from undertaking anything which may be an offence under the Prevention of Corruption Act. Such procedures must comply with guidelines, which are yet to be prescribed by the government.

The Amendment Act has introduced a new provision wherein police officers now require prior approval from the relevant government authority to investigate an offence alleged to have been committed by a public servant under the Prevention of Corruption Act. This provision has been challenged in the Supreme Court of India and awaits judgment.

In the wake of numerous scams being unearthed in India over the past decade, enforcement agencies have also been proactive in terms of monitoring compliance under relevant anti-corruption and bribery laws and taking action against violations.

In 2016 the government announced demonetisation of Rs500 and Rs1000 bank notes in its attempt to combat unethical practices such as hoarding black money outside the formal economic system, tax evasion and using illicit or counterfeit cash to fund illegal activities. Consequently, on basis of information received from banks, the tax authorities and other anti-corruption bodies have identified suspicious persons and entities and initiated action against them.

In 2017 the Ministry of Corporate Affairs voluntarily struck off 224,000 shell companies and imposed restrictions on the usage of their bank accounts and transference of company property. Action was taken to disqualify directors who failed to comply with specific requirements under the Companies Act 2013. The ministry also announced that if any director or other authorised signatory of a struck-off company tried to siphon off money from the company’s bank account, he or she will be punished with a prison term of between six months and 10 years, and where the fraud involved public interest, the minimum prison term will be at least three years and may also involve a fine of up to three times the amount involved. The prime minister's office has created a special task force to oversee the drive against such defaulting companies with the help of various enforcement agencies. Further, in 2018 an ordinance to the Companies Act 2013 was promulgated reintroducing the requirement to declare the commencement of business for newly incorporated companies, which may restrict the opening of shell companies.

The Central Vigilance Commission (CVC) has also taken certain proactive actions recently, such as advising all central government departments on quicker disposal of pending corruption cases. The CVC has an online complaint management system where individuals can register complaints in this regard.

The Benami Transactions (Prohibition) Act, 1988

 • The Act prohibits any benami transaction (purchase of property in false name of another person who does not pay for the property) except when a person purchases property in his wife’s or unmarried daughter’s name.

 • Any person who enters into a benami transaction shall be punishable with imprisonment of upto three years and/or a fine. 

• All properties that are held to be benami can be acquired by a prescribed authority and no money shall be paid for such acquisition. The Prevention of Money Laundering Act, 2002 

• The Act states that an offence of money laundering has been committed if a person is a party to any process connected with the proceeds of crime and projects such proceeds as untainted property. “Proceeds of crime” means any property obtained by a person as a result of criminal activity related to certain offences listed in the schedule to the Act. A person can be charged with the offence of money laundering only if he has been charged with committing a scheduled offence. 

• The penalty for committing the offence of money laundering is rigorous imprisonment for three to seven years and a fine of upto Rs 5 lakh. If a person is convicted of an offence under the Narcotics Drugs and Psychotropic Substances Act, 1985 the term of imprisonment can extend upto 10 years. 

• The Adjudicating Authority, appointed by the central government, shall decide whether any of the property attached or seized is involved in money laundering. An Appellate Tribunal shall hear appeals against the orders of the Adjudicating Authority and any other authority under the Act. 

• Every banking company, financial institution and intermediary shall maintain a record of all transactions of a specified nature and value, and verify and maintain records of all its customers, and furnish such information to the specified authorities. Process followed to investigate and prosecute corrupt public servant

 Companies Act 2013

• The Companies Act 2013 contains certain provisions to prevent corruption and fraud in the corporate sector, including:
• the duty of statutory auditors to disclose any instances of fraud (which covers instances of corruption and bribery) committed by company employees;
• increased penalties for fraud offences (up to 10 years of imprisonment and a fine of up to three times the amount involved in the relevant fraudulent transaction);
• vesting increased powers (eg, power to arrest) with the SFIO;
• provisions for the establishment of vigilance mechanisms and audit committees; and
• increased responsibilities of independent directors.  

• The Whistleblowers Protection Act 2011 is primarily intended to protect whistleblowers with respect to disclosure of acts of corruption, wilful misuse of power, wilful misuse of discretion or the commission of attempted commission of a criminal offence by a public servant. While the Whistleblowers Protection Act has yet to come into force, the government has clarified that it intends to amend the act further before bringing it into effect.

• The Lokpal and Lokayuktas Act 2013 establishes the offices of the nodal ombudsman for the central and state governments (Lokpal and Lokayuktas, respectively) and accords relevant powers to these bodies to unearth and investigate cases of corruption in the public sector in India (eg, the authority to provisionally attach property pending proceeding).
• The Foreign Contribution (Regulation) Act 2010 regulates the acceptance and use of foreign contributions and hospitality by corporate entities and individuals. Receipt of foreign contributions requires prior registration with or approval of the Ministry of Home Affairs. In the absence of such registration or approval, receipt of foreign contributions may be considered illegal and punishable.

Authorities

The primary regulatory authorities responsible for monitoring and investigating corruption and bribery in India are as follows:

• The Central Vigilance Commission (CVC) is the nodal statutory body that supervises investigation of corruption (under the Prevention of Corruption Act 1988 and the Penal Code 1860) in central government departments, government companies and local government bodies, and among public servants. The CVC can refer cases to either the central vigilance officer of the relevant government department or the Central Bureau of Investigation (CBI) for investigation.
• The CBI and the Anti-corruption Bureau (ACB) are also investigative authorities for corruption under the Prevention of Corruption Act 1988 and the Penal Code 1860. While the CBI’s jurisdiction covers the central government and union territories, the ACB investigates cases within the states.
• The Serious Fraud Investigation Office (SFIO) is set up under the Ministry of Corporate Affairs and investigates the affairs of companies based on an order from the central government:
  • on receipt of an application from the competent regulatory authority or government department;
  • at the request of the concerned company; or
  • in cases of public interest on a suo moto basis (ie, of its own accord).

If a matter is handled by the SFIO, no other investigatory agency is entitled to proceed with a parallel investigation. The Ministry of Corporate Affairs has recently conferred the power of arrest (of any person, including those associated with foreign companies) on the SFIO on the grounds of commission of the offence of corporate fraud under the Companies Act 2013.

• The Lokpal, which comprises a chairperson and up to eight members, is a nodal ombudsman authority which investigates and prosecutes cases of corruption involving:
  • the prime minister;
  • the council of ministers;
  • members of Parliament;
  • public servants and other central government employees, other than members of armed forces;
  • employees of companies funded or controlled by the central government; and
  • private persons who have abetted in the commission of relevant offences.

The Lokpal also has the power of superintendence over the CBI, if it refers any case to the CBI. Members of the first Lokpal office have yet to be appointed. Lokayuktas are state-level counterparts of the Lokpal, and certain Indian states have already appointed officers for this position.

• The Enforcement Directorate is established under the Ministry of Finance to investigate and prosecute cases relating to the Prevention of Money Laundering Act 2002 and the Foreign Exchange Management Act 1999. The Enforcement Directorate also cooperates with foreign countries in matters relating to money laundering and restitution of assets in accordance with their respective local laws.
• The Income Tax department has been appointed as the authority in cases pertaining to the Benami Transactions (Prohibition) Act, by virtue of which it can attach and confiscate benami properties.