By Anand S. Dayal

The centerpiece domestic legislation for curbing corruption in India is the Prevention of Corruption Act, 1988 (“PC Act”). It has been hailed as being among the most comprehensive anti-corruption statutes in the world, and is in many respects significantly broader in scope than the Foreign Corrupt Practices Act of the United States. However, as India’s lead anti-corruption enforcement agency, the Central Vigilance Commission, noted in its proposed National Anti Corruption Strategy: “gaps remain between the statutes, policies and their actual implementation, which has led to limited success…”

This article describes key features of the PC Act and allied anti-corruption legislation, and explores gaps and inadequacies in the legal framework that hinder effective anti-corruption enforcement in India. We begin with an overview of the legal regime addressing corruption in India.

ANTI-CORRUPTION STATUTES AND ENFORCEMENT AGENCIES

The anti-corruption offenses and related enforcement regime in India is comprised of the following enactments:

• Prevention of Corruption Act, 1988 applicable throughout India;

• Lokayukta Acts passed by various states and applicable within such states;

• Central Vigilance Commission Act, 2003 establishing the Central Vigilance Commission (“CVC”) to inquire into offenses alleged under the PC Act;

• Delhi Special Police Establishment Act, 1946 (“DSPE Act”) governing the Investigation and Anti-Corruption Division of the Central Bureau of Investigation (“CBI/DSPE”).

In addition, the “Whistleblower Resolution” of the Government of India, which protects against retaliation any person who brings to the attention of the CVC allegations of corruption or misuse of office and the “Integrity Pacts,” which are required in connection with public procurement, have an anti-corruption focus. The Integrity Pact is an agreement between the procuring government agency and each bidder that neither side will pay, offer, demand or accept bribes, or collude with competitors to obtain the contract, that bidders will disclose all commissions paid in connection with the contract, and that sanctions will apply if violations occur. The CVC has urged all government organizations and public sector undertakings to adopt the Integrity Pact. The vast majority of central government undertakings have done so.

Prevention of Corruption Act, 1988

The PC Act prohibits the (a) the acceptance of a bribe or any other gratification by a “public servant” and (b) possession by a public servant of assets “disproportion to his known sources of income.” The term “public servant” is extraordinately broad in scope and brings within its sweep any person who holds an office by virtue of which such person is required to perform any public duty. It is significantly broader in scope that the concept of a “foreign official” in the US Foreign Corrupt Practices Act; “public duty” is expansively defined and there is no requirement that the person performing the public duty be acting on behalf of the government.

The anti-bribery provisions are contained in Section 7 and 11 of the PC Act. They prohibit a public servant from accepting gratification other than legal remuneration in respect of an official act (Section 7); and accepting any valuable thing without consideration from persons concerned in proceedings or business transacted by such public servant (Section 11). There is no de minimis or other exception (such as for facilitating payments) in the PC Act. Regardless of amount or circumstances, all bribery is prohibited.

In addition to the anti-bribery provisions, Section 13 of the PC Act defines the offence of “criminal misconduct”, which includes, inter alia, the abuse of office by a public servant and the possession by a public servant of assets disproportionate to his known sources of income. Prosecutions of criminal misconduct under Section 13 of the PC Act are commonly referred to as “disproportionate assets” cases.

The PC Act does not expressly punish an offer or payment of a bribe, except to a limited extent. Section 12 of the PC Act deals with abetment, and could be used to punish the bribe giver. In addition, Sections 8 and 9 of the PC Act prohibit the acceptance of any gratification by corrupt or illegal means to influence a public servant.

The PC Act, which has an entirely domestic focus, does not prohibit the bribery of foreign public officials, although the PC Act does extend to and applies “to all citizens of India outside India.” Its extra-territoriality is therefore limited to non-resident citizens of India who engage in conduct prohibited under the PC Act.

With respect to the trial of accused persons, Section 3 of the PC Act authorizes the government to appoint special judges as may be required to try offenses punishable under the PC Act. It is contemplated that special judges would specialize in and be dedicated to trying anti-corruption cases, with the object of disposing of such cases within one year.

Lokayukta Acts and Rules

The Lokayukta Acts are anti-corruption laws enacted by individual states. These laws supplement the PC Act, and typically provide for the appointment and functions of a lokayukta (ombudsman) for the investigation of administrative actions taken by or on behalf of the state governments in certain cases. The lokayukta is appointed by the governor of the state to investigate allegations that a public servant:

(i) has abused his position to obtain any gain or favour to himself or to any other person, or to cause undue harm or hardship to any other person;
(ii) was actuated in the discharge of his functions by improper or corrupt motive and thereby caused loss to the state or any member or section of the public; or,
(iii) is guilty of corruption, or lack of integrity in his capacity as such public servant.

See section 2(b), Andhra Pradesh Lokayukta And Upa-Lokayukta Act, 1983.

Central Vigilance Commission

The Central Vigilance Commission was established for the purpose of inquiring into and investigating offenses alleged to have been committed under the PC Act by certain categories of public servants of the central government, corporations established by or under any central act, government companies, and societies and local authorities owned or controlled by the central government.

The CVC was established in 1964 by an administrative order of the government pursuant to the recommendation of the Santhanam Committee on the prevention of corruption. Being an administrative agency of the government, the CVC as initially constituted was largely ineffective in curbing corruption, particularly at higher levels of government. The CVC was upgraded and accorded statutory status in accordance with directions given by the Supreme Court of India in the landmark case of Vineet Narain v. Union of India, S. Ct. (1997), initially by an ordinance (executive order) in 1998, and then by enactment of the Central Vigilance Commission Act, 2003.

Central Bureau of Investigation

The Central Bureau of Investigation (“CBI”) is the lead criminal investigative and prosecutorial agency of the Government of India. It was established in 1963. The CBI is the successor organization to the Delhi Special Police Establishment (“DSPE”), but with an enlarged charter of functions. Bribery and similar offenses, previously contained in the Indian Penal Code, were earlier investigated and prosecuted by the DSPE. Later, the DSPE was made one of the six divisions of the CBI, namely the Investigation and Anti-Corruption Division (“CBI/DSPE”).

The CVC has a quasi gate-keeper and supervisory role vis-à-vis the investigation and prosecution by the CBI/DSPE of offenses alleged under the PC Act. Superintendence of the CBI/DSPE vests with the CVC insofar as it relates to the investigation of offenses alleged to have been committed under the PC Act. The CVC can give directions to the CBI/DSPE in discharging this responsibility. See section 4 of the DSPE Act and section 8 of the CVC Act, in relation to investigations under the PC Act.

The CVC, however, has very limited influence over how the investigation and prosecution is conducted by the CBI, and whether charges are ultimately brought against the accused. Although the CVC may give directions to the CBI/DSPE for purposes of discharging the responsibilities provided in the DSPE Act, the CVC cannot require the CBI/DSPE to investigate or dispose of any case in any particular manner. The CVC may only review the progress of an investigation conducted by the CBI/DSPE into offenses alleged to have been committed under the PC Act, and it may review application pending with the competent authorities for sanction of prosecution under the said Act. See Central Bureau of Investigation, CBI (Crime) Manual, Chapter 2 (2005). The requirement for a sanction for prosecution is explained later in this article.

GAPS IN LEGAL FRAMEWORK AND ENFORCEMENT

The anti-corruption legal regime in India suffers from structural gaps and flaws that hinder its enforcement. Some of the more significant ones are described below.

Limited CVC Jurisdiction
Although CVC is the main anti-corruption agency, its jurisdiction is narrowly limited in two ways. First, the CVC has jurisdiction only over employees of the central government or entities established, owned, or controlled by it. It has no jurisdiction over employees of the state government or its entities or, perhaps more importantly, those holding elective office or contesting elections or political parties and their office bearers, in each case, whether at the central or state level. Second, even within its limited jurisdiction, the CVC can investigate only those persons holding a rank below a Joint Secretary in the Government of India. The DSPE Act, as amended, prohibits the CBI/DSPE from conducting any inquiry or investigation into any offense alleged under the PC Act except with the prior approval of the Central Government, where such allegation relates to a person of the rank of Joint Secretary and above. This effectively excludes from investigation all high level bureaucrats in government ministries and departments and the top management of public sector enterprises. In effect, the CVC has jurisdiction only of central government employees below the Joint Secretary level; it cannot act upon allegations of political corruption or corruption at the state level.

At the state level, there is no uniformity in the organization structures of the state anti-corruption agencies. Although some states, particularly Karnataka and Orissa (where the state agencies have been given absolute (independent) powers of inquiry) have fared better, most state agencies lack independence and are susceptible to executive and political influence. In general most state agencies are plagued with operational difficulties, such as shortage of staff, excessive turn-over, lack of proper incentives and inadequate budgets. See Central Vigilance Commission, National Anti-Corruption Strategy (Final draft circulated for comment September 2010) (“Draft NACS”).

Requirement of Prior Sanction

In order to prosecute a public servant for alleged offenses under the PC Act, it is necessary to obtain the prior sanction (approval) of the central government or state government in the case of central and state government employees (as applicable) and, in the case of any other person, the authority competent to remove the accused from office. Section 19(1), PC Act. In addition, as mentioned earlier, the CBI/DSPE can investigate a person at or above the rank of Joint Secretary only with the prior approval of the central government.

The prior sanction is meant as a safeguard against frivolous and vexatious prosecutions against innocent persons. “The object underlying Section 19 [of the PC Act] is to ensure that a public servant does not suffer harassment on false, frivolous, concocted or unsubstantiated allegations.” State of Himachal Pradesh v. Nishant Sareen, S. Ct. (2010). Similarly, in an earlier decision, the Supreme Court of India observed that “[s]anction is a weapon to ensure discouragement of frivolous and vexatious prosecution and is a safeguard for the innocent, but not a shield for the guilty.”

Furthermore, the courts have not intervened in reviewing whether a sanction should or should not have been granted, except if it is manifest that the sanctioning authority has not applied its mind. It is “well settled that the Superior Courts cannot direct the sanctioning authority either to grant sanction or not to do so,” but can only remand for reconsideration. State of Punjab vs. Bhatti, S.Ct. (2009).

The requirement of obtaining prior sanction has been a serious impediment to prosecute offences under the PC Act. The CVC has observed that past experience has shown that these provisions have often resulted in long delays due to: (a) inordinate delays in according sanction; (b) the provision being used to shield public servants though a wrong has been committed (usually to protect colleagues since the sanctioning authority is normally a senior officer of the accused officer); and (c) the sanction accorded being challenged at the trial stage and cases being discharged on the basis that the sanctioning authority had not applied its mind while according sanction.

No Whistleblower Statute

Throughout the world, anti-fraud and corruption efforts have relied heavily on insiders to provide information on wrong doing. To encourage such disclosure, the protection of insiders who come forward is essential. Accordingly, both the United States and England have enacted specific legislation providing comprehensive protection and other incentives to such persons.

In India, however, there is no statutory protection given to persons who come forward with information. Under the PC Act, whistleblowers and witnesses have only very limited protection. Sections 5 and 24 of the PC Act provide limited protection to whistleblowers, but only against prosecution under the PC Act. They do not protect the whistleblowers against other consequences, such as retaliation by the wrongdoer or their associates.

The need for special legislation protecting whistleblowers has been recognized by the Law Commission of India, which in its 179th Report in 2001 recommended the enactment of a bill titled “The Public Interest Disclosure (Protection of Informers) Bill.” However no such legislation has been passed, although a bill was introduced in the Lok Sabha (Lower House of Parliament) in September 2010. At the present time, limited protection is available by way of an administrative notification. See Central Vigilance Commission, Government of India Resolution on Public Interest Disclosure and Protection of Informer, Office Order No. 33/5/2004 dated 17 May 2004. However, on many occasions, this protection is rejected on technical grounds, as pointed out in the Draft NACS. Also, the CVC order cited above applies only to person within the CVC’s jurisdiction, and is therefore limited to central government actors and does not extend to state governments or politicians.

Asset Recovery Largely Ignored

Anti-corruption enforcement in India has focused primarily on the crime, the criminal, and the conviction, thus relegating asset recovery to a secondary or minor role. Asset recovery is the process used to recover property acquired through corrupt means by the state, victims of corruption, or duly designated third parties. It comprises a mechanism for criminal forfeiture as well as non-conviction based forfeiture and civil proceedings. Non-conviction based forfeiture, referred to as “civil forfeiture” or “in rem forfeiture” in some jurisdictions, is a legal proceeding against the asset itself and not against a person.

The PC Act provides for confiscation and forfeiture of the assets of a public servant or the proceeds of corruption only after the public servant is convicted of the relevant offense under the PC Act. It lacks provisions allowing for non-conviction based forfeiture and for civil forfeiture, the need for which was articulated by the Supreme Court in Delhi Development Authority vs. Skipper Construction Co., AIR 1996 SC 2005:

[A] law providing for forfeiture of properties acquired by holders of public office (including the office/posts in the public sector corporations) by indulging in corrupt and illegal acts and deals, is a crying necessity in the present state of our society. The law must extend not only to – as does SAFEMA [Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976] – properties acquired in the name of the holder of such office but also to properties held in the names of his spouse, children or other relatives and associates. Once it is proved that the holder of such office has indulged in corrupt acts, all such properties should be attached forthwith. The law should place the burden of proving that the attached properties were not acquired with the aid of monies/properties received in the course of corrupt deals upon the holder of that property as does SAFEMA whose validity has already been upheld by this Court in the aforesaid decision of the larger Constitution Bench. Such a law has become an absolute necessity, if the canker of corruption is not to prove the death-knell of this nation. According to several perceptive observers, indeed, it has already reached near-fatal dimensions. It is for the Parliament to act in this matter, if they really mean business.

Taking a cue from the Supreme Court’s impassioned plea, the Law Commission in its 166th Report (February 4, 1999) recommended passage of the Corrupt Public Servants (Forfeiture of Property) Bill. No meaningful steps have been taken towards passage of this legislation, primarily due to a lack of political leadership and the influence of vested interests.

Delays in Prosecution

The time taken for prosecution of corruption cases is a major bane of the Indian system, according to the CVC. The CVC has noted “that past experience has shown that in many cases, there are inordinate delays in prosecution of public servants against whom complaints have been made.” Delays in the preliminary stages of an investigation can lead to difficulties in gathering evidence, which ultimately hamper efforts to obtain a conviction. Also delays can increase the possibility of reprisals, as pointed out by the Law Commission in its 166th Report.

Besides delays in conducting the investigation, the trial and disposal of corruption cases often takes years, during which time the accused and key witnesses often have retired from service and some have died. Despite provision in the PC Act for special judges, there is a substantial backlog of cases due to the non-establishment of special courts in some states and special judges being entrusted with general cases other than of corruption.

No Supply Side Culpability

As previously noted, the PC Act does not expressly seek to punish the paying of a bribe, except to a limited extent. Traditionally, the payer of a bribe has been viewed in India as a victim, and therefore not culpable or criminally liable. This is of course plausible where a bribe is paid to meet an extortionist demand by a public official to provide something to which the payer is otherwise entitled. This is less plausible in the case of “grand corruption,” where the payer seeks to influence government decisions in its favor.

Given the lack of meaningful supplier-side culpability, purely domestic actors face little exposure to criminal liability if they pay bribes or use undue influence. By contrast, companies that operate on a global level and are subject to transnational anti-corruption enforcement regimes face severe sanctions for such conduct.

STRENGTHENING THE RULE OF LAW

Closing the gaps in the anti-corruption legal regime and stepping up enforcement are the obvious first steps in any roadmap for combating corruption. The functioning of anti-corruption laws is however dependent upon a larger more expansive framework of laws and the institutions that interpret and apply them. It presupposes adherence to the rule of law. Time and again, this supposition has not been borne out by experience, and even the best laid plans have been thwarted and subverted often from within the governing establishment itself. Ultimately, if meaningful progress is to be made for curbing completion, particularly in high places, it cannot be achieved without strengthening the rule of law.
Anand S. Dayal is a partner with Koura & Company, Advocates and Barrister, based in New Delhi, India. Anand is admitted to the bar both in India and the US (NY and DC). He is chairman of the Anti-Corruption Committee of the American Chamber of Commerce in India. Anand can be contacted at dayala@vsnl.com or adayal@kouraco.com.