Raise a voice and Blow the whistleblower act whistle!

The official definition of whistleblowing is “making a disclosure that is in the public interest.”A whistleblower act discloses information about misconduct in the workplace that he/she feels violates the law or endangers the welfare of others and speaks out with an intention to expose corruption or dangers to the public or environment. It will usually occur when an employee discloses to a public body, usually the police or a regulatory commission that their employer is partaking in unlawful practices.

Did you know? The word whistle blower originates from ‘whistle’ as used by a referee to indicate an illegal or foul play. Civil activist Ralph Nader coined it in the early 1970s to avoid any negative connotations.

When it comes to whistleblowing in India, we would like to throw emphasis on when it really started and why it has become crucial.

India has witnessed the case of two whistleblower act who were graduates from IIT Kanpur and IIM in the year 2003 and 2005 respectively that led to the cost of their lives as a reaction to their whistleblowing action. Why did they blow the whistle? Reasons stated were mishandling of funds between the engineers and adulteration of fuel and the role of the mafia behind it. 

WhistleBlowers Protection Act, 2011 is an Act of the Parliament of India which provides a mechanism to investigate alleged corruption and misuse of power by public servants and also protect anyone who exposes alleged wrongdoing in government bodies, projects and offices. The wrongdoing might take the form of fraud, corruption or mismanagement. The Act was approved by the Cabinet of India as part of a drive to eliminate corruption in the country’s bureaucracy and passed by the Lok Sabha on 27 December 2011. The Bill became an Act when it was passed by the Rajya Sabha on 21 February 2014 and received the President’s assent on 9 May 2014.

Let’s put emphasis on the Legal Framework of Whistleblowing in India

The Whistle-Blowers Protection Act, 2014 (“Whistle Blowers Act”), provides a mechanism to examine corruption and abuse of authority by the public servants, also protecting person who exposes misconducts in government bodies, initiatives, and offices.

It was passed with the purpose of creating a system to:

1) Receive concerns against allegation of corruption or deliberate misuse of power/discretion against any public official;

2) Inquire or cause an inquiry into such disclosure; and

3) Provide adequate safeguards against victimization of the individual making such complaint.

Under the Whistle-Blowers Act, a person can make any divulgence of information for the sake of public interest. The Whistle-blowers Protection (Modification) Bill, 2015 (“Amendment Bill”) suggested an amendment to the previously mentioned Act. The Amendment Bill aims in providing safety against in such disclosures that could jeopardize the country‘s sovereignty and integrity, as well as the state‘s security. Nevertheless, the Rajya Sabha rejected the Amendment Bill. Section 211 of the Act, empowers the Serious Fraud Investigation Office (SFIO) to arrest anyone suspected of fraud in the corporation. If the auditors have grounds to believe a fraud has been committed or has been perpetrated against the company, they must report it to the central government.

Under Rule 12.5 of the Companies Act, 2013 and Section 177(9) it is mandatory for the draft listed companies, companies receiving public deposits, and companies borrowing more than Rs. 50 crore from banks or public financial institutions to implement a whistle-blowing policy and Institute a vigil mechanism for directors and employees to report legitimate concerns. A vigil committee must be formed to guarantee that the company‘s surveillance system and whistle-blower policy are effectively enforced.

In 2003, the Securities and Exchange Board of India (SEBI) rationalised the Corporate Governance Principles wherein clause 49 of the Listing Agreement requires the formulation of a Whistle-blower policy in Indian companies. Employees may avail themselves of a reporting system to report actual or suspected fraud or violations of the company‘s code of conduct or ethical policies. Under Regulation 7D, the whistle-blower is entitled to a monetary reward of up to 10% of the proceeds collected, capped at Rs1 crore.This amendment asseverates a consequential innovation in Indian corporate regulation, drawing upon the Dodd-Frank Act of 2010 from the United States.

The Whistle-blowers Protection Act of 2014, enacted to safeguard whistle-blowers, saw the envisioned organizational structure under the amendment put into place by March 2020, with the modification taking effect 120 days after notification. The law protects their identities and establishes strict guidelines to prevent them from being victimized. For example, until the claims are investigated, an organization cannot take legal action against a whistle-blower.The Companies Act, which applies to publicly traded companies, has formalized the identical portions which are part of SEBI‘s governance norms.

What are the types of Whistleblowing that you need to know?

1. Internal: When the whistleblower act reports the wrong doings to the officials at higher positions in the organization. The usual subjects of internal whistleblowing are disloyalty , improper conduct, indiscipline, insubordination, disobedience etc. 

2. External: External whistleblowing occurs when individuals report wrongdoing to external parties such as the media, public interest groups, or enforcement agencies.

3. Alumni: Former employees of the organization engage in alumni whistleblowing when they blow the whistle.

4. Open: Revealing the identity of the whistleblower is known as Open Whistle Blowing.

5. Personal: Disclosing such wrongdoings, where organizational misconduct aims to harm one person only, is referred to as personal whistleblowing.

6. Impersonal: When others are harmed by wrongdoing, it is referred to as impersonal whistleblowing.

7. Government: When officials of the Government adopt wrongdoings or unethical practices, someone makes a disclosure.

8. Corporate: When a disclosure is made about the wrongdoings in a business corporation, it is called corporate whistle blowing. 

When incorporating the whistleblowing policy in place, one must consider the following factors?

When a company adopts a whistleblowing framework, it should ensure that this framework includes robust safeguards to maintain the anonymity of the complainant. Additionally, the company should consider implementing an incentive mechanism. Under this mechanism, if a complainant raises concerns about any wrongdoing or provides evidence substantiating allegations of malpractice by the company, they should be eligible for a reward.

Some other recommendations for enhancing the effectiveness of whistleblowing practices are as follows:

  • 1. Expand the Scope: Broaden the scope of the whistleblowing framework to include private sector companies. Currently, the Act only covers whistleblowers exposing corruption, fraud, and irregularities in the government sector.
  • 2. Regulator Responsibility: Regulatory bodies and relevant authorities should take proactive measures to implement an efficient whistleblower policy. This policy should safeguard the identities of whistleblower act to prevent them from facing victimization or harassment.
  • 3. Legislative Integration: To strengthen whistleblower protection, legislative efforts should incorporate whistleblowing provisions directly into specific Acts or regulations.
  • 4. Employee Awareness: Top-level management should ensure that they inform every employee about the whistleblowing policy. Conducting workshops and awareness programs can be instrumental in achieving this goal.
  • 5. Accountability for Frivolous Complaints: Companies should hold complainants accountable in cases where they file frivolous or baseless complaints.

By implementing these recommendations, companies can establish a more comprehensive and effective whistleblowing framework that encourages employees to report wrongdoing while ensuring their protection and maintaining the integrity of the process.

Whistleblowing in Indian corporates is a critical component of maintaining ethical standards and accountability. As awareness grows and legal protections strengthen, whistleblowers will play a pivotal role in ensuring that businesses in India operate with integrity and adhere to the highest ethical standards, ultimately benefitting society as a whole. It is a journey towards a more accountable and ethical corporate India, and whistleblowers are the unsung heroes leading the way.

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