SAFEGUARDS FOR WHISTLEBLOWERS

SAFEGUARDS FOR WHISTLEBLOWERS

CONTEXT

Recently, experts have highlighted the need to strengthen safeguards for corporate whistleblowers and extend the requirement of a vigil mechanism to large private companies in India.

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Background

- The Delhi High Court (HC) is currently hearing a writ petition, which has challenged the constitutional validity of the existing provisions of the Companies Act 2013.

Current provisions only require listed companies to have a vigil mechanism to address whistleblower complaints.

These companies are those which accept public deposits and companies that have loans from banks or public financial institutions of over Rs. 50 crore.

Concerns Highlighted

Absence of any specific guidelines on the functioning of a vigil mecha nism has led to companies not ensuring that whistleblower complaints are addressed in a timely manner.

Current provisions do not provide any guidelines on the functioning of the vigil mechanism for companies.

Companies were able to retaliate against employees raising whistleblower complaints and even terminated their employment as any civil suit for such actions could be too expensive and time-consuming.
Parties filing civil suits are required to first pay court fees, typically amounting to around 1% of damages claimed.

Suggestions

Private sector companies above a certain threshold of turnover or employees should set up a vigil mechanism.
Large private sector companies, including subsidiaries of large multinational corporations, should be regulated differently from small private sector companies and should be required to have vigil mechanisms.
The law should require a permanent internal committee and specify directions on the functioning of the committee.
For that, the government should consider issuing guiding principles on such as internal reporting to and review by the audit committee, timelines for addressing grievances and consideration by the board on nature and number of open matters and outcomes of resolved matters, etc.
However, regulating the functioning of vigil mechanisms pose a risk of over-regulation and micro-management.
The mechanism should provide for “adequate safeguards against victimisation of persons who use such mechanisms and make provision for direct access to the chairperson of the audit committee in appropriate or exceptional cases.
There was a need for a deterrent against frivolous complaints.

Examples of Whistleblowing

- - Shanmugam Manjunath was a marketing manager (grade A officer) for the Indian Oil Corporation (IOC) posted at Lakhimpur Kheri in UP. He in order to curb the malpractices of petrol pump owners sealed a petrol pump in his jurisdiction area. Hence, he was murdered.

- - An IPS officer of the batch 2009, Narender Kumar was assigned to work at Morena District located in Madhya Pradesh. The district is famous for the good quality of sand ideal for construction. Narender found out the sand mafia was mining sand illegally not only in Morena district but other parts of Madhya Pradesh as well.

- - In mid-2001, Sherron Watkins, an executive at US energy company Enron, wrote to its CEO Kenneth Lay warning of accounting malpractices. While Enron bosses didn’t act on her letter, the company filed for bankruptcy four months later.

- In 2003, Satyendra Dubey, a project engineer with National Highways Authority of India, exposed corruption in the Golden Quadrilateral project in Bihar. He was shot dead in November 2003 in Gaya. Three persons were given life term in 2010 for the murder. Calls for a law to protect whistleblowers arose in the wake of his murder.