NEW DELHI: In an important development that will bring down culpability of directors of a private company in case one of its employees is caught bribing a public servant, the Law Commission has told the government to amend certain provisions of the proposed Prevention of Corruption Act (Amendment) Bill and bring it in line with laws in the US and the UK.
So far, the Prevention of Corruption Act only covers a public servant accepting bribe. The government is proposing amending the act to hold “a commercial organization liable for failure to prevent persons associated with it from bribing a public servant to obtain business or an advantage in the conduct of business”.
In such a situation, “every person in charge of and responsible to it shall be deemed guilty, unless he/she can prove that the offence was committed without their knowledge or that they had exercised all due diligence”.
The Law Commission, in a report submitted to the government on Thursday, recommended amendment of the proposed PC Act bill “to provide for a section, along the lines of Section 9 of the UK Bribery Act, introducing a statutory obligation on the government to publish guidance as to the procedures that commercial organizations can take to put in place adequate systems”.
The commission has further asked the government to add a clause in Section 9 stating that “the central government shall prescribe and publish guidelines about the adequate procedures, which can be put in place by commercial organizations to prevent persons associated with them from bribing any person, being or expecting to be, a public servant”.
As per the recommendations of the law panel, directors of a firm shall only be held guilty in a situation where they have digressed from the set procedure.
The commission said the proposed bill was inadequate in prescribing guidelines. For instance, as per the government’s proposal, “if an employee (P) of a company (C) sitting in Bangalore bribes a local official (R) to get its clearance on time, then the combined effect of the bill is that P will be liable under Section 8; R under Section 7 and C under Section 9, unless it can prove it has in place adequate procedures designed to prevent such conduct”.
“Thus, making every director who may be sitting in Delhi more than 2,000 km away guilty, and the burden on proof will shift on each of these directors to prove they had no knowledge or had exercised due diligence,” it said.
The situation could be worse if, for instance, P had the high level clearance of one of the directors to bribe R, because of which every other director would now be faced with the difficult task of discharging their high burden of proof. The law panel said these provisions of the bill were more stringent than the provisions in the UN Convention Against Corruption or the UK Bribery Act.
The commission has said “to provide for consistency and coherence between Sections 9 and 10 of the PC Act (Amendment) Bill and to remove the over-broad elements of negligence, Section 10 should be redrafted and modified” to make directors guilty only if such “offence is proved to have been committed with the consent or connivance of any director, manager, secretary or other officer of the commercial organization”.
TOI | Feb 16, 2015
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