Whistleblower act India: Whistleblower Protection in India

In our experience, while whistleblowers often face retaliation and several other issues, they remain the best source of information on malpractices in any system – public enterprises or private. The Association of Certified Fraud Examiners (ACFE), in their 2014 edition of the Report to the Nations on Occupational Fraud and Abuse stated that over 40% of all frauds globally were detected were through tips – an observation consistent with the 2010 and 2012 editions of the Report.

Whistleblowers or those who provide tips to the authorities on misconduct in the enterprise, have assumed greater significance today due to   various reasons. The complex nature of business operations, high volume and magnitude of transactions, limited integration of data across organizations and obsolete internal controls can make it difficult to detect fraud and other wrongdoings through traditional routes such as internal audit or reviews. In such instances, concerned employees, or third parties connected to the situation can raise the initial red flags by reporting suspicious behavior.

The Companies Act, 2013, as well as SEBI (through revisions of Clause 49 of the Listing Agreement) have made it mandatory for certain classes of companies to establish mechanisms to receive complaints related to such grievances or concerns raised by Directors or employees of a company. Further, the Whistleblowers Protection Act, 2014, passed last year in the parliament, is a move to encourage individuals to report suspected malpractice and fraud in public sector organizations, supported by disclosures. However, the Act does not allow anonymous complaints, raising concerns about how protection would be accorded to whistleblowers if their identity is known. There are enough instances of retaliation against whistleblowers in corporations and government driven organizations including some where whistleblowers are known to have lost their lives in their fight against fraud and corruption.

While leading private sector organizations allow anonymous complaints and are putting in place processes to safeguard the identity of the whistleblowers, as well as ensuring confidentiality of the investigation process, there is an urgent need for the government to focus on these areas.  The government can perhaps consider including some of the measures prescribed by the US Whistleblower Protection Enhancement Act, 2012.

Else, the issues raised by the Magsaysay winner may continue to prevail for years to come, discouraging other whistleblowers.