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  • Internal Code :
  • Subject Code : LLM650
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  • Subject Name : Law

Arbitration and Litigation: Principles and Practices

Behind every great fortune, there is a crime.

-The Godfather, Mario Puzo, Signet, 1969.

The crime committed to get access to fortune often goes unnoticed as success and fortune dazzles and is blinding. The term ‘Bribery’ may be defined as an incentive that is provided or promised by one individual to another with the view of gaining undue advantage or to incite the person to perform his duty in an improper manner. The incentive involved usually results in a change of behaviour and favourable treatment to the person providing the bribe. The act of giving and accepting bribes is considered morally as well as legally incorrect and is punishable by law. Different legal terms are used to refer to the act of bribery all over the world. The term ‘facilitation payments’ is used to refer to a monetary amount that is paid to ‘facilitate’ the working of officials. They are also refereed to as ‘speed payments’ as they are used to speed up the working speed of the officials. All the countries around the world forbid the use of bribery as a method to get Governmental work done. Corruption, on the other hand, is the improper use of power- which is usually attached to the position held in a public office. The Webster’s Dictionary defines the term ‘Corruption’ as an inducement that is made by way of inappropriate advantage given to an official for the voluntary breach of his/her duty.

On comparison of the two terms, it may be said that the scope of corruption is wider than the scope of bribery and the act of bribery can be included to be a part of corruption along with acts of extortion, nepotism, fraud, deception, money laundering, and many more similar acts. The acts of giving and receiving bribery, both have been made punishable by the law. Although the working system recognises otherwise, it is extremely easy to breach laws made against bribery and is done on a daily basis in all parts of the world. Governmental processes are extremely lengthy, complex and tiring in nature and working individuals do not have a lot of time to sit in the Government offices for unlimited time to get their work done.[1] Thus, they resort to paying a little extra if their work can get done a little faster. It has been accepted as a part of the system, especially so in developing countries. In this particular essay, the researcher shall bring to light the crime and the effect of the acts on the society.[2] A comparison shall be made between the laws that are followed by different countries and also at the international level with special focus on the governing laws in India. India has been specifically chosen for research of this particular topic as, being a developing country, it is bound to have cases of bribery and corruption at a higher rate than those of developed countries. Additionally, the poverty that is prevalent in India boosts up the number of incidents each day. The politicians in India have a corrupt image all over the world. This essay shall study in detail the practices followed in India and the attempts taken by the Government to prevent such acts.

Similar to the offences which affect societies and the economy of a whole country, the offence of bribery impacts the society as a whole. It cannot be considered as an offence that is limited to the offender like those of traditional crimes of theft and rape, where one party is an offender and the other party is innocent. In this particular crime of bribery, the giver and the acceptor are considered equally guilty and liable to be punished. The morality of both the parties involved is affected along with the economy of the country. People work hard and pay taxes for the proper administration of the nation and corrupt officers accept bribes and encourage the system of black money. The offences of bribery and corruption go hand in hand as any officer accepting a bribe shall be counted to be guilty of the offences of corruption as well.

If the reason of such fraudulent practices and corruption is researched on, it may be seen that a majority number of the Government officials hail from low to middle class backgrounds who had to strive hard to get into the position that they hold. There is large scale financial and economic depravation among these classes and the salary of the post does not do justice to the amount of workload that is put on these officers. To make ends meet and to maintain a basic standard of living, these officials are forced to accept bribes and thus, the rates of corruption within a country keep rising. However, this situation may not always be true, and a few exceptional examples may be found where the officers crave for a higher standard of living and are never satisfied.

The offence of bribery requires 5 elements- An officer who holds a public position or office, criminal intention on part of the individual offering the bribe, the incentive[3] that is offered- this may be given to the officer or promised to be delivered after a particular event, the commission of a particular act by the officer or the omission of his duty, and the act to induce fraud. In the case of Trilochan Singh vs Karnail Singh[4], the SC held that the gratification offered to the public servant does not mandatorily have to be in terms of monetary value.

Fraud in relation to the topic may be understood as the presentation or demonstration of facts in a manner that conceals the truth, or is a misrepresentation of the true facts of the situation with the intention of gaining undue advantage. This falsification of facts has to be done knowingly and voluntarily to constitute the offence as that of fraud. One of unique features of this offence is that other than offender is not the main beneficiary after the commission of the crime. The person who actually benefits from the crime is a party to it and no party is the direct victim after the crime has been committed. The action to be taken against the crime is delayed and becomes difficult as both the parties try to remove evidence and maintain privacy about the transactions that have been entered into. According to the definition provided by Peter H. Odegard, corruption may be accepted as an element that is ingrained in our daily lives where the society understands the phrase of ‘money talks’ and the society tends to lean towards the materialistic things possessed by the person rather than how the person is, as an individual.

The acts that have been explained and discussed about in the previous paragraphs destroy public trust for a few personal gains. There are several definitions that provide the inter-relation between bribery and corruption, but the basic idea is that both the offences combine when a Government servant accepts some sort of advantage or incentive to perform his duty or not to perform his duty.

INTERNATIONAL AUTHORITIES

There are several conventions that govern the area of bribery and corruption at the International level.

  1. OECD Convention on Combating Bribery of Foreign Public Officials (1997)- This Convention criminalises bribing of public officials of foreign nations by companies and individuals.
  2. UN Convention against Corruption (2003)- This Convention criminalises the act of bribery within as well as outside the country, it also includes bribery in private sector of a country.
  3. International Chamber of Commerce, Rules on Combating Corruption

India has ratified the United Nations Convention Against Corruption in 2011. India is a member of the G20 Anti-Corruption Action Group.

The United Nations Convention Against Corruption contains provisions that has to be followed while entering into transactions with foreign officials as well as in domestic transactions. It contains transactions that cater to public sector as well as private sector of a nation. Contrary to the Prevention of Corruption Act, the United Nations Convention Against Corruption uses the term ‘undue advantage’ which includes monetary as well as other advantages. Although India incorporates almost all the provisions of the United Nations Convention Against Corruption, the domestic laws of India do not contain preventive policies implemented against corruption and bribery as present in the United Nations Convention Against Corruption. Another major criterion that is not included within the domestic laws of India against corruption is the right of the victim or the person suffering losses to seek compensation and damages against the perpetrating party.

OECD Guidelines for Multinationals, 2011contain provisions to be followed by organisations to fight against bribery and corruption. Similar to the UN Convention against Corruption, these guidelines too focus on the preventive measures to by taken by any organisation to curb the nuisance of corruption.

The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (‘OECD Bribery Convention’) mandates the provision that should criminalize the offering of a bribe to any foreign national. This convention also uses the term ‘undue pecuniary or other advantage’, similar to the United Nations Convention Against Corruption. Both the conventions contain provisions which state that any contribution made to political parties shall not be considered while making tax deductions from the accounts of the organisation. It is clear that there is a huge gap between the provisions of the international conventions and the domestic statutes implemented and followed in India.

In case of absence of laws in any particular area of fraud or corruption, the guidelines and draft provisions of the International Chamber of Commerce shall be made applicable.

INDIA

Even after 73 years of gaining independence, India continues to fight issues of malnutrition, poverty, illiteracy and financial imbalance among the different classes of populations within the country. In a recent study conducted by the Transparency International, India was ranked 78 out of a total of 180 countries in the Corruption Perception Index.[5] The honest citizens of the country are working hard to make ends meet and earn two breads for their living and pay their taxes and on the other hand, the government officials who are supposed to work for such honest citizens go forward to accept bribes to gain personal advantages and a minority population of the country is benefitted at the expense of the majority population. Such incidents shatter the trust and morale of the citizens and they lose hope in the Government of the country and question if their hard work is ever going to reap benefits for them.

It has been noticed that the cases of corruption have percolated from the highest levels to the lowest ones. The political leaders in India are the ones who are less interested towards public welfare and more interested towards the rise of their own bank balance. The major reason behind corruption and the election of such politicians are:

  1. India follows an electoral system in which the people of India elect their own representatives. The majority of the population on the country being uneducated, does not understand the importance of a single vote and often end up voting for known faces which are usually those of film actors or actresses, who do not understand the basics of politics. The parties, on the other hand, enter into collaborations with successful business firms which provide financial support to the parties (like those of election costs) in exchange for favours. The industrialists of the country are only too eager to enter into such an arrangement as it would mean that they would get their licences and permits in a smoother and faster way than other competitors in the market. When the leading politicians of a particular party get involved in such agreements, the subordinate officers are expected to do the same in return of a promotion.
  2. Regular delays in governmental work leads to the offer of bribes just to get the work done and over with.
  • Incorporation of the western cultures into the daily lives has made the population impatient and they are not willing to spend more time but follow the process in a proper manner. Traditional values taught to Indian kids are slowly getting dissolved due to rapid development and the idea of ‘time is money’ is blindly followed by the new generations.
  1. The societal ideology of placing government servants on a pedestal has back-fired and they feel encouraged to indulge in crimes related to corruption and bribery.
  2. The authorities that have been given the power to inquire into crimes of bribery and corruption have not been allowed to investigate cases against higher authorities like that of the ministers. Thus, they are unable to prevent the main bulk of corruption cases that take place in India.
  3. The increasing prices of goods and services and the inability of the government to curb inflation renders the monthly salary of the government employees insufficient. This persuades the employees to accept bribes to need their own needs.
  • The social practices like dowry are followed in India. This makes the bride’s family search for government employees as groom as it means a stable source of income in addition to the salary, and the huge amount of dowry also requires acceptance of bribes if the father of the female child is in government service. The environment in India is such that there exist people who are willing to give and accept bribes and thus, the offences continue.

The offences of bribery and corruption have been recognised under the Indian Penal Code, 1860, the Prevention of Corruption Act, 1947 and the Representation of People Act, 1951. In recent years, there has been a huge uproar in the country against corruption which has led to huge scams being revealed. The legislature has taken action against such offences and made the laws stringent and has also enacted new policies, laws and rules. The government has established a separate authority known as ‘Lokpal’, which has been given the power to register, inspect and sue individuals and public officials accused of taking or giving bribes.[6]

The legislations being followed in India for the prevention of the offence of bribery and corruption are discussed below:

Prevention of Corruption Act, 1988

This was one of the first anti-corruption laws that were implemented in India and it remains one of the principle laws to curb corruption till date. It makes the acceptance of any advantage- monetary or otherwise and the offering of any such advantage illegal and punishable. To cover any loopholes, it has kept a wide definition of the term ‘public servant’. According to the provisions of the statute, this definition is inclusive of all the people who are in the service or the payroll of the Central or State Government, any local authority, Government company, or any body that is owned or controlled by the Government, it also includes members and employees of the judiciary and employees of institutions that collect financial help from the Government. In the judgement of CBI vs Ramesh Gelli & Ors.[7], the Supreme Court held that employees of public and private banks shall also fall under the ambit of this definition.

Central Vigilance Commission Act, 2003

Central Vigilance Commission has been established under the provisions of the Central Vigilance Commission Act. 2003. This particular commission has been entrusted with the work of enquiry into any offence that is committed under the provisions of the Prevention of Corruption Act, 1988. The commission works independently, free from the governance of the executive and the legislature and has been given the power to refer cases to the CBI if detailed inquiry is required.

The Indian Penal Code, 1860

The Indian Penal Code, 1860 – Section 161 provides for a definition of ‘illegal gratification’ and also lists out the particular acts that are to be covered within the purview of the definition. It does not limit bribery and corruption acts till public servants, it includes the acts that shall be considered as corrupt in the private sector. Since corruption does not just include bribery, the Code provides for definitions of all the acts that are construed to be acts that are corrupt in nature like cheating, dishonesty and breach of trust.

The criminal law of India mandates the presence of the elements of mens rea and actus reus for a particular act to be constituted as a crime. The offences of bribery and corruption do not fulfil the requirements to be called a criminal act. In the judgment of Raj Singh vs Delhi Administration[8], the Supreme Court of India held that the intent to commit the crime shall not be considered in the present offence, but if the official accepts any renumeration other than the legally stipulated amount, then he shall be held liable for the commission of the offence. 

Since the Courts in India do not recognise monetary rewards as the only offering which may be made to public servants, Section 165 of the Act[9] renders the acceptance of any gifts without proper consideration as an offence. The reason behind this section is that the public servants should be curbed from evading the provisions of section 161 and accepting expensive objects as gifts in place of a bribe.

The Companies Act, 2013

The Act is very recent and defines the term ‘fraud’ with reference to companies. It contains provisions with regard to corporate governance and also states the duties of different levels of authorities like auditors that are under an obligation to report the acts of fraud and corruption which are committed by the company. It also includes within the duty of the directors of the company to report acts related to frauds and corruption.

The Companies Act, 2013 provides the establishment of the Serious Fraud Investigation Office (SFIO) and the National Financial Regulatory Authority (NFRA). The Serious Fraud Investigation Office has been entrusted with the powers to enquire and arrest any individual whom they have enough reason to believe is guilty of any offence related to fraud or any other white-collar crime. On the other hand, the National Financial Regulatory Authority has been entrusted with the power of investigation in cases of professional misconduct involving the offence of fraud by employees or members of any company or a chartered accountant who is registered under the Chartered Accountants Act of 1949.

The Prevention of Money Laundering Act, 2002

The provisions of the Prevention of Money Laundering Act, 2002 do not directly govern the offence of fraud or corruption but the recent statutory changes to the Prevention of Money Laundering Act in 2018 has identified the offence of fraud committed under the provisions of the Companies Act, 2013 as an offence which will attract the provisions of the Prevention of Money Laundering Act as well. The meaning of fraud as understood by the Companies Law, 2013 covers a much larger ambit than that of the definition of fraud given under the Indian Penal Code. The Prevention of Money Laundering Act requires institutions like banks, post offices and other financial institutions to maintain customer details by way of procedures specified in the KYC scheme and report any suspicious activity.

Right to Information, 2005

Under the provisions of the Right to Information Act, 2005 the Indian citizen can access information within the possession of any public office. However, information which might jeopardise the National interest or which might infringe the right to privacy have been considered as exceptions under the Act. This particular legislation has been a major tool in the Nation’s fight against corruption as demand of transparency and information by the citizens have brought to light several instances of corruption and scams. This tool has helped in encouraging transparency in the working procedures of the government and provide the public with a powerful tool to look behind the curtain in the working of the government.[10]

The Lokpal and Lokayuktas Act, 2013

This legislation is a recent addition to the number of statutes in India to curb the offence of bribery and corruption. Under this Act, Ombudsman have been established- the Lokpal at the Central level and the Lokayuktas at the State level.

The Foreign Contribution (Regulation) Act, 2010

The Foreign Contribution (Regulation) Act, 2010 prohibits the acceptance of bribery from foreign sources such as a foreign citizen, company, entity, trust or foundation. Contributions up to INR 25,000/- are allowed to be accepted and exempted from any inquiry. Any consideration higher than the specified amount can lead to investigation, and if found guilty, the legislation records a punishment of imprisonment of up-to 5 years or a fine, or both. This particular legislation also contains provisions with regard to the offence by companies where the individuals holding positions will be held liable for the crime.

Central Civil Services (Conduct) Rules, 1964 and All India Services (Conduct) Rules, 1968

The statutes mentioned above provide service rules which bind the government officials in India and prohibit them from accepting gifts or other monetary rewards other than the compensation given legally. A violation of the provisions of the service rules result in in departmental enquiry and can lead up to termination of services of the government official.

Whistle Blowers Protection Act, 2014

The Whistle Blowers Protection Act, 2014 aims to create a system in which complaints can be registered against the acts of public servants or government officials which are related to voluntary misuse of the public office and the power attached to the office. This particular act provides for protection of the person who chooses to file a complaint against the illegal activities of a public servant although being an internal part of the system.

The unique feature of this piece of legislation is that the identity of the complainant has to be disclosed along with the complaint. If the identity of the complainant is not disclosed or is found to be false, then the authorities will refrain from taking any action based on the complaint made. The provisions of the statute protect identity of the complainant and does not disclose it while enquiry is being made on the complaint filed. The procedure to be followed by the authorities once a complaint is received has been explained in detail within the provisions of the act. To prevent false complaints the provisions of the statute has specified penalties that shall be levied on the complainant if his complaint is found to be false or insignificant.

The act contains provisions which make sure that the person making the complaint, as well as the people who come forward to give evidence during the process of enquiry do not suffer any losses and are not victimized. The provisions of the act provide that the complainant should be restored to his original position held before making the complaint and in case such directive is not followed, then a compensation of at least ₹ 30,000 should be awarded to the complainant.

In a recent case of corruption disclosed by an airline captain, Mr Gaurav Taneja, against the well-known airline company of Air Asia did not follow the mandate of this Act and it was seen that the pilot captain was removed from his job and threatened by the airline company after he chose to disclose the lapses made by the company which put passenger safety into grave compromise just to maximise profits and save airline fuel.

Black Money (Undisclosed Foreign Income and Assets) And Imposition of Tax Act, 2015

This particular statute criminalises any undisclosed reward that is held by a person in any bank account situated abroad, whereas the individual is a resident of India. Usually illegal income that is gained through illegal methods or by way of corruption is stashed in bank accounts abroad to evade tax or legal action that might be taken if the truth is exposed to authorities in India.

The last decade has been extremely important for India as huge progress has been made with regard to anti-corruption laws in the country. The spark against corruption was lighted with the scam of the Telecom Spectrum Case and the scam of the Organisation of The Commonwealth Games in Delhi in 2010. A huge public hue and cry followed these two incidents and forced the authorities to take strict legal action against the offenders. The dissatisfaction amongst the Indian public with regard to frequent scams and corruption cases being revealed only grew after a number of bank fraud cases came to light where the individuals obtained high loan amounts and then refrained from paying the money back to the banks. The defaulters absconded and took refuge in foreign Nations and did not return to India and thus, the jurisdiction of the Indian Courts to arrest and try the defaulter could not be established. A new statute known as the Fugitive Economic Offenders Act was implemented in 2018 to curb the number of loan default cases and the high rate of NPA that were forming in the banking industry.

Several amendments to the existing laws were made, and the authorities which were barred from investigating the acts of politicians and ministers in the past, were now given increased powers to try any high-profile authority if they had the reason to believe that a case of fraud or corruption could be made against them.[11]

In a few landmark cases, where the former Central Government ministers (Telecom Spectrum Scam)[12], politicians and diplomats holding high ranks (Commonwealth Games Scam organised in Delhi) and even a former head of the Indian Air force (Defence Procurement Scam)[13] were investigated and convicted by the courts in India for having indulged in fraudulent acts. To curb the issue of fraud and corruption with regard to companies, the legislature and the judiciary of India have established the Principle of Corporate Criminal Liability. Under the provisions of this principle, the essentials of a crime- mens rea and actus reus have been made applicable on a company. Since a company does not have a brain or a mind of its own, the court shall hold liable- the people who were behind the acts of the company committing the fraud. In the case of Iridium India Telecom vs Motorola Incorporated[14], the Supreme Court decided that corporate organisations shall be held liable and guilty on the grounds of criminal prosecution and cannot claim immunity with the help of the argument that a company does not have a mind and thus, cannot possess a guilty intent for the commission of a crime which may include fraud corruption of payment of bribes. However, since a company cannot be punished or imprisoned, the individuals holding posts in the company and who were responsible for the acts of the company at the time of the commission of the crime, shall be held liable and punished. The Prevention of Corruption Act and Companies Act recognise the principle of Corporate Criminal Liability and state that a company will be held guilty under the principal if any illegal consideration is given to gain any advantage for the conduct of its business or to retain business.

In comparison to the anti-corruption laws of UK and USA, India has a large number of laws to govern the offence and yet the rate of crime in India is much higher compared to the other countries. UK has a total of 3 laws to govern the anti-corruption practices in the country- Bribery Act, 2010 (‘UK Act’), Companies Act, 2006 along with the Common law offence of bribery. USA has a single law to govern the offence- US Foreign Corrupt Practices Act, 1977 (‘FCCPA’)

The public administration of India was assessed by Paul A. Appleby in the year 1953 and his report titled ‘Irregularity and Corruption’ stated that there was a very low level of corruption in India and the honesty of the government officials surprised him. However, recent reports on civil services and civil servants in India put forward a very negative image of the services. A former civil official of India who has spent 35 years of his life serving the nation, criticised the Indian administration for being corrupt. This portrays a drastic change in the administrative services of the country over the last 50 years. If the statistics of corruption in the Indian government is compared with those of the other countries it seems that the curbing of corruption may be an impossible dream for India. The Prime Minister of the country initiated a scheme of demonetisation in November, 2016, but the expected results of the Government were not fulfilled. The public of India had to run around in search of valid currency, while the ministers of the political party already had prior information of the scheme and were prepared by exchanging their share of black money before the scheme was initiated.

The legislative provisions are available in India with a wide range of laws implemented to curb the offence of corruption but the political will to fight the offence seems to be absent. A number of agencies and organisations have been created by the Indian government to tackle the offence of corruption. But, to effectively curb the offence the society has to lend a helping hand in the working procedures of these agencies. This initiative on the part of the society seems to be absent as the individuals of the society are themselves involved in the commission of the offence. Joginder Singh, a former CBI director, was pessimistic about resolving the problem of corruption in India, and has stated that: “The rot is so deep that it can’t be solved by one single party. ... The real problem is not the system; the real problem is that the people are corrupt. The malady is too deep, the problem too serious to be solved by speeches.” The issue of corruption and bribery is here to stay in India, the general public has already accepted this fact and has taken it in their stride. The expectation and hope that somebody will fight against this injustice is long gone. The politicians of the country are not interested in eradicating the issue as it will cause harm to their own lavish lifestyles. Thus, the dream of a corrupt free country remains unfulfilled for Indian citizens.

Bibliography for Corruption and Bribery

Articles

Acharya G, ‘India: Case Study On The Supreme Court Ruling On The 2G Spectrum Scam’ [2012] SSRN Electronic Journal

Gould W, ‘Paper, Public Works And Politics: Tracing Archives Of Corruption In 1940S–1950S Uttar Pradesh, India’ (2017) 25 Contemporary South Asia

G A, 'Iron India Rusts By Corruption' (2015) 01 International Journal of Research in Arts and Science

Shaikh A, 'Study Of The Anti-Corruption Laws In India And The Social Justice System Of India' [2020] SSRN Electronic Journal

Raj A, 'Cultural Roots Of Corruption: Efficacy Of Judiciary In Combating Corruption In India' (2011) 57 Indian Journal of Public Administration

Prabhu S, 'Corruption In India: Causes And Remedies' (2012) 2 International Journal of Scientific Research

Jacob W, 'Ending Corruption? How To Clean Up India' (2014) 13 Metamorphosis: A Journal of Management Research

'Bribery And Corruption' (1980) 3 Computer Fraud & Security Bulletin

Cases

Trilochan Singh vs. Karnail Singh, A.I.R. [1968] Punjab, 416 (F.B.)

CBI vs Ramesh Gelli & Ors., [2016] (3) SCC 788

Raj Singh vs Delhi Administration, A.I.R. [1968] S.C. 1419

Iridium India Telecom vs Motorola Incorporated [2011] 1 SCC 74

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