Prevention of corruption act, 1988 - New amendment and its analysis

BACKGROUND

The Prevention of Corruption Act, 1988 was enacted to combat corruption in government departments and public sector businesses in India; and to prosecute and punish public servants involved in corrupt practices.

The Prevention of Corruption (Amendment) Bill, 2013, for amending the Prevention of Corruption Act, 1988, was introduced in the Rajya Sabha on 19.08.2013.  The Bill after having been considered by the Department related Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice and the Law Commission of India, was also examined by the Select Committee of Rajya Sabha, which submitted its report on the Bill to the Rajya Sabha on 12th August, 2016. 

Recommendations made by the Select Committee in its report on the Bill were considered by the Government and official amendments were moved on the Bill as reported by the Select Committee of the Rajya Sabha.

The Bill was taken up for discussion and passed by the Rajya Sabha on 19th July, 2018 during its current 246thSession. Further, it was taken up for discussion and passed by the Lok Sabha on 24th July,2018, which got assent from President of India on 26th July, 2018. With this, Bill became Prevention of Corruption (Amendment) Act, 2018 effective from 26.07.2018.

KEY HIGHLIGHTS OF THE AMENDMENT

The amendments propose a lot of changes to the anti-corruption law which range from redefining criminal misconduct to bringing collusive bribe givers to book.

(a) Time extensions: Under Section 4(4), the courts no longer have complete trails for offences under the Act within 2 years, failing which the judges will need to record the requirement for extension in time. A trial can now be extended by 6 months at a time and shall not exceed ordinarily four years in aggregate.

(b) Substitution of new sections 7, 8, 9 and 10:

• Section 7 prescribes punishment for offences relating to public servants being bribed.
• Section 8 prescribes punishment for persons abetting a bribe or attempting to indulge in corruption with a public servant. The Amendment Act exempts those acts committed out of compulsion, provided a person so compelled files a complaint with the police or investigating agency within 7 days of giving a bribe under compulsion.
• Section 9 prescribes punishment for offences relating to bribing a public servant by a commercial organisation. This section now specifically deals with commercial organizations and persons associated with commercial organizations. The term commercial organization is clarified to include all forms of business structures and the phrase 'persons associated with commercial organization' is wide enough to include employees and vendors.
• Section 10 now imposes specific terms for imprisonment and a fine where the commercial organization's directors, officers in default or a person with control over the organization has consented to the corrupt act violating the provisions of the Act. It may be useful to note that when amendments to Section 10 and Section 9 (please see above) are read together – the amended Act seems to penalize both the commercial organisations for violation of the Act by levying of a fine and the officers in charge of such commercial organization under Section 10 for criminal liability.

(c) Corruption by public servants: The Amendment Act seems to have diluted the instances where a public servant can be accused of alleged criminal misconduct. The amended Section 13 of the Act only refers to the misuse of property and unjust enrichment as grounds for misconduct (which is assessed by disproportionate assets). Earlier, Section 13 accounted for general tendencies to seek bribes or indulge in corrupt practices as grounds of criminal misconduct.

(d) Permission to prosecute government employee: The Amendment Act appears to make it more difficult to prosecute government employees. The amendment under Section 19 states that for prosecution of a public servants under Sections 7, 11, 13 and 15 of the Act, firstly a sanction must be obtained from an authority that has the right to dismiss them. Secondly, an investigative authority (such as a police officer) must seek an application for permission, or else there are multiple layers of compliances that need to be cleared before the court can take cognizance of the offence.

(e) Criminal Misconduct: The criminal misconduct provision is intended to protect public servants from being wrongly prosecuted for official decisions. Under it, bankers cannot be pulled under the corruption law unless they have accumulated assets more than what they could have obtained with their steady income, or have misappropriated assets entrusted to them.

(f) Forfeiture of property: Forfeiture of property is believed to help avoid a fresh procedure to confiscate property obtained through corruption and to enable court conducting trial to do so itself

(g) Introduced new definitions: The Amendment Act includes the following new definitions:

• The term "Undue Advantage" has been defined to mean any gratification other than legal remuneration.
• The term "gratification" has been clarified to include all forms of gratifications estimable in money besides pecuniary gratification.
• The term "legal remuneration" has been clarified to include all remuneration a public servant is permitted to receive by the concerned authority1

BRIEF ANALYSIS OF AMENDMENTS

Parliament passed Prevention of Corruption (Amendment) Bill 2018 on July 24 in line with United Nations Convention against Corruption 2005, which was ratified by India in 2011 to enhance transparency and accountability of the government but some of the provisions of the bill are drawing criticism on social media.

• Firstly, the consequence of not completing a trial within 4 years is not clearly stated in Section 4 of the Act. If the prosecution lapses, then it may encourage related activities to stall or slow down the process.

• Secondly, the definition of the term 'Undue Advantage' makes a generic reference to 'organization' while clarifying the meaning of legal remuneration. When this definition is applied to Sections 7A or 8, it appears that every person involved in the chain of corruption whether working for a private entity or a public enterprise could potentially be prosecuted under the Act.
• Thirdly, the changes to Section 9 of the Act, while lacking total clarity, seem to insinuate that Indian companies must start incorporating anti-bribery provisions in their commercial agreements.
• Additionally, it appears that if any party contracting with an Indian company indulges in corrupt practices and the Indian company accepts the services of such third party with or without knowledge, then the company itself (and its directors) could get prosecuted under the Act.
• The only risk mitigation measure in this context seems to be that Indian companies must develop robust anti-bribery and anti-corruption procedures or guidelines in place with any party it deals with.
• The amendments seem to, perhaps appropriately, place a lot of accountability on commercial organizations.
• The amendments to also call for harsh action against those who offer bribes without any coercion from the bribe taker. The term of sentence for giving or taking bribes has also been increased to seven years.

CONCLUSION

In a country like India where corruption is rampant, the efforts of the government to amend the anti-corruption legislative framework through amendments to the Prevention of Corruption Act 1988, passed in July this year, are welcome. The amended Act may prove to be transformational and a game changer.