Whistleblowing –Walking and balancing on a tight rope

WHO IS A ?

The origin of the word whistleblower is from the German word ‘whistle’ which means to expose wrongdoing. ‘Whistle Blowing’ is any activity that is deemed illegal, unethical or not morally correct within an enterprise i.e. either private or public and a person who exposes any kind of such activity is known as ‘Whistleblower.

The International Labour Organization (ILO) defines it as “the reporting by employees or former employees of illegal, irregular, dangerous or unethical practices by employers.”[1]

 In the context of international anti-corruption standards, the 2009 OECD Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Recommendation) refers to protection from “discriminatory or disciplinary action public and private sector employees who report in good faith and on reasonable grounds to the competent authorities…”[2]

The UNCAC refers to “any person who reports in good faith and on reasonable grounds to the competent authorities any facts concerning offenses established in accordance with this Convention.[3]

 The Council of Europe Civil Law Convention on Corruption refers to “employees who have reasonable grounds to suspect corruption and who report in good faith their suspicion to responsible persons or authorities.”[4]

Whistleblowing –Walking and balancing on a tight rope

A whistleblower is a person who reports about the illegal activities done in the organization. Whistleblowers can be employees, suppliers, contractors, clients, or any individual who becomes aware of illegal business activities. Under Occupation Safety and Health Administration (OSHA), Sarbanes Oxley Act, and the Securities and Exchange Commission (SEC).

Whistleblowers at Infosys have flagged alleged corporate malpractices at the Indian IT giant, accusing executives in its top echelons of flouting norms and misreporting numbers. Indian Parliament passed the Whistleblower Protection Act in 2014, but it is yet to be operationalized. Further, an amendment introduced to the Act was criticized on the grounds that it dilutes protections to whistleblowers. But while the Act doesn’t cover corporate whistleblowers, India Inc has followed regulatory norms to put in place mechanisms to enable whistleblower complaints.

in the Indian banking sector it comes to notice that, in terms of the RBI whistleblower policy, it has been prescribed that the complainants can lodge their reports to the designated officials in the Bank regarding corruption, misuse of office or criminal actions of his superior officer or employer Bank and failure to adherence to RBI guidelines. The identity of the whistleblower should be revealed to the designated officer because the anonymous complaints are not being entertained and it is advisable to the officer to keep the identity disclose. The activist in India is of the opinion that recent banking frauds would have been timely detected if there were laws for protecting whistleblowers, the activists in the banking sector are working relentlessly and are committed to blowing the lid off many wrongdoings by the senior executives of the banks.

The facts were communicated to PMO and state governors but no response was taken for the wrongdoings in banking. Due to which there was a great loss to the economy. This creates a perception in the activist that the government is against the concept of whistleblowing in the banking sector so that the voice of the whistleblower is silenced. The Indian Government should follow up action of the US for the protection of whistleblower.

After the fallout of Wall Street meltdown, the US has made strong laws for whistle protection through the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act which yielded better results in regulatory compliance.  Whistleblowing is necessary for the governance, corporate or financial sector as it has to go long way in the Indian context because the people are not ready to accept the view is going to help in averting of major corporate financial scams. There should be an easy alternative route, for the outsider or the insiders to raise the concern for the function of the organization so that there is no fraud/ scam in the baking sector. There is a contrary view of the government and corporate India that giving protection to whistleblowers will only increase the blackmail of employer organizations or vested interests is not tangible. They stated that it is risky to give a license to put the trade secrets, fiduciary relationship or official secrets in open to the public because the employees of the Government or organizations have unlimited access to these documents. The same type of concerns was expressed by the authorities and corporate world in the western countries but was taken care of while enactment of legislation strengthening whistleblower protection in those countries.

Whistleblowing –Walking and balancing on a tight rope

It has also come to open now that in western economies the strengthening of the whistleblower protection has helped in bringing into limelight various unlawful/unethical practices adopted by corporate entities thus helping it in cleansing the system. The health and security of the country are at risk because the corporate world is more in profit-making. There was a case from Maryland USA[5] where a senior executive of an Indian pharma company after blowing the whistle fought for four years forcing a settlement of INR 3000 crore between various Government Departments and the company. He was also awarded a compensation of INR 270 crore by the Federal Court for the victimization and agony he had faced during the pendency of court proceedings. After this award policy, there were many cases of practices adopted by dishonest officials which have helped the scammers and swindlers to rob Indian Financial Institutions and evade the Indian criminal justice system. Whistleblowers have decided to be silent about the wrongdoing because of the management of the bank’s victimization of the whistleblower by way of unpleasant posting or termination resulting in loss of their jobs. The frauds and scams can only be stopped in India by encouraging whistleblowers and protecting them along with strengthening the regulatory compliances for banks and FIs of the country. To begin with such process the enactment of the Whistleblowers Act 2011 is a small baby step by the government.

TYPES OF WHITLERBLOWERS[6]

  1. Internal:  whistleblower reports misconduct to another person within the organization is called internal whistleblowing. The report includes disloyalty, improper conduct, disobedience, etc.
  2. External: The report of the whistleblower is submitted to a person who is outside the organization like media, public agencies, etc are considered as external whistleblowing.
  3. Alumni: when the former person of the organization performs whistleblowing it is called Alumni
  4. Open: when the identity of the whistleblower is known by the members of the organization it is called open whistleblowing.
  5. Personal: To harm only one person in the organization, disclosing such wrong activities is called Personal whistleblowing.
  6. Impersonal: To harm other persons in the organization, disclosing such wrong activities is called Impersonal whistleblowing.
  7. Government: when wrongdoing or unethical practice is done by the officials of government is disclosed it is considered as government whistleblowing.
  8. Corporate: when wrongdoing or unethical practice is done by the business corporation is disclosed it is considered as corporate whistleblowing.

OBJECTIVE

  1. To alert the members of the organization and the public about the wrongfully done happening in the organization
  2. To stop the misuse of power in the organization.
  3. To protect the surroundings from the harm which can be caused by the wrongful activities.
  4. It is to provide necessary safeguards for the protection of employees from reprisals or victimization.

COMPONENTS OF EFFECTIVE WHISTLEBLOWING[7]

  1. A clearly laid whistleblower Policy: There should be a policy for whistleblowers which should give them protection, rules, and regulation which should be followed by them.
  2. Effectively communicated statement of responsibility
  3. A clearly-defined procedure for reporting: The policy should include a proper structure of reporting and also procedure.
  4. Trained persons to receive and investigate report: There should be a properly trained person assigned for the investigation of the report, and all investigations should be informed to the whistleblower.
  5. A commitment to take appropriate action: The whistleblower should make proper and appropriate investigations for the betterment of the company and the public.
  6. An effective safeguard of the whistleblower:  The policy should include an effective procedure and laws for the protection of the whistleblower.
  7. Specifying steps towards abused protection by false whistling blowing:  If there is wrong whistleblowing done then there should be laws and regulation must be laid down for the protection of wrong whistleblowing.
Whistleblowing –Walking and balancing on a tight rope

PROCEDURE OF WHISTLEBLOWING

Whistle officer raises a concern to whistle officer or CMD depending on the employee level. Then HR examines the allegation or the CMD appoints the committee for investigation. if the allegations are proved by them, they form a committee and if not, then whistleblower is informed about the same. The committee which is formed by the CMD carries out the investigation and submits the report in 2 Months. If it is proved the investigation is further carried and the culprit is punished but if not then the process ends. 

DIFFERENCE BETWEEN WHISTLEBLOWERS Vs. INFORMERS[8]

Mostly the word whistleblower is considered as a synonym of an informer. The most important difference between the two terms is the liability of the person disclosing the information. Informer is usually involved in unethical activities but the whistleblower is there to stop wrongdoing. The whistleblower does not seek favor or remuneration for disclosure of information but the informant seeks favor and remuneration. But some laws provide a reward for the information provided by the whistleblower.

A SWOT model for practicing whistles was ready to take an initiative to blow the whistle when blowing in the workplace[9].

STRENGHT
1. Employees are conscious of ethical principles.
2. The Code of conduct is followed by the employees.
3. They are more encouraged to blow the whistle.
4. There is peer support.
5. There is confidentiality in the organization
WEAKNESS

1. Employees, use whistleblowing for personal interest and are used frequently.
OPPORTUNITY
1. Whistleblowers are encouraged for whistleblowing.
2. There is a career option for whistleblowers.
3. They are being recognized by the public.
THREAT

1. There is a lack of confidence in the peer groups. 
2. There is a loss of job, life, and image.  

COMPARATIVE STUDY OF PROTECTION OF WHISTLEBLOWER IN INDIA AND USA

INDIA

The government of India is putting efforts to make laws for the protection of whistleblowers from so many years. The law commission of India in 2003 recommended the adoption of public interest disclosure (Protection of Informer) Act 2002. In 2010 the bill of Public Interest Disclosure and Protection of Persons Making the Disclosure bill was introduced in Lok Sabhas’ lower house of the Indian Parliament. In June 2011 the bill was approved by the cabinet. The bill of Public Interest Disclosure and Protection of Persons Making the Disclosure bill was renamed as The Whistleblowers Protection bill, 2011. Later the bill was passed by Lok Sabha on 28 December 2011 and by the Rajya Sabha on 21 February 2014. The bill got the approval of the President on 9th May 2014.

There was an issue related to wrongdoing which was detected by the whistleblower in the head office of Infosys in India. The case was directly taken to the headquarters in the USA as they stated that “We have not sent to the company (recordings and documentary evidence) as our identity will be revealed and the whistleblowing laws in India are weak so the case was sent to the USA”.

USA

False Claims Reforms Act 1986: The USA first adopted this act for the protection of whistleblowers in the USA. This act opened the doors for citizens and entities who have evidence of fraud in the banks and other sectors.

Sarbanes-Oxley Act of 2002: This act was there for the protection of whistleblowers with a clause that the identity will not be revealed. It classified the wrongdoings. The act granted the whistleblower the right to trial and the decision should be given in 180 days.

Fraud Enforcement and Recovery act of 2010: The government strengthened the False Claim Reform Act to make it easy for the whistleblower to file a successful claim. The 2010 bill aimed to improve the country’s efforts to prosecute individuals; who harmed the USA economy.

Whistleblowing –Walking and balancing on a tight rope

CASES IN INDIA

  • Satyendra Dubey Case(1973-2003)[10]: Satyendra Dubey was an Indian Engineering Services officer posted as Project Director in the National Highway Authority of India(N.H.A.I). PM Atal Bihari Vajpayee started a golden Quadrilateral project to connect major cities of India via four and six-lane highways. Satyendra Dubey came to know that Larsen and Toubro had taken the contract from the government and passed it to the mafia who were not capable of handling such large projects and was using banks’ money for illegal purpose. So he wrote a letter to the head of N.H.A.I but there was no proper response. Later he wrote a letter to the P.M of India and asked him not to disclose the identity but the letter was circulated in the bureaucracy and no action was taken for the same. Later after one year, on November 27, 2003, he was murdered in Gaya, Bihar.   
  • M.Shanmugan Manjunath Case(1978-2005)[11]: He was appointed as a manager in Indian Oil Corporation posted in Uttar Pradesh. He was murdered for sealing the petrol pumps as he was a whistleblower appointed by the higher authorities. The quality of the fuel was not good and so he sealed the petrol pump but his identity was revealed due to which he was shot six times. There was no protection given nor any action was taken for the same. Only IOC gave compensation of Rs. 2.6 million to his family.
  • V.Saseendran Case[12]: He was the company Secretary of Malabar Cement Ltd. In 2007 he reported about the loss of 400 cores by the company but he was asked to withdraw the allegations. In September 2010 he wrote a letter to Chief Minister of Kerala, Industries Minister and Vigilance Director informing them about the loss of the company and also stated that the managing director’s secretary was leaking vital information of the company. Later he was found hanging with his two sons at his house.
  • D.K.Ravi case (1979-2015): He was an Indian Service officer of Karnataka cadre from the 2009 batch. He was a public man and used to work for the public interest. He started carking down the illegal sand mining and tax corruption. But he was transferred to Bangalore as Additional Commissioner of Commercial Taxes and there he prepared a list of tax-evading citizens. In two weeks he collected almost 138 crore of INR tax due to which he was in the limelight and used to get threatening calls from the political persons and sand mafias. He was an open whistleblower. On 16th March 2015, he was found dead at his place in Bangalore. The police investigation stated that it was a suicide but there was a mass protest by the public. Due to which CBI was given the case and the case is still ongoing. 
  •  Yashwant Sonwane Case: He was posted as Additional District Collector of Malegaon. He was a whistleblower and found oil adulteration carried out on a large scale. He wrote a letter to higher authorities but no responses were given by them. While returning home he saw trucks of oil companies like IOC, HPCL, and BPCL were parked. He started investing but the officer was attacked and set on fire. He was dead until he reached the hospital.
  • Satish Shetty Case (1970-2010)[13]: He was an Indian social activist and he was appointed for exposing land scams in Maharashtra. He used RTI to expose irregularities in government offices and construction work carried out in Maharashtra. He was a systematic Whistleblower and help in solving land scams. Later he was found dead in the park while he was walking and the police gave different theories of murder. Later the case was given to CBI and is still going on.
  • Whistleblowing against PMC  Bank: Punjab and Maharashtra Cooperative Bank extended privileges to the promoters of Housing Development and Infrastructure Ltd (HDIL). A group of women employees who were working with the credit department was aware of the ghost accounts through which loans were provided to at least 44 borrowers linked to HDIL. These loans were then masked using other 21, 049 fictitious accounts. They allowed them to function password-protected ‘masked accounts’ through which around 70% of the depositor’s money was approved as untenable loans. These loans given by PMC were used to meet the debt obligations of other banks by the realty developer group[14].
  • Whistleblowing against ICICI bank: Arvind Gupta, a shareholder activist revealed about the loan fraud between the bank’s CEO Chanda Kochhar and Videocon group[15]. It was sated as around 3,250 crore scam. Ms. Chanda Kochhar her husband Deepak Kochhar and Venugopal Dhoot (Videocon head) were charged with criminal conspiracy and cheating by the CBI[16]. Venugopal Dhoot invested crores of rupees in NuPower Renewables, a company founded by Deepak Kochhar months after the Videocon group was granted a loan of Rs. 3250 by the ICICI bank. Videocon got Rs. 40,000 crore loan from a consortium of 20 banks led by SBI[17]. Out of said loan, the Videocon head started transferring crores rupees to NuPower Renewables. The major issues were the fact that Ms. Chanda Koacher was part of a credit committee that cleared the loan of Rs. 3,250 corer in 2012. In 2009, Mr. Dhoot transferred a newly purchased stake to Deepak Kochhar for Rs. 2.5. lakh and resigned as director. Later, in March 2010, NuPower Renewables got a loan of Rs. 64 crore from Supreme Energy wholly owned by Mr. Dhoot. Thereafter, Supreme energy became 94.99% shareholder in NuPower Renewables, remaining shares were owned by Ms. Kochher[18] while Supreme Energy became a 94.99 percent shareholder in NuPower, the remaining shares were held by Kochhar.
  • 50 companies of the National Stock Exchange of India’s Nifty index said that they received 3,508 whistleblower complaints in the last financial year 2018. The complaint of Infosys and Wipro were 1168 and 1526 respectively but not specify how many of those whistleblower complaints were. 71% of the cases of Wipro was solved [19].

Taking into consideration all the cases as mentioned above there is a need for a strong framework for the protection of whistleblowers in India. In India, there are many cases where the whistleblower is murdered and it is considered as suicide or they are being transferred. Some of the cases of 10 years ago but still are ongoing and no conclusion is given or the culprits are punished. So there is a need for proper and elaborate laws for the protection of whistleblowers.

CONCLUSION

In this paper, we have seen that there is a number of laws in the USA for the protection of whistleblowers as compared to India, whereas only one bill has been passed until now. In the USA the protection is given to family members of the whistleblower but in India, only the whistleblower is given protection not his family. So it is recommended that there should be laws for the protection of the family of the whistleblower.

There is a significant increase in awareness of the importance of whistleblowing activities in the organization, but many people choose not to report about the wrongdoing in the banking sector. It is not easy to blow the whistle as it needs courage, moral and has to put the public interest ahead than his or her interest. Still, there are so many whistleblowers who are being praised for their good faith in the banking sector and work. There are people who oppose the concept of whistleblowing it believes that employees should have prima facie duty of the employees that they should be loyal to their origination and not blow the whistle as it will tarnish the company’s image and reputation. For the betterment and effectiveness of the whistleblowing mechanism, it is necessary to be aware of the usability and reliability of the grievance reporting system among the Indian banking sector across various sectors. The whistleblower should use the proper procedure of disclosing wrongful acts in public. The evidence should not hinder the fundamental rights of the accused.

Whistleblowing helps in reducing white-collar crime and also in deterring the organization to collapse. According to the Indian perspective whistle-blowing landscape is relatively new and just being brought in the organization or institutes. Therefore, it would be sagacious for the organization to implement a legal framework, rule, and regulations for whistleblowers. India has no proper laws for the protection of whistleblowers, so there is a need for proper, elaborate and strong laws for whistleblowers. The legislation should strike fear into corrupt and unethical employees, give a sense that others are watching, they need to get their act together and work for the progress of their organization and country as a whole.


[1] International Labour Organization Thesaurus (2005)
[2] OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, Recommendation for Further Combating Bribery of Foreign Public Officials in International Business Transactions, Recommendation IX(iii). Section II.9
[3] UNCAC (2005), Article 33
[4] Council of Europe Civil Law Convention on Corruption (1999), Article 9
[5] “Where the Law Stands on Whistleblowers in India – Infosys Episode.” The Economic Times, https://economictimes.indiatimes.com/news/company/corporate-trends/where-the-law-stands-on-whistleblowers-in-india/whistleblower-complaints-on-the-rise-in-india-inc/slideshow/71770777.cms.
[6] Study.com, Study.com, https://study.com/academy/lesson/what-is-the-whistleblower-act-definition-rights-protection.html
[7] Biegelman, Martin T., and Cfe. “Fraud Magazine.” Fraud Magazine, https://www.fraud-magazine.com/article.aspx?id=4294981969.
[8] Biegelman, Martin T., and Cfe. “Fraud Magazine.” Fraud Magazine, https://www.fraud-magazine.com/article.aspx?id=4294981969.
[9] Leading Daily of Jammu. “Whistle Blowing in Indian Banking.” Jammu Kashmir Latest News | Tourism | Breaking News J&K, 15 May 2018, https://www.dailyexcelsior.com/whistle-blowing-indian-banking/
[10] Where the law stands on whistleblowers in India (Oct. 26, 2019) https://economictimes.indiatimes.com/news/company/corporate-trends/where-the-law-stands-on-whistleblowers-in-india/infosys-episode/slideshow/71770940.cms
[11] Where the law stands on whistleblowers in India (Oct. 26, 2019) https://economictimes.indiatimes.com/news/company/corporate-trends/where-the-law-stands-on-whistleblowers-in-india/infosys-episode/slideshow/71770940.cms
[12] Where the law stands on whistleblowers in India (Oct. 26, 2019) https://economictimes.indiatimes.com/news/company/corporate-trends/where-the-law-stands-on-whistleblowers-in-india/infosys-episode/slideshow/71770940.cms
[13] Giriprakash, K. “Why India’s Whistleblower Protection Programme Is Not as Effective as That in the US.” @Businessline, The Hindu BusinessLine, 25 Oct. 2019, https://www.thehindubusinessline.com/companies/why-indias-whistleblower-protection-programme-is-not-as-effective-as-that-in-the-us/article29794564.ece
[14] Rashmi Rajput, Ghost accounts at PMC routed HDIL loans, (Oct. 05, 2019) https://economictimes.indiatimes.com/industry/banking/finance/banking/ghost-accounts-at-pmc-routed-hdil-loans/articleshow/71449748.cms?from=mdr
[15] Where the law stands on whistleblowers in India (Oct. 26, 2019) https://economictimes.indiatimes.com/news/company/corporate-trends/where-the-law-stands-on-whistleblowers-in-india/infosys-episode/slideshow/71770940.cms
[16] Jimmy Jacob, Just The Tip Of The Iceberg,” Says Whistleblower In Chanda Kochhar Case (Jan. 25, 2019) https://www.ndtv.com/india-news/chanda-kochhar-case-whistleblower-calls-icici-loan-irregularities-just-the-tip-of-the-iceberg-1982858
[17] Vibhav Tiwari, All You Need To Know About Case Against Chanda Kochhar: 10 Points (Jan. 25, 2019) https://www.ndtv.com/india-news/all-you-need-to-know-about-case-against-chanda-kochhar-10-points-1982776
[18] How a whistleblower complaint sank ex-ICICI Bank CEO & MD Chanda Kochhar, Business Standard, (last visited- Nov. 21, 2019) https://www.business-standard.com/article/news-ians/the-fall-of-chanda-kochhar-how-it-began-from-whistleblower-s-complaint-119012401277_1.html
[19] “Where the Law Stands on Whistleblowers in India – Infosys Episode.” The Economic Times, https://economictimes.indiatimes.com/news/company/corporate-trends/where-the-law-stands-on-whistleblowers-in-india/whistleblower-complaints-on-the-rise-in-india-inc/slideshow/71770777.cms

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