India’s Whistle-blowers Bill needs a comprehensive revamp and must include the corporate sector

On May 13, 2013, an eight-year criminal and civil investigation against India’s largest generic drug maker Ranbaxy Laboratories Limited and its subsidiaries in the US came to an end with the pharmaceutical giant pleading guilty to felony charges related to drug safety. The company will now pay $500 million in fines under the settlement agreement with the US Department of Justice, the largest-ever settlement for a generic drug maker. And this would not have been possible without Dinesh Thakur – a former Ranbaxy executive based in New Jersey.  

Thakur, a former director of research information & project management at Ranbaxy, blew the lid of the company’s wrongdoings by accusing it of manufacturing adulterated drugs – acne drug Sotret, epilepsy and nerve pain drug gabapentin and antibiotic ciprofloxacin – at its facilities in Paonta Sahib and Dewas in India. When the top management did not respond to his overtures, he took his battle to the US courts. Read his statement here

Thakur is probably among the very few whistle-blowers who not only succeeded in exposing the wrongdoings of Ranbaxy but also was awarded in the process. In India, that is a rarity. At best, an employee could have escalated the grievance to the top brass of the firm. Whistle-blowers are not accorded protection by the Indian law. Instead, the Union cabinet approved the Public Interest Disclosure and Protection to Persons Making the Disclosure Bill 2010 in August 2012.  

The Bill seeks to establish a mechanism to register complaints on any allegations of corruption or willful misuse of power against a public servant and provides safeguards against victimisation of the complainant. Though it forbids disclosing the identity of the complainant, there is no penalty for victimizing the complainant.

Besides, though the Central Vigilance Commission has been mandated by a government resolution to receive public interest disclosures since 2004, it has very limited powers. Also, it does not have any powers to impose penalties. This is in sharp contrast to Delhi and Karnataka Lokayuktas. Incredible as it may seem, even though India has the largest number of companies in the world, it does not have a whistle-blower’s policy that covers the corporate sector. The Bill mentions only the government sector.  

In India, typically, a whistle-blower is governed by an internal company policy where cases of wrong doing of any kind are brought to the notice of the top management. In the case of Ranbaxy, Thakur exposed the wrongdoings of the management to an external government agency in the US. Thakur has alleged that the company’s senior leadership had in 2005 ordered the destruction of evidence when they were alerted to data fudging, misbranding and adulteration in drugs according to an ET report. Yet the company did not take any action.

Whistle-blowers in the country not only have to fear the company’s wrath but also fear for their lives. This came into sharp focus following the death of NHAI engineer Satyendra Dubey and the Satyam scandal.

The Confederation of Indian Industries (CII), the country’s apex industrial body, came up with the voluntary set of guidelines on Corporate Governance, subsequently adopted by Securities and Exchange Board of India.

However, due to the lobbying by Indian companies, the whistle-blower policy, despite being a mandatory recommendation in the Narayana Murthy Committee Report, was diluted and made non-mandatory provision under the Clause 49. The article deals with the legal implications of this dilution and tries to identify the origin and legislative development of the policy and its need in the present corporate world.

Now, companies have to disclose in the corporate governance section of their annual reports whether a whistle-blower policy is in effect or not, and whether all the employees have access to it. Such policies exist in other countries too. The US was one of the earliest to have the Whistleblower Protection Act of 1989, while the UK has the Public Interest Disclosure Act of 1998, and Norway has a similar law in place since January 2007.

Legal experts told ET that they find it surprising that the official’s name in Ranbaxy was made public since the Witness Protection Programme in the US ensures complete secrecy and protection to the whistleblower. “Many times, people are taking a big risk and such cases pose a threat to life and liberty. Usually, most whistle-blower cases involve pharma companies or financial irregularities. Even in the US, whistle-blowers tend to get impacted adversely,” says Vijaya Sampath, former group general counsel at Bharti and now ombudsman in the same organisation.

Organisational culture and transparency will determine if people feel confident enough to come forward with information that may prove to be invaluable. Most companies prefer to settle such cases internally in order to avoid public attention and scandal. Also, more than often not, the whistle blowers policy get relegated to company annual reports and not much is done to sensitise or educate employees and various stakeholders about how it will be implemented.

Though most employees come across irregularities, they do not know whom to approach. The lack of rewards and proactive investigation through a regulatory body are also other major deterrents. Lengthy legal procedures, miniscule fines compared to the scale of fraud/corruption ensure that the guilty find a loophole every time a complaint is filed. With no legal redress or witness protection, the idea of blowing the whistle finds few takers.

It is time that India Inc takes up necessary steps to improve transparency and work towards a robust whistle-blowers policy.