Guide to Whistleblowing

Contributing Editors

In this new age of accountability, organisations around the globe are having to navigate a patchwork of new laws designed to protect those who expose corporate misconduct. IEL’s Guide to Whistleblowing examines what constitutes a protective disclosure, the scope of regulations across 18 countries, and the steps businesses must take to ensure compliance with them.

Learn more about the response taken in specific countries or build your own report to compare approaches taken around the world.

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01. Which body of rules govern the status of whistleblowers?

01. Which body of rules govern the status of whistleblowers?

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India

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The only legislation dealing with the protection of whistleblowers in India are:

  • the Whistle Blowers Protection Act 2014 (Whistle Blower Protection Act). This Act provides a legal mechanism for the reporting of illegal, unethical and illegitimate practices by members of an organisation. However, the scope of the Act is limited to public servants and public sector undertakings. Further, please note that as of the time of writing, despite the Whistle Blower Protection Act being passed by both houses of the Indian parliament, it has not yet been enacted by the central government; and
  • the Companies Act 2013 (Companies Act), which mandates the incorporation of a whistleblower policy, but primarily only by listed companies.

To date, there are no specific laws dealing with the protection of whistleblowers applicable to private, unlisted companies or unincorporated entities and their employees. Employers are free to formulate and adopt a whistleblower policy to encourage employees (or any other person for that matter) to report matters without the risk of subsequent victimisation, discrimination or disadvantage, economic or otherwise. Accordingly, for private establishments, the whistleblowing regime remains largely discretionary and policy-driven. 

India has not yet adopted laws to improve the protection of whistleblowers across sectors or levels in the economy and establish adequate secure channels or mechanisms to enable whistleblowers to report without fear of disclosure, retaliation or victimisation.

Last updated on 29/07/2022

02. Which companies must implement a whistleblowing procedure?

02. Which companies must implement a whistleblowing procedure?

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India

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As per the Companies Act, the following types of companies are required to establish a vigil mechanism and adopt a “whistleblower policy” for directors, employees, stakeholders and any other individuals (such as auditors) to report concerns about unethical behaviour, actual or suspected fraud or violation of the company’s code of conduct or ethics policy:

  • listed companies;
  • companies that accept deposits from the public; and
  • companies that have borrowed money from banks and public financial institutions totalling more than 500 million Indian rupees.

The abovementioned companies will be hereinafter referred to collectively as “Covered Companies”.

The vigil mechanism or whistleblower policy must provide adequate safeguards against the victimisation of persons who use it. The Companies Act also requires auditors to report an offence of fraud in the company by its officers or employees if they identify or note such instances during the performance of their duties.

Last updated on 29/07/2022

03. Is it possible to set up a whistleblowing procedure at a Group level, covering all subsidiaries?

03. Is it possible to set up a whistleblowing procedure at a Group level, covering all subsidiaries?

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India

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Yes, this may be done. Various organisations in India have adopted a whistleblowing policy at the group level and set up a common hotline channel or speak-up portal to receive complaints of unlawful or unethical conduct and other wrongdoing within group companies.

Last updated on 29/07/2022

04. Is there a specific sanction if whistleblowing procedures are absent within the Company?

04. Is there a specific sanction if whistleblowing procedures are absent within the Company?

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India

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For failure to adopt and implement a whistleblowing procedure, a Covered Company and every officer of that company who is responsible for such non-compliance may be punished with a fine of up to 10,000 rupees and, if non-compliance continues, a further fine of up to 1,000 rupees a day.

Last updated on 29/07/2022

05. Are the employee representative bodies involved in the implementation of this system? 

05. Are the employee representative bodies involved in the implementation of this system? 

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India

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No, employee representative bodies are not involved in the vigil mechanism. The whistleblowing mechanism will be overseen by a Covered Company through its Audit Committee or Board of Directors, as may be relevant.

Last updated on 29/07/2022

06. What are the publicity measures of the whistleblowing procedure within the company?

06. What are the publicity measures of the whistleblowing procedure within the company?

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India

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Details of the whistleblowing policy and the mechanism thereof will have to be disclosed by the Covered Company on its website as well as in the Board of Directors’ annual report filed with the competent regulatory authority.

Last updated on 29/07/2022

07. Should employers manage the reporting channel itself or can it be outsourced?

07. Should employers manage the reporting channel itself or can it be outsourced?

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India

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While the reporting channel may be outsourced, in respect of Covered Companies, the mechanism should be overseen by the Audit Committee or Board of Directors, as applicable.

Last updated on 29/07/2022

09. What precautions should be taken when setting up a whistleblowing procedure?

09. What precautions should be taken when setting up a whistleblowing procedure?

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India

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Key aspects that should be borne in mind while formulating a whistleblower policy or procedure are:

  • a special or distinct committee or channel must be created for receiving and handling disclosures, giving the whistleblowing mechanism a separate institutional framework;
  • the reporting mechanism should be systematic, simple and straightforward to facilitate an early and easy disclosure of any wrongdoing. The procedure for disclosure must be easily comprehensible and should be accessible by all employees or individuals associated with the organisation;
  • the policy should provide adequate assurances and comfort regarding confidentiality of the identity of the whistleblower, continuity of association with the organisation, and the steps that the organisation will take to ensure that the whistleblower is not victimised, discriminated against or adversely impacted in any manner according to the disclosure (including facilitating legal assistance at the organisation’s cost, if necessary);
  • the policy should ensure that no action will be taken against whistleblowers who make disclosures in good faith and even allow for anonymous reporting; and
  • identification of what matters may be reported under the policy, the persons against whom such matters can be reported, the process that should be followed by the organisation, remedial measures, details of persons with whom reported information will be shared, and an overview of the mechanism for protecting whistleblowers and persons cooperating with an investigation, etc.  
Last updated on 29/07/2022

10. What types of breaches/violations are subject to whistleblowing?

10. What types of breaches/violations are subject to whistleblowing?

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India

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As per the Whistle Blower Protection Act, a whistleblower may make a complaint or disclosure relating to:

  • the committing of or an attempt to commit an offence under the Prevention of Corruption Act 1988 by a public servant;
  • wilful misuse of power or wilful misuse of discretion by which demonstrable loss is caused to the government or demonstrable wrongful gain accrues to the public servant or any third party; and
  • the committing of or an attempt to commit a criminal offence by a public servant.

The Companies Act only states that stakeholders of a company may report “genuine concerns” under the vigil mechanism. While the definition of “concerns” has not been provided for under the Companies Act, it would be a prudent assumption that it covers instances of suspected fraud and non-compliance with applicable laws, rules and procedures or any other wrongdoing that would adversely affect the organisation or stakeholders at large (financially or otherwise).

Last updated on 29/07/2022

11. Are there special whistleblowing procedures applicable to specific economic sectors or professional areas?

11. Are there special whistleblowing procedures applicable to specific economic sectors or professional areas?

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India

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The Whistle Blowers Act of 2014 targets public servants and is intended to prevent corruption, misappropriation of assets and misuse of power in the public sector. Further, provided a whistleblower makes full and true disclosure of all material facts, the settlement commissions established under the Income Tax Act 1961 and the Goods and Services Tax Act 2016 have the power to grant them immunity from those statutory penalties. Similarly, the Competition Commission of India established under the Competition Act 2002 possesses the power to award a reduced penalty to an informant who is a part of an anticompetitive cartel and makes a full, true and vital disclosure.  The Securities Exchange Board of India also rewards whistleblowers who are themselves guilty of violating securities law by granting anonymity and a pardon for their complete cooperation.

Last updated on 29/07/2022

13. Who can be a whistleblower?

13. Who can be a whistleblower?

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India

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There are no limitations or qualifications on who can be a whistleblower. Any person with knowledge of a breach or wrongdoing may report it and qualify as a whistleblower.

Last updated on 29/07/2022

14. Are there requirements to fulfil to be considered as a whistleblower?

14. Are there requirements to fulfil to be considered as a whistleblower?

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India

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Not applicable.

Last updated on 29/07/2022

15. Are anonymous alerts admissible?

15. Are anonymous alerts admissible?

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India

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As per the Whistle Blower Protection Act, a complaint is only acted upon by the competent authority if the complainant discloses their identity in the complaint. Complainants providing false identities or anonymous complaints are not recognised.

However, there is no embargo under the Companies Act against anonymous reporting concerning the activities of companies. The Audit Committee or Board of Directors may independently assess the contents of the anonymous complaint and take necessary action or attempt to reach out to the whistleblower for further information and cooperation. Leading business organisations in India allow anonymous complaints and have put in place processes to safeguard the identity of whistleblowers, and ensure the confidentiality of the investigation process.

Last updated on 29/07/2022

16. Does the whistleblower have to be a direct witness of the violation that they are whistleblowing on?

16. Does the whistleblower have to be a direct witness of the violation that they are whistleblowing on?

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India

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There is no such requirement prescribed under applicable laws and the information provided by whistleblowers may be independently assessed and acted upon, notwithstanding the fact that the whistleblower was not a first-hand witness to the reported act.

Last updated on 29/07/2022

17. What are the terms and conditions of the whistleblowing procedure?

17. What are the terms and conditions of the whistleblowing procedure?

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India

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For Covered Companies, the terms and conditions, as well as the whistleblowing procedure, will be subject to the policy adopted by them. As regards the Whistle Blower Protection Act, at the time of writing there is no specific procedure prescribed in the legislation (this would be prescribed by the rules framed by the appropriate governments once the Whistle Blower Protection Act is in force).

Last updated on 29/07/2022

18. Is there a hierarchy between the different reporting channels?

18. Is there a hierarchy between the different reporting channels?

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India

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This would be subject to the policy and reporting channels prescribed under the whistleblowing policy.

Last updated on 29/07/2022

19. Should the employer inform external authorities about the whistleblowing? If so, in what circumstances?

19. Should the employer inform external authorities about the whistleblowing? If so, in what circumstances?

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India

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There is no blanket requirement for an employer to inform external authorities upon receipt of disclosure from a whistleblower. However, depending on the nature of the disclosure, its gravity and impact, employers may be required to report the same to certain authorities, including but not limited to the Securities Exchange Board of India or relevant stock exchanges (in the case of listed companies) or even the Serious Fraud Investigation Office.

Last updated on 29/07/2022

20. Can the whistleblower be sanctioned if the facts, once verified, are not confirmed or are not constitutive of an infringement?

20. Can the whistleblower be sanctioned if the facts, once verified, are not confirmed or are not constitutive of an infringement?

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India

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There are no sanctions prescribed under the Companies Act if the facts, once verified, are not confirmed or do not constitute an infringement.

However, as per the Whistle Blower Protection Act, only persons who make any disclosure with a mala fide intention or knowing that it was incorrect or false or misleading, shall be punishable with imprisonment for up to two years and a fine of up to 30,000 rupees.

Last updated on 29/07/2022

21. What are the sanctions if there is obstruction of the whistleblower?

21. What are the sanctions if there is obstruction of the whistleblower?

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India

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Protection is only offered to whistleblowers under the Whistle Blower Protection Act after they report fraudulent activity or non-compliance, and not before. Accordingly, there is a lacuna in the Whistle Blower Protection Act (as well as the Companies Act) as far as they fail to prescribe sanctions to those who obstruct an individual from reporting fraudulent activity or non-compliance.

Last updated on 29/07/2022

22. What procedure must the whistleblower follow to receive protection?

22. What procedure must the whistleblower follow to receive protection?

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India

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As per the Whistle Blower Protection Act, if any person believes they are being victimised because they filed a complaint, made disclosures or rendered assistance in an inquiry under the Act, they may apply to the competent authority (as may be designated or appointed under the Whistle Blower Protection Act) seeking protection.

The authority may take such action, as appropriate, and give suitable directions to the concerned public servant or the public authority (including the jurisdictional police to protect such person from being victimised or to avoid such victimisation. However, it is important to note that the Whistle Blower Protection Act does not clarify or lay down any standards or definitions for “victimization”, and the same is subject to the assessment of the competent authority.

The process to be followed by whistleblowers in respect of Covered Companies or other establishments is subject to the policy adopted by such establishments.

Last updated on 29/07/2022

23. What is the scope of the protection? 

23. What is the scope of the protection? 

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India

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While the Whistle Blower Protection Act does not define the specific scope of protection that may be provided to the complainant, the competent authority has a wide range of powers to take such action, as it deems fit, depending on the facts and circumstances of each case, and may give suitable directions to the concerned public servant or the public authority (including the jurisdictional police) to protect the whistleblower or witnesses.

However, the competent authority is not empowered to impose civil or criminal sanctions against perpetrators for any sort of physical harassment or attacks on whistleblowers.

Last updated on 29/07/2022

24. What are the support measures attached to the status of whistleblower?

24. What are the support measures attached to the status of whistleblower?

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India

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The Whistle Blower Protection Act and Companies Act do not prescribe any support measures to the status of whistleblowers.

Last updated on 29/07/2022

25. What are the risks for the whistleblower if there is abusive reporting or non-compliance with the procedure?

25. What are the risks for the whistleblower if there is abusive reporting or non-compliance with the procedure?

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India

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Apart from the risk of retaliation and adverse action in terms of withholding or denial of benefits, termination of the engagement, etc, historically, whistleblowers in India have also faced the risk of death and physical injury, especially in matters that involve public institutions related to scams and frauds. It may not be possible to identify and list all the risks that a whistleblower may be subjected to, as it will depend on the nature of the activity reported by him, the persons involved in such activity, the gravity, magnitude and impact of the disclosure and the position of the whistleblower within the organisation.

Last updated on 29/07/2022