Law School, Sonepat, Haryana.
and Confidentiality Agreements”.]
a US company, required employees and former employees
to sign confidentiality agreements when they were being interviewed for
internal compliance issues with regard to violation of federal securities laws.
These confidentiality agreements imposed certain restrictions on the employees
before they intimated the SEC, thereby rendering their whistleblowing
provisions insignificant. In a final settlement with the SEC, KBR agreed to pay
a sum of $130,000 as a penalty to settle and revise its confidentiality
India and the internal whistleblowing policy of a company is rendered nugatory?
What if a member of the audit committee or a director is engaged in nullifying
the effect of a company’s whistleblowing policy? What is the relief available
to an employee apart from intimating the audit committee?
2013, specifically with the phrase ‘…any
information received by him…’. This enables a shareholder or an employee to
inform the Registrar of Companies about any malpractice the company may indulge
in. In accordance with section 206(2), it is the duty of the company and its
officers to supply information or give an explanation to the best of their
knowledge and power and to produce the documents to the Registrar within the
time specified or extended by the Registrar.
the basis of information furnished to him or on a representation made to him by
‘any person’ that the business of a
company is being carried on for a fraudulent or unlawful purpose or not in
compliance with the provisions of the Act or if the grievances of investors are
not being addressed, then the Registrar may, after informing the company of the
allegations made against it by a written order, call on the company to furnish
in writing any information or explanation on matters specified in the order
within such time as he may specify and carry out an inquiry as he deems fit
after providing the company a reasonable opportunity of being heard. Here, ‘any person’ could mean a shareholder or
importance. Where business of a company is being carried on for a fraudulent or
unlawful purpose, every officer of the company who is in default shall be
punishable for fraud in the manner as provided in section 447. The explanation
to Section 447 mentions that ‘fraud’
includes any act, omission, concealment of any fact or abuse of position
committed by any person or any other person with the connivance in any manner,
with intent to deceive, to gain undue advantage from, or to injure the
interests of, the company or its shareholders or its creditors or any other
person, whether or not there is any wrongful gain or wrongful loss. The
punishment for fraud is that any person who is found to be guilty of fraud,
shall be punishable with imprisonment for a term which shall not be less than
six months but which may extend to ten years and shall also be liable to fine
which shall not be less than the amount involved in the fraud, but which may
extend to three times the amount involved in the fraud.
furnish any information or explanation or produce any document required under
this section, the company and every officer of the company, who is in default,
shall be punishable. The penalty may extend to one lakh rupees and in the case
of a continuing failure, an additional fine which may extend to five hundred
rupees for every day after the first during which the failure continues, if the
company fails to furnish any information or explanation or produce any document
required under this section.
that when the Registrar or inspector calls for the books of account and other
books and papers under section 206, it shall be the duty of every director,
officer or other employee of the company to produce all such documents to the
Registrar or inspector and furnish him with such statements, information or
explanations in such form as the Registrar or inspector may require and shall
render all assistance to the Registrar or inspector in connection with such
inspection. Non-compliance with this section will render the director liable to
punishment with imprisonment which may extend to one year and with fine which
shall not be less than twenty-five thousand rupees but which may extend to one
lakh rupees under section 207(4)(i).
investigation is required, it can submit a report to the Central Government
stating its reasons in writing. Section
210 is a follow up of section 208 which allows the Central Government to
investigate into the affairs of a company on the receipt of the report of the
Registrar or Inspector under section 208 or in public interest.
affairs of a company by the Serious Fraud Investigation Office:
inspector under section 208 has been received, as per S. 212(1)(a).
immense amount of power to usurp the functioning of a company. As per S. 212(14), on receipt of the
investigation report, the Central Government may direct the SFIO to initiate
prosecution against the company and its officers or employees or any other
person directly or indirectly connected with the affairs of the company. Here, ‘any
other person’, can include a director, who is part of the Audit Committee.
provisions is providing a safe route of communication which ensures anonymity
between the whistleblower and the RoC/Central Government/SFIO. Perhaps this is
a concern that Parliament can consider while amending the Companies Act in the
India, there is a safeguard provided for in the Indian Companies Act. This situation
also resurrects an archaic principle of statutory law over-riding provisions of
a non-disclosure agreement.