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Shardul Amarchand Mangaldas & Co

AMARCHAND TOWERS, 216 OKHLA INDUSTRIAL ESTATE, PHASE 3, NEW DELHI 110 020, INDIA
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Work +91 11 4159 0700
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Fax +91 11 2692 4900
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www.amsshardul.com
Ahmedabad, Bangalore, Chennai, Gurugram, Kolkata, Mumbai and 1 more

IHL Legal Briefings

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An overview of the Anti-Bribery Law in India: Key takeaways for Commercial Organizations

May 2019. By Shardul Amarchand Mangaldas & Co and Anuj Berry

Introduction The Prevention of Corruption Act, 1988 (“PC Act ”) is the principal anti-bribery legislation in India. The PC Act criminalizes the following acts: Accepting or obtaining or attempting to accept or obtain an undue advantage by a public servant with the intention to perform or cause performance of public duty improperly or dishonestly or to forbear or cause forbearance to perform such duty either by himself or by another public servant; Accepting or obtaining or attempting to accept or obtain an undue advantage by a person from another person as a motive or reward to induce a public servant, by corrupt or illegal means or by exercise of his personal influence to perform or to cause performance of a public duty improperly or dishonestly; Giving or promising to give an undue advantage by one person to another person with an intention (a) to induce a public servant to perform improperly a public duty or (b) to reward such public servant for the improper performance of a public duty; Giving or promising to give an undue advantage by a person associated with a commercial organisation to a public servant with an intention to obtain or retain business for such commercial organisation or any advantage in the conduct of the business for such organization. The ‘bribing of a public servant’ was introduced as a direct offence by way of the amendment to the PC Act with effect from July 2018. Specific to, commercial organizations, a new offence of ‘bribing of a public servant by a commercial organisation’ was recently introduced ( Section 9, PC Act ). These are discussed in detail in this note. Key takeaways for commercial organizations under the PC Act Firstly, a ‘commercial organization’ is defined to mean: A body incorporated in India and which carries on business in India or outside India; Any body incorporated outside India but which carries on a business or a part of the business in any part of India; A partnership or association of persons formed in India or such partnerships or association formed outside India but which carries on a business or a part of a business in any part of India. As indicated above, bribing a public servant by a commercial organization is now a direct offence. Equally, if any person ‘associated with a commercial organization ’ also gives or promises to give any undue advantage to a public servant intending to (a) obtain or retain business for such organization or (b) to obtain or retain an advantage in the conduct of business of such organization, then such commercial organization shall be punishable with fine. A person ‘associated with a commercial organization ’ has been defined to mean any person performing services for or on behalf of such organization including an employee, agent or subsidiary. Thus, there is now a wide net cast on commercial organizations in terms of potential liability that can be attracted should it directly or through persons associated engage in conduct criminalized by the anti-bribery legislation. Attribution of liability to a commercial organization or its officers/ directors Under general principles of Indian law, the general principles of criminal liability in relation to a company can broadly be understood in the following manner: • the liability of a company for the acts of its officers / employees (i.e. by application of the doctrine of attribution) and the liability of the directors for the acts of the company (i.e. by application of the principle of vicarious liability of the directors). In terms of the accepted principles of attribution, the company can be made liable for the acts of its officers/ employees who are the ‘alter ego’ / directing mind and will of the company. Companies can be made liable for statutory or common law offences involving ‘mens rea’ and a corporation cannot escape criminal liability merely because the punishment prescribed for such specific offence envisages imprisonment. Separately, insofar as the criminal liability of the officers/ directors for the acts of the company are concerned, under general principles of Indian law, there is no automatic vicarious liability of the directors or the officers of the company for the acts or omissions of the company. So as to make a director or an officer of the company vicariously liable for the acts of the company, the statute must explicitly provide for such vicarious liability of the directors or persons responsible for the management of the company, should the company be held guilty of an offence under such statute. No person, by merely holding the office of a director or officer of a company, can be made criminally liable for the offences committed by such company. However, in circumstances where it can be established that such director or officer of the company was complicit and/or abetted the commission of such offence by the company, he may be proceeded against for the abetment and/or the commission of such an offence. Some of these general principles now stand altered basis recent amendments made to the PC Act. The PC Act now recognizes a form of vicarious liability, in as much as, a person in charge of a commercial organization is made liable for the acts of such commercial organization upon proof that such an act was committed with the consent or connivance of such person in charge. Need for bribery prevention procedures Given the wide net cast on commercial organizations that can accrue basis acts of persons associated with such organization, the PC Act now enables a commercial organization to raise a defence and prove that it had adequate procedures in place to prevent persons associated with it from undertaking such conduct and accordingly, it can avoid any liability in terms of the PC Act. In the absence of adequate bribery prevention procedures, the commercial organisation may be exposed to liability for all such acts of such associated persons. Post these recent amendments, the Indian law now is substantially similar to the United Kingdom Bribery Act 2010 (“UKBA ”) on this aspect. While as of now there are no prescriptive guidelines in respect of the anti-bribery procedures to be adopted by commercial organisations that would pass the muster of Indian law, commercial organisations exposed to operations in should relook at their existing policies or in the absence of policies adopt such polices or standards as may be proportionate to the nature or scope of their business, so as to avail the benefit of the defence should there arise a situation to do so. Penalties for violation of PC Act Commercial organizations facing a prosecution / conviction under the anti-bribery law in India would face the likelihood of imposition of fines should they be convicted of an offence of paying a bribe. It is pertinent to note that there are no sentencing guidelines pertaining to imposition of fines in India. The courts typically arrive at the fines by considering factors such as the gravity of the offence and the amount of money or the value of the property involved in the commission of the offence. In sentencing fines, the courts typically target the deterrence of the commission of such offence and endeavour to ensure that no person benefits from his/her wrongdoing. As per the PC Act, the quantum of fine is to be ascertained basis the amount or property the accused had obtained or the property the accused person is unable to satisfactorily account for. Further, where it is proved that the offence had been committed with the consent or connivance of any director, manager, secretary or other officer of a commercial organization, such person shall be guilty of the offence and shall be liable for punishment for 3-7 years and shall also be liable to fine. The following table briefly captures the changes effected to the PC Act in so far as the liability of the commercial organisations and/or its officers is concerned:   Pre Amendment Act (Prior to July, 2018) Post Amendment Act (Post July, 2018) Offence of giving or promising to give bribe No direct liability Direct liability Liability of a commercial organisation Abetment of the commission of the offence and offence by a public official under the PC Act or conspiring with the public official for the commission of an offence under the PC Act Direct liability for giving or promising to give bribe or liability under for the acts by persons associated with the commercial organization Liability could be attributed to the commercial organization if the offence was committed only by directing mind such organization Liability is incurred for all the acts of any person associated with such organization, including its employees, agents, contractors, subsidiaries etc. Vicarious liability of the officers of the commercial organisation  No automatic vicarious liability Officials      of      the      commercial organization are vicariously liable [Continue Reading]

Nikesh Tarachand Shah v. Union of India Constitutionality of the pre-bail conditions provid

June 2018. By Shardul Amarchand Mangaldas & Co, Nishant Joshi, Anuj Berry, and Malak Bhatt

Introduction The question “Bail or Jail ?” at the pre-trail stage, as famously pointed out by the famous Indian jurist, Hon’ble V R Krishna Iyer, shall always belong to the “blurred area of the criminal justice system ” [1] . The Indian courts, in line with the Eight Amendment of the US Constitution, have acknowledged that ‘bail, not jail, is the norm’ [2] but at the same time have also evolved principles such as “collective interest of the community and the safety of the nation ” [3] , to carefully balance the interest of the state and the rights of the accused while deciding bail applications made by accused persons. [Continue Reading]

Legal Developments in India

Legal Developments and updates from the leading lawyers in each jurisdiction. To contribute, send an email request to
  • WHHPL v NHAI

    New Delhi, 31st August 2019: West Haryana Highways Projects Private Limited (a Special Purpose Vehicle of Era Infra Engineering) was awarded a Concession Agreement by NHAI on DBFOT Toll basis for widening of existing two lane highway and also constructions of two new bypasses. Although WHHPPL substantially completed the work and Toll was stared in 2014, NHAI was not declaring the completion. Also WHHPPL suffered huge losses due to Project overrun including threat from Banks/Financial Institution w.r.t Insolvency Proceedings (needless to reiterate one such proceedings under I&B Code filed by Bank of Baroda (erstwhile Dena bank) was recently rejected by Principal Bench, New Delhi). It was the case of WHHPPL that NHAI failed to adhere to the terms of CA in fulfilling its obligation of handing over of land. The Arbitral Tribunal passed an Award in favor of WHHPPL inter alia agreeing with the contentions of WHHPPL and also held that NHAI was in breach of the CA. The Tribunal passed an award (including interest) of Rs.750 Crores in favor of WHHPPL .
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  • Chambers Guides - Insurance 2018 - India

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    The transportation industry – aviation, shipping and rail – has been predominantly owned by government entities since India’s independence in 1947. Air India and Indian Airlines, both government-owned, rules the skies; the Shipping Corporation of India (SCI), established in 1961 and owned by the government, owns and operates around one-third of the Indian tonnage. All railway property is government owned.
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    The Arbitration and Conciliation Act, 1996 (Act) provides the framework for arbitration and conciliation in India. Drafted on the basis of the UNCITRAL Model Law, it is divided into four parts. Each part governs a different aspect of the arbitration and conciliation process: a Part 1 governs commercial arbitration; b Part 2 governs the enforcement of certain foreign awards; c Part 3 governs conciliation; and d Part 4 contains supplementary provisions (regarding the power of the court to make rulings, etc.). The Act 2 was recently amended in 2016 with an aim to make it more robust by plugging the lacunae that existed in the original legislation.