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Whistleblower Protection in Finance: A Safeguard for India’s Economy
The whistleblower policy in India is aimed to safeguard the interest of general public. Employees who reveal fraud, corruption or mismanagement to the senior management are called internal whistleblowers. Employees who report fraud or corruption to the media, public or law authorities are external whistleblowers. Indian whistleblowers are protected under the Whistleblower Protection Act India.
Importance of Transparency in Corporate Governance
Effective corporate governance in a company can be ensured by having complete transparency in internal and external dealings of the corporate. Transparency can be cemented in the company’s affairs through active management and strong policies in place. A disclosure system needs to be employed to detect internal fraud and corruption in the company and have a quick mechanism to deal with it.
What is Whistleblowing?
Whistleblowing means when an employee makes fraud, corruption, and wrongdoing in an organization known to the public. A whistleblower in India is a current or ex-employee who exposes information regarding what is believed to be fraud, corruption or deviation from the company rules and company law India.
The Law Dealing with Whistleblowing in India
Laws relating to whistleblowing and protection of whistleblowers are inadequate in India. However, the Companies Act, 2013 lays down provisions for whistleblowing and corporate governance in India and the elimination of fraud by establishing adequate vigil mechanism.
- Section 208 of the Act empowers an Inspector to inspect company records and furnish any recommendations to conduct investigations.
- Section 210 states that the Central Government may order an investigation into the affairs of the company in the following cases: on receipt of a report by Registrar or Inspector of the company, on intimation of a Special Resolution passed by a company that the affairs of the company must be investigated, and to uphold the public interest.
- The Serious Fraud Investigation Office (SFIO), a statutory body is created under Section 211 of the Act which has the power to arrest any person for fraud in the company.
Challenges of Whistleblowing in India
However, even if a whistleblower reports a fraud or even if there is a whistleblower policy in place, the perpetrators of the fraud or the higher management generally try to shut down the whistleblower. They also have this apprehension that if they report the fraud, they will be at the risk of losing their job as most of the frauds in an organization are done by the higher management or board members.
Instances of Whistleblower Cases in India
There have been instances of whistleblower cases in India wherein not only the employees but also the middle management and higher management has reported the fraud in the organizations. Whistleblower policy and protection of whistleblowers help and motivate the whistleblower to come forward and report the incidents of fraud.
Conclusion
The formulation of concrete policy and its effective implementation can tremendously reduce the risk of corruption and fraud in the internal dealings of a company. The whistleblower policy must ensure that not only the company’s interest is protected, but a chain of free communication is established in an organization where the employees don’t feel afraid in coming forward to put forth their grievances and concerns over the internal organization.
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