Whistleblower Protection in Finance: India Falls Short of International Standards

Inadequate Protection for Whistleblowers in India

India’s legal framework fails to provide adequate protection for whistleblowers who report financial irregularities or wrongdoing within companies. Unlike the US, where a separate entity takes care of such incidents, Indian law relies on companies to draft their own policies to safeguard against victimization.

Current Legal Framework

Under the Companies Act, 2013, listed entities are required to set up an audit committee to investigate whistleblower complaints. However, this does not provide a mechanism to protect whistleblowers from retaliation or intimidation. Instead, it is left to individual companies to develop and implement their own policies, which often lack teeth.

Absence of Robust Protection

Vijay Belavadi of BRK Law Firm laments the absence of robust protection for whistleblowers in India:

“It is incumbent upon directors (usually top management) of a company to investigate complaints of wrongdoing by erring top management, which usually defeats the purpose, primarily because of lack of appropriate legislation.”

The Whistle-Blowers Protection Act, 2014

Notified in May 2014, this law aims to provide a mechanism for investigating alleged corruption and misuse of power by public servants, as well as protecting those who expose wrongdoing in government bodies, projects, or offices. However, the law has yet to be implemented.

International Comparison: US Office of Whistleblower Protection Program

In contrast, the US Office of Whistleblower Protection Program enforces protections for employees who suffer retaliation for engaging in protected activities under more than 20 federal laws. The program has a neutral investigation process, where investigators do not work for either the complainant or respondent (employer).

Challenges Faced by Indian Whistleblowers

Belavadi notes that whistleblowers in India have very little protection and are therefore wary of sending documentary evidence to regulators or employers. This is evident from a recent case involving Infosys, where an employee group sent its documents and voice recordings to the US Department of Labor’s Whistleblower Protection Program instead of the company itself, citing concerns about revealing their identity.

Voluntary Policies: A Limited Solution

Some Indian companies, such as Infosys, Wipro, Tata Motors, TCS, SAIL, and Reliance Industries, have implemented whistleblower policies. However, these policies are often voluntary and lack a robust mechanism for protection. The absence of effective legislation and regulatory oversight means that whistleblowers in India continue to operate in a precarious environment, where they risk retaliation or intimidation if they report wrongdoing.

Conclusion

India’s failure to provide adequate protection for whistleblowers is a major concern. Until a robust legal framework is put in place, whistleblowers will continue to face inadequate protection and risks of retaliation or intimidation. It is essential that the government takes concrete steps to ensure the safety and security of those who report wrongdoing in the financial sector.