INDIA Law and Practice Contributed by: Vijayendra Pratap Singh, Asif Ahmed, Tanmay Sharma and Bhanu Jindal, AZB & Partners
person or their agent to deal in securities, wheth - er or not there is any wrongful gain or avoidance of any loss. 1.2 Causes of Action After Receipt of a Bribe The Prevention of Corruption Act, 1988 (the “PC Act”) Paying illegal gratification (bribes) to a public or a government official is punishable under a special statute – the PC Act. The PC Act penal - ises a government servant as well as any per - son or organisation (including its officers) who gives any illegal gratification to a public official to obtain a benefit. The term “gratification” is used very broadly under the Act, and includes getting any undue advantage, whether pecuni - ary or otherwise. Likewise, “public servant” has been defined broadly to include officials working in corporations controlled or aided by the gov - ernment, and anyone performing a public duty (such as bank officials, irrespective of whether they are employed by the government). There is no de minimis standard for the quantum that would qualify as a bribe. In order to prove the offence of bribery, the prosecution has to prove: • the demand of a bribe by the public servant or the offer to pay a bribe by a person; and • the acceptance or obtainment of the illegal gratification, either through direct or circum - stantial evidence. Claims relating to bribery in India can be brought against public servants and can also lie against persons or organisations who bribe or attempt to bribe such public servants. Receipt of a bribe by an agent of a claimant in general is also punish - able under the PC Act where such a bribe has been received to induce a public servant to per - form their public duty improperly or dishonestly.
The claimant in that case may proceed to file a complaint with specialised investigative agen - cies such as the Central Bureau of Investigation (CBI) or the State Anti-Corruption Bureau. How - ever, the claimant may not be able to compel the CBI to act on a complaint, and the CBI may treat the complaint as information upon which it initiates its own investigation. The Companies Act Under the Companies Act, it is the directors’ responsibility to create adequate internal finan - cial controls that enable the prevention and detection of fraud and other irregularities within a company. Such internal controls include the setting-up of channels for reporting of the receipt of a bribe by an agent. In the event of a failure to do so, various recourses are available to stake - holders under the Companies Act, such as: • prosecution for fraud; • an action for disgorgement pursuant to a class action (in the case of egregious default); or • an action for oppression and mismanage - ment. A statutory auditor of the company is obligated to report fraud to the audit committee or the board of directors. Where the amount of sus - pected fraud is more than INR1 crore, the auditor is also required to report such to the central gov - ernment, after the audit committee or the board of directors (as the case may be) has been given an opportunity to respond to this. Where the auditor fails to do so, they are exposed to vari - ous legal liabilities, as explained in 1.3 Claims Against Parties Who Assist or Facilitate Fraud- ulent Acts . The company may also pass a special resolution that its affairs are required to be investigated and
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