India: Anti-Corruption: If You Are Not Part Of The Solution; You Are The Problem


Fighting corruption in India has entered a new phase. In recent times, newspapers are filled with reports and analyses of alleged acts of bribery common in India. Of course, fighting corruption has become a global priority particularly with the international reach of the anti-corruption laws and how damaging such behavior can be. Much of the impetus in the increased attention results from US leadership fighting supply-side bribery and corruption due to America's fast-growing prosecution of violations of its Foreign Corrupt Practices Act ("FCPA"). Fueled by a number of international conventions and increased enforcement in the member states of the OECD and by more transparency in international transactions, the United Kingdom has also passed its own Anti-bribery Act in 2010. The subject is one of great concern to Indian corporations generally, and particularly for those who are linked with US/UK and Europe. This newsletter focuses on issues for US companies doing business in India and Indian companies doing business in US in light of FCPA and corresponding Indian law, the Prevention of Corruption Act, 1988 ("POCA").

1. The Legal Framework

1.1 FCPA

Mandated with its principal object is to check corrupt practices among US companies and its employees regardless of where they are located, the FCPA makes it unlawful for certain classes of persons and entities to make payments to foreign government officials in order to assist in obtaining or retaining business. The term person includes US listed companies operating globally, foreign companies who qualify as "issuers" in the US as well as employees of the subsidiaries. The Department of Justice ("DOJ") and the Securities Exchange Commission ("SEC") prosecute FCPA violators; SEC is the securities regulator whose focus is on civil violations related to issuers1 while the DOJ concentrates on criminal violations. It is essential to remember that the long-arm reach of the FCPA has expanded significantly and there is no territoriality nexus or requirement to implicate a person. Thus, these regulators can reach out and investigate improper payments made by US companies, their foreign subsidiaries obligated to comply with FCPA and citizens overseas.

There are two distinct sets of provisions; anti-bribery and books and records and internal controls provisions. As noted above, the former prohibits any kind of payment (direct or indirect) to secure or gain an improper favor or advantage. It is not necessary that money should exchange hands; rather, anything of value2 or even a promise to pay to a foreign official3 is barred. The accounting provisions require "issuers" to make and keep books, records and accounts in detail, accurately and should fairly reflect transactions, devise and maintain a system of internal accounting controls. There is one exception i.e., facilitation payments in order to expedite or secure the performance of a routine governmental action (discussed further below).

1.2 POCA

India too has its own equivalent since 1988 – POCA. This law also prohibits taking of bribe or any other gratification4 by a public official.5 Gratification too is a wide term and includes money or non-cash benefits as well. POCA applies in India, to Indian citizens, Indian citizens residing abroad and even to foreigners in India. Under POCA, offenders are public officials (existing or prospective) who accept a bribe; bribe givers; and intermediaries who exercise influence over such officials. It is important that gratification must be for doing or abstaining to do an official act. A mere demand or solicitation by a public servant amounts to an offence and it is not necessary that the act is actually performed; receipt of gratification simply completes the offence. Further, the FCPA exception is not a carve-out in India and, thus, payments for routine government acts are an offense.

With a new company law in place since 2013 with greater focus on corporate governance, companies are under an obligation to keep "true and fair accounts" and payments with an illegal purpose cannot be recorded as expenses and if done so, ramifications are wide. The government, both at central and state level is empowered to appoint special judges to try any offence punishable under POCA including conspiracies or abetment of any offences.

2. The Exception and Small Cash Payments

While most corporations have their gifts, hospitality and entertainment limits, code of conduct and zero tolerance policies in place, the reality in-country and on the ground may be different. While large pay-outs or favors may be simpler to track, the challenge arises when bribes are camouflaged through petty cash payments. Specifically, companies may use petty cash to make small payments, say up to INR 3,000 or about USD 60 consistently to government agencies to secure absence of obstructions in a process. The question that arises is whether such payments come within the ambit of FCPA exception of routine governmental action, even though Indian law does not allow for this exception. Under the FCPA, such routine actions include those performed by foreign officials ordinarily and exclude decisions about awarding new business or continuing business with a particular party. These cover, for instance:

  • obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country;
  • processing governmental papers, such as visas and work orders;
  • providing police protection, mail pick-up and delivery;
  • scheduling inspections associated with contract performance or inspections related to transit of goods across country;
  • providing phone service, power and water supply;
  • loading and unloading cargo, or protecting perishable products or commodities from deterioration; or actions of a similar nature.6

In the US, generally the exception is viewed narrowly plus the justification of the size of the payment is not a defense. Small, frequent payments will be equivalent to a significant bribe if the intent and objective is to bribe. Corrupt intent may be inferred from repeated conduct as well as through description of payments in the accounting entries which often tend to be vague, unclear, sans details thereby raising doubts about their authenticity. Failure to record properly can compel a reasonable inference about their actual character – i.e., payments made to bribe officials to secure favors. In essence, while conducting internal compliance audits due regard has to be paid on the categorization and frequency of such payments and, if further inquiry raises more doubts about their objective, they must be necessarily stopped.

3. Enforcement

There have been numerous instances in the last decade or so where FCPA proceedings involving bribery in India were initiated against US corporations, their Indian subsidiaries and/or company officers. According to the DOJ statistics for 2013, USD 635 million were imposed in civil and criminal penalties imposed. Some cases are described below to demonstrate how the parent company or their officials have been penalized in various instances under FCPA. All the cases below do not relate to India, but the key point is the ability of the US enforcement agencies to reach out anywhere on the globe.

3.1 Goodyear: Subsidiaries paid bribes to secure sales in Africa, and the company agreed to pay USD 16 million to settle the charges. The SEC's order found that Goodyear's subsidiary in Kenya bribed employees of several agencies, including the Kenya Ports Authority, Armed Forces Canteen Organization, Kenyan Air Force, Ministry of Roads. Goodyear violated the books and records and internal control provisions and ordered Goodyear to report its FCPA remediation efforts to the SEC for three years.

3.2 Avon Products: SEC alleged that Avon's Chinese subsidiary paid USD 8 million in cash, gifts, travel, and entertainment to gain access to Chinese officials implementing and overseeing direct selling regulations in China. Again, the books and records failed to accurately record the details and purpose of the payments and the company failed to impose controls in place to detect and prevent payments and gifts to officials by subsidiaries. In December 2014, Avon agreed to pay USD 135M to settle charges and a parallel criminal case.

3.3 Oracle: The SEC's complaint alleged that Oracle violated FCPA's books and records and internal controls provisions by failing to accurately record the side funds that Oracle India maintained with its distributors. Without admitting or denying SEC's allegations, Oracle consented to the entry of a final judgment ordering the company to pay USD 2 million penalty and permanently enjoining it from future violations of these provisions. Essentially, this sum was lowered due to voluntary disclosure of conduct in India and remedial measures taken including firing employees involved in the misconduct and made significant enhancements to its compliance program.

3.4 PwC: Five PwC Indian offices faced action for repeated deficient audits of an Indian outsourcing company, Satyam, and of its financials which enabled massive accounting fraud to go undetected for years. In April 2011, the SEC imposed USD 6 million as penalty which is the largest by a non-US based accounting firm for audit failures indicative of a much larger quality control failure at PwC India.

3.5 Diageo: SEC alleged that Diageo, London based spirits producer made over USD 1.7 million of illicit payments to hundreds of Indian government officials for purchasing and authorizing the sale of its beverages. As a result of the increased sales, Diageo recorded a large profit of USD 11 million. Diageo's books and records did not accurately reflect illicit payments that it made through its Indian subsidiary and thus came under SEC scanner. In July 2011, Diageo paid USD 16 million to settle payments made for securing favors and making (amongst others) extra commission payments to cover payments made.

In the US, the fines are not small by any means, but even more damaging is the impact on reputation, possible termination of government licenses and debarment from government contracting programs, disgorgement of company's profits on contracts secured with improper payments, and appointment of independent watchdogs over violators.

In India, corruption cases are registered by the anti-corruption division of the CBI, India's premier investigating police agency. Further, different categories of police are also empowered to conduct investigations in POCA cases. Any individual can provide information regarding corrupt practice and become an informer. The identity of such an informer is kept secret, even from the court. While the Indian Penal Code and POCA prescribe criminal and civil liability for corruption, the reality is that actions taken against the perpetrators have been far and few in between. These legislations, per se, do not hold a company as an offender, and the primary liability rests on the concerned individual i.e. the bribe receiver. However, companies cannot be absolved completely of liability when there is recurrent evidence of corruption.


With increasing cross-border business activities, governments have either revised their domestic anti-corruption laws, or introduced new ones, come down heavily on violators but, one thing is certain – anti-corruption compliance is exceedingly high on the priority list of General Counsels, Chief Compliance Officers and even the CEOs of large corporations. The heightened scrutiny of FCPA compliance resulting in prosecutions and fines, it is imperative for U.S. companies operating in India to recognize the risks of violations of FCPA can entail. To this end, managements must work closely with employees to educate them on the scope and application of FCPA to their enterprise; repeatedly train them on best practices and how to identify red-flags, put in place whistle-blower protections and constantly bolster their compliance policies and initiatives so as to insulate themselves. Compliance spend has increased enormously in recent years and the challenging question is how to bring about a mindset change or, rather, a DNA change so that those sitting thousands of miles away do not have to worry about ethics of their operating companies across the globe.


1. Any company including foreign companies who are authorized to issue their securities on a US stock exchange

2. This is rather wide and includes cash, its equivalent, and, among other things, discounts, gifts, use of materials, facilities or equipment, entertainment, travel, lodging and even promise of future employment

3. It means "...any officer or employee of a foreign government or any department, agency or instrumentality thereof [. . .] or any person acting in an official capacity for or on behalf of any such government, department, agency, or instrumentality"

4. Gratification is defined in terms of anything, which gives satisfaction to the recipient of any kind

5. The expression used is "public servant" and is defined rather widely under section 2(c) of POCA with about nine different categories of persons including judges, government officers, governing body members of universities etc.

6. 15 U.S.C. section78dd-1(f)(3).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.