Ishan Agarwal 4Th Year BBA LLB (Hons.) School of Law, Bennett University

INTERNATIONAL JOURNAL FOR LEGAL RESEARCH & ANALYSIS (ISSN 2582 – 6433)

VOLUME I ISSUE X (FEBRUARY 2021)

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EDITORIAL TEAM

EDITORS Ms. Ezhiloviya S.P. Nalsar Passout

Ms. Priya Singh West Bengal National University of Juridical Science

Mr. Ritesh Kumar Nalsar Passout

Mrs. Pooja Kothari Practicing Advocate

Dr. Shweta Dhand Assistant Professor

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ABOUT US

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CORRUPTION IN INDIA- A DETAILED EXPLORATION -Ishan Agarwal 4th year BBA LLB (Hons.) School of Law, Bennett University

INTRODUCTION Corruption is from a very long time has become a major issue in any country and it is a widely discussed topic around the world. India is the second largest country in the world after China with a population of more than 1 billion people1 and it is the fastest growing economies around the world2. But India’s growth has always been obstructed due to the corruption in the country which prevents the benefits of development from reaching to a wide section of population of the country. Hence, eradicating corruption is a major challenge in India for which various laws has been passed. This research paper brings up all the laws concerned with corruption in the country and other particular related to corruption in India.

WHAT IS CORRUPTION ? Leading organization Transparency International fighting for corruption around the word, defines corruption3 as “Corruption is the abuse of entrusted power for private gain.” They have very well defined corruption in 3 points which are as follows: - i. Public servants demanding or taking money or favours in exchange of services, ii. Politicians misusing public money or granting public jobs or contracts to their sponsors, friends and families, iii. Corporations bribing officials to get lucrative deals.

LAWS GOVERNING CORRUPTION IN INDIA There are various laws which are present in the Indian Legal System to curb corruption which will be discussed in detail as follows. From the above stated definition of corruption it is clear that the act of corruption is committed by public servants, politicians or private or public corporations or entities. White collar crimes are the most common example of corruption in India.

1 https://data.worldbank.org/indicator/SP.POP.TOTL 2 https://www.imf.org/en/Publications/WEO/Issues/2019/10/01/world-economic-outlook-october-2019 3 https://www.transparency.org/en/what-is-corruption

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‘Public servant’ as defined by the combined reading of Section 214 of Indian Penal Code, 1860 & Section 2(c) 5of Prevention of Corruption Act, 1988 which states ‘public servant’ as a government employee, officers in the military, navy or air force; police, judges, officers of Court of Justice, office bearers of cooperative societies receiving financial aid from the government, employee of any educational, scientific, social, cultural or other institution, employees of public service commission or banks and any employee who is in service or pay of any local authority or corporation established by a central or state Act, or any employee who is in the service or pay of the Government or remunerated by fees or commission for the performance of any public duty by the Government.

The Indian Penal Code provides provisions for the public servants who abuse their position and are indulged in corrupt practices. Chapter IX specifically deals with the wrongful acts by public servants where Section 1696 specifically states about unlawfully buying or bidding of property by public servants in their names or others name to gain benefits for him will be punished. Section 171B7 talks regarding Bribery during elections where sub-clause (ii) states regarding accepting bribery for performing certain duties will be punished as per Section 171E8 of Indian Penal Code, 1860. Section 4099 also talks regarding criminal breach of trust by public servants.

The Prevention of Corruption Act is the principal legislation against the offences related to corruption in India which came in force after the recommendations made by Santhanam Committee Report10. Earlier only Chapter IX11 of Indian Penal Code was dealing with the offences related to corruption but then due to the increased number of corruption practices this special legislation was formed and has been amended time to time make it work more effectively. The act not only governs the acts of corruption by public servants but of individuals and corporations too. Chapter VII12 of the act specifies the offences and

4 Indian Penal Code, 1860, § 21, No. 45, Acts of Imperial Legislative Council, 1860 (India) 5 The Prevention of Corruption Act, 1988, § 2(c), No. 49, Acts of Parliament, 1988 (India) 6 Indian Penal Code, 1860, § 169, No. 45, Acts of Imperial Legislative Council, 1860 (India) 7 Indian Penal Code, 1860, § 171B, No. 45, Acts of Imperial Legislative Council, 1860 (India) 8 Indian Penal Code, 1860, § 171E, No. 45, Acts of Imperial Legislative Council, 1860 (India) 9 Indian Penal Code, 1860, § 409, No. 45, Acts of Imperial Legislative Council, 1860 (India) 10 Santhanam Committee Report 1964, 9.11-9.15 11 Indian Penal Code, 1860, No. 45, Acts of Imperial Legislative Council, 1860 (India) 12 The Prevention of Corruption Act,1988, No. 49, Acts of Parliament, 1988 (India)

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punishments of corruption or bribery where Section 713 of the act states that any public servant who accepts gratification in carrying out their official functions will be punished. Whereas Section 8-1214 of the act states regarding the corrupt acts or bribery of individuals or corporations. This act was passed with the intent to make anti-corruption laws more effectively and bring different acts of corruption from different legislations under one umbrella act. Still, there are further act of corruption which will be discussed further in other laws.

The Lokpal And Lokayuktas Act in its preamble provides for the establishment of a body on a Centre and State level to inquire about corruption allegations against public functionaries. Section 115 of the act states that this act will be applicable to public servants in or outside India. This act basically talks about the procedure followed to investigate and prosecute corrupt public servants. To bring simplicity and effectiveness in the process of prosecuting corrupt public officials, this act was passed with the intent to create Lokayuktas on Centre and State levels to investigate the matters against corrupt public officials.

The Prevention of Money Laundering Act talks regarding movement of illegally or dishonestly acquired money so that it appears to be transferred from a valid source which means that someone who acquired huge amount of money by illegal means and he doesn’t pay taxes on it or hides that money and transfers that money in such a way that it looks like legal or white money which results in the act of corruption as the taxes are not paid on that money. Section 316 of PMLA defines the act of money laundering which states that any person who is indulged or actively participating in any crime and received proceeds from it has committed the offence of money laundering. Section 2(u)17 of the act states the meaning of ‘proceeds of crime’ which states that any property obtained by any person from any criminal activity will be considered as ‘proceeds of crime’ and the person will be punished according to the Scheduled Offences. As the act uses the word any person than it is clear that this act is applicable to every individual including public servants.

13 The Prevention of Corruption Act, 1988, § 7, No. 49, Acts of Parliament, 1988 (India) 14 The Prevention of Corruption Act, 1988, § 8-12, No. 49, Acts of Parliament, 1988 (India) 15 The Lokpal And Lokayuktas Act, 2013, § 1 No. 1, Acts of Parliament, 2014 (India) 16 The Prevention of Money Laundering Act, 2002, § 3, No. 15, Acts of Parliament, 2003 (India) 17 The Prevention of Money Laundering Act, 2002, § 2(u), No. 15, Acts of Parliament, 2003 (India)

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The Foreign Exchange Management Act18 regulates the corrupt acts of the brokers who act as a middle person in foreign purchases where they charge huge commissions from the suppliers for transferring the goods into the country.

The Benami Transaction (Prohibition) Act prohibits benami transaction of property where properties are purchased on the name of other person and the money is paid by other. These type of acts are done for the purpose of tax evasions and most of the money which any person accumulates by corrupt means got invested in such benami purchases of property. Section 319 of the act prohibits all types of benami transaction.

The Income-Tax Act20 provides for the penalties for any resident of India who is not paying tax on his total computed income for the previous financial year. Chapter XXI and Chapter XXII of the act deals with all the penalties and prosecutions for the matters related to defaulting of tax payment by various means.

The Black Money (Undisclosed Foreign Income and Assets) And Imposition Of Tax Act21 provides for the penalties and punishments for undisclosed income and assets which are held outside India by any resident of India who is not paying tax on it. Chapter IV and Chapter V of the act deals with all the penalties and prosecutions for the matters related to defaulting of tax payment of the undisclosed foreign income and assets by various means.

The Right to Information Act22 provides the citizens of the country to access of all the information which is in public domain. Citizens are empowered to ask information related to public services, utilisation of public funds etc which can curb corruption as public officials will have fear of getting caught if the information becomes public.

The Companies Act also provides punishment for corrupt practises by the company or the its stakeholders like directors, promoters etc. Section 44723 of the act provides for the

18 The Foreign Exchange Management Act, 1999, No. 42, Acts of Parliament, 1999 (India) 19 Prohibition of Benami Property Transactions Act, 1988, § 3, No. 45, Acts of Parliament, 1988 (India) 20 Income-Tax Act, 1961, No. 43, Acts of Parliament, 1961 (India) 21 Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, No. 22, Acts of Parliament, 2015 (India) 22 The Right To Information Act, 2005, No. 22, Acts of Parliament, 2005 (India) 23 The Companies Act, 2013, § 447, No. 18, Acts of Parliament, 2015 (India)

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punishment of fraud where the explanation to the section where ‘Fraud’ is defined as any person who abuses his power to gain advantage by injuring other person will be punished for the offence of fraud. As the definition of corruption clearly indicates that the corrupt acts can also be performed by corporations this provision clearly states the fraudulent acts of the companies or its officers which will be considered as corrupt acts.

AUTHORITIES ALLOWED TO INVESTIGATE AND PROSECUTE CORRUPT PUBLIC SERVANTS The three main authorities involved in the process of investigating, prosecuting and inquiring cases related to corruption are Central Vigilance Commission, Central Bureau of Investigation and Anti- Corruption Bureau. The Central Vigilance Commission Act regulates the formation and appointment of Central Vigilance Commissioners and it also regulates the powers and functions of Central Vigilance Commission. The preamble of the Central Vigilance Commission Act clearly states that this act provide for the constitution of a Central Vigilance Commission to inquire or cause inquiries to be conducted into offences alleged to have been committed under the Prevention of Corruption Act, 1988 by certain categories of public servants defined above. Section 324 of the act talks about constitution of Central Vigilance Commission and Section 825 provides for the powers and functions of the constituted commission. CBI’s and ACB’s investigate matters related to corruption where CBI’s jurisdiction is the Centre and Union Territories while ACB’s jurisdiction is limited to corruption cases within the state. As per Section 326 of Prevention of Corruption Act, 1988 special judges are appointed by the central or state government to try cases related to corruption. In cases of Money Laundering and Foreign Exchange of Money investigation and prosecution are done by the Directorate of Enforcement. As per Section 3627 of FEMA, 1999, the appointment of Directorate of Enforcement will be done by central government.

24 The Central Vigilance Commission Act, 2003, § 3, No. 45, Acts of Parliament, 2003 (India) 25 The Central Vigilance Commission Act, 2003, § 8, No. 45, Acts of Parliament, 2003 (India) 26 The Prevention of Money Laundering Act, 2002, § 3, No. 15, Acts of Parliament, 2003 (India) 27 The Foreign Exchange Management Act, 1999, § 36, No. 42, Acts of Parliament, 1999 (India)

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INTERNATIONAL OBLIGATIONS India has signed UN Convention Against Corruption in 2005 and ratified in 2011. As per Article 128 of the Convention, the main purposes are:

(a) To promote and strengthen measures to prevent and combat corruption more efficiently and effectively; (b) To promote, facilitate and support international cooperation and technical assistance in the prevention of and fight against corruption, including in asset recovery; (c) To promote integrity, accountability and proper management of public affairs and public property. The convention puts obligations on India to make laws related to corruption and come forward for preventing corruption.

FAMOUS CASES The Satyam Scam Case29 is the biggest financial crime of the country where the major issue of corporate governance came up. The fraud was committed by the CEO of Satyam Computers Mr. Ramalingam Raju where he manipulated company’s accounts and he inflated the company’s overall financial position by various means to attract more shareholders. He was charged under various provisions of IPC and Prevention of Money laundering Act for the offences of criminal conspiracy, cheating, cheating by impersonation, forgery of valuable security, forgery for the purpose of cheating, using a forged document as genuine, falsification of accounts and money laundering. The CBI investigated the case and court held Mr. Raju guilty and gave him rigorous imprisonment for 7 years and a fine of Rs. 5 crore.

The Commonwealth Games Scam30 was the most famous scam related to sports event in the country where the head of the Organizing Committee of the event Mr. Suresh Kalmadi was booked under various charges under Prevention of Corruption Act and Indian Penal Code. He was accused for giving contracts to private companies on a higher price from the actual price which was unreasonably high. Suresh Kalmadi allegedly given a Rs 141-crore contract to Swiss Timing for its timing equipment, a deal which was inflated by Rs 95 crore. Further, it

28 Article 1, The United Nations. (2003). United Nations Convention Against Corruption. Treaty Series, 2349, 41 29 Madan, Lal & Bhasin, Madan, Revisiting the Satyam Accounting Scam: A Case Study, 5, International Journal of Management and Social Sciences Research, 31-46 (2016) 30 https://lawlex.org/lex-bulletin/commonwealth-games-scam-2/6518

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was also reported that Indian athletes were forced to stay in shabby apartments instead of the flats allotted to them by the authorities. The Central Vigilance Commission took the case and appointed CBI to look into the matter where he was charged with various offences and was sent to jail for 10 months and later on released on bail for a surety amount of Rs. 5 Lakh.

The 2G Spectrum Case31 is also named as one of the biggest scams in India where formed telecom minister A. Raja and DMK chief M Karunanidhi’s daughter, Kanimozhi were found accused for giving 2G spectrum licenses and airwaves on the low asked prices and there was no auctions that were conducted for a fair delivery of licenses and spectrums. Both of them with others were booked32 for offences of Criminal breach of trust by a public servant, Criminal conspiracy, Cheating under Indian Penal Code and for offences under Prevention of Corruption Act. CBI took over the investigation and both of them were in custody but the court later cancelled all the licenses and acquitted them as prosecution was not able to find any evidences against them.

The much talked Raffle Deal33 can also become the country’s biggest scam in the future. In Raffle deal there are allegations that the current government has over-priced the cost of jets and the contract was given to Anil Ambani led Reliance Defense and not to Hindustan Aeronautics Ltd. According to the contract 30% of the aircraft has to be made by the French Firm Dassault Aviation and the remaining by the Hindustan Aeronautics Ltd. but later the contract is changed and the responsibility of making the remaining part has been given to Reliance Defense on a higher price.34 There were complaints that were registered to CBI for the same but no enquiry has been done stating the reason of national security.

ISSUE WITH ELECTORAL BONDS The Government of India has notified the Electoral Bond Scheme 2018 vide Gazette Notification No. 20 dated January 02, 201835 under which any individual who is a citizen of India or corporation registered in India can buy Electoral Bonds from State Bank of India and

31 https://blog.ipleaders.in/case-study-2g-spectrum-case/ ,(last visited on Feb 10, 2021) 32 https://telecom.economictimes.indiatimes.com/news/2g-scam-here-are-the-charges-against-the- accused/62178775, (last visited on Feb 10, 2021) 33 https://economictimes.indiatimes.com/news/defence/rafale-deal-largest-defence-scam-in-indias-history- prashant-bhushan/articleshow/66196602.cms?from=mdr ,(last visited on Feb 10, 2021) 34 https://www.thehindu.com/news/national/rafale-deal-congress-alleges-huge-scam-reliance-denies- it/article20444680.ece ,(last visited on Feb 10, 2021) 35 http://egazette.nic.in/WriteReadData/2018/181434.pdf ,(last visited on Feb 10, 2021)

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donate those bonds to the political parties which are registered under Section 29A36 of the Representation of the People Act and which secured not less than one per cent of the votes polled in the last General Election to the House of the People or the Legislative Assembly of the State. The issue which came up with these Electoral Bonds is that as per Section 7(4) of Electoral Bond Scheme, 201837 the confidentiality of the buyers and the source of the income of buyers of the bonds has to be kept secret which simply gives chance to people for dumping all their black money stored and turn them white through these bonds giving rise to a space in corruption in political funding.

REASONS FOR POLITICAL LEADERS NOT GETTING CONVICTED Corruption in politics is a huge issue in the country which has to be looked upon as there are various anti-corruption laws in place in the country but generally political leaders escape from all such laws. In my opinion in most of the cases the political leaders get caught and they are convicted too as we can see form the famous cases of Suresh Kalmadi, A. Raja & Lalu Prasad Yadav. But still there are politicians who get to escape from the conviction due to numerous reasons: -

i. During elections political leaders has to spend a huge amount of money on their election campaign for winning the elections and once they win and get into power they resort to various illegal and corrupt means to recover the huge amount they have spent during elections.

ii. Complex Procedure to remove any public servant from his office usually causes delay in his conviction and in this period the concerned public servant find ways to get out it where he can purchase witnesses or tamper evidence being in the government himself.

iii. Less stringent laws in the country to punish the politicians and public servants where if any enquiry has been started against them by any officer such officer gets suspended with registering fake charges against them. There was an act which came named as Whistle Blowers Protection Act, 201438 whose main object was to establish a mechanism to receive complaints relating to disclosure on any allegation of

36 The Representation of the People Act, 1951, § 29A, No. 43, Acts of Parliament, 1951 (India) 37 Govt. of India, Ministry of Finance , F. No: -2018/29(E) (January 2, 2018). 38 http://legislative.gov.in/sites/default/files/A2014-17.pdf ,(last visited on Feb 10, 2021)

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corruption or wilful misuse of power or wilful misuse of discretion against any public servant and to inquire or cause an inquiry into such disclosure and to provide adequate safeguards against victimisation of the person making such complaint. But this act is not yet operational which leaves a big question mark on the government as it would have created problems for them due to which this act never got operational.

WHETHER BRIBERY SHOULD BE LEGALISED ? In 2011, Kaushik Babu, the then Chief Economic Advisor of Ministry of Finance has proposed that bribery should be legalised to reduce the cases of bribery39. He has differentiated bribe into two forms harassment and non-harassment bribes and then he proposed that harassment bribes should be legalised. According to him ‘Harassment Bribes’ are those bribes where anyone has to give bribe even for the things he is legally entitled to, like any person having all the correct documents for a land deal but he has to give bribe to get the deal done. In his view, as per present law in Prevention of Corruption Act, both bribe giver and bribe taker will be held liable and they will be punished due to which the bribe giver even if he wants to complain does not complain as he will also be equally held liable and will get punishment and will be equally fined. He suggests that change in law is required, where bribe giver should give bribe and get his work done and later if he complaints than only the bribe taker should be held liable and get punished and bribe giver will not be held liable as he was indirectly forced to give bribe for his work to be done. Knowing that this can happen, the bribe taker will refuse to take bribes as he will be the one who will be liable. He quoted that “The giver of a harassment bribe should have full immunity from any punitive action by the state.”

CORRUPTION AROUND THE WORLD- TRANSPARENCY INTERNATIONAL Transparency International, an international NGO working towards combatting corruption around the world releases every year Corruption Perceptions Index which ranks 180 countries around the world for the levels of public sector corruption in those countries.

39 http://kaushikbasu.org/Act_Giving_Bribe_Legal.pdf ,(last visited on Feb 10, 2021)

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As per CPI Ranking40, 2019 the following 6 countries tops the ranking and are the least corrupt countries.

Source: Transparency International’s Corruption Perceptions Index, 2019

India’s ranking in CPI41, 2019 is 81st out of 180 countries. The reason behind the increased levels of corruption in India are lack of knowledge of laws and their rights, personal interests of public servants above nations interest, complex procedures and laws forces people to give bribes to get their work done, less moral values of the politicians etc.

STEPS TAKEN BY LEAST CORRUPT COUNTRIES TO COMBAT CORRUPTION The steps taken by the least corrupt countries in curbing corruption in their country are as follows:42 i. The countries have created a platform and empowered people to bring up their complaints against corrupt public leaders. People are made educated regarding their rights and the laws prevailing in the country by various education drives by the government.

ii. The countries have protected the freedom of press to report on the corruption matters of public leaders without fearing of their lives in any manner. The press can fearlessly conduct sting operations, report corruption cases against the corrupt leaders.43

40 https://www.transparency.org/en/cpi/2019/results/table ,(last visited on Feb 10, 2021) 41 https://www.transparency.org/en/countries/india ,(last visited on Feb 10, 2021) 42 https://www.transparency.org/en/news/how-to-stop-corruption-5-key-ingredients ,(last visited on Feb 10, 2021)

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iii. Enforcing laws strictly against the culprits and leaving no gap for them to escape. The political leaders are also scrutinized before they come into power for the criminal records they have.

iv. Strict Laws for private companies to function in the country as companies often pay bribes to get contracts. There should be anti-corruption measures for companies.

v. The important step is to create a political will among political leaders to eradicate corruption which is followed by Singapore to cub corruption maintaining the 5th rank in curbing corruption. 44

vi. Strict Code of Conduct for Police brings the corruption low as in any country police performs more corruptive actions. Sweden has established an effective mechanism to investigate police forces found in corruption cases. 45 In Finland also, police services are considered to be the least corrupt services as citizens don’t have to pay bribes to police officials in the country.46

CONCLUSION Corruption is an everlasting situation in the country which cannot be completely eradicated. It can only be controlled by some measures like control over the expenses incurred during elections, honest public leaders with high moral values to serve nation interest first and their individual interest later, or more stringent laws which should be followed strictly like the laws protecting public servants for misusing their power should be abolished. The least corrupt countries also have big corruption cases on a private scale as CPI only calculate the rank according to the corruption on a public scale. The government should seriously look towards implementing more anti-corruption measures to make India corruption-controlled country.

43 https://www.weforum.org/agenda/2019/02/least-corrupt-countries-transparency-international-2018/ ,(last visited on Feb 10, 2021) 44 https://www.unafei.or.jp/publications/pdf/RS_No104/No104_18_VE_Lim_1.pdf ,(last visited on Feb 10, 2021) 45 https://www.ganintegrity.com/portal/country-profiles/sweden/ ,(last visited on Feb 10, 2021) 46 https://www.ganintegrity.com/portal/country-profiles/finland/ ,(last visited on Feb 10, 2021)