But when it comes to actually cracking down on corruption and meting out deterrent punishment, foreign regulators clearly appear to be doing a better job than Indian ones. A case in point is the whopping $23 million ( ₹188 crore) fine coughed up by Oracle to settle charges that its officials paid a bribe to secure a contract from an Indian Railways subsidiary. The US Securities and Exchange Commission announced that US infotech major, which has a significant presence in India, had created and operated a slush fund to bribe public officials in India, as well as used an “excessive discount scheme" to funnel funds to public officials in return for contracts.
This is the second time that the US tech major had run foul of the stringent Foreign Corrupt Practices Act (FCPA), a sweeping US law that makes it illegal to offer or provide money or anything else deemed to be of value to officials of foreign governments, foreign political parties, or public international organizations with the intent to obtain or retain business.
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The FCPA also has accounting provisions which require that companies covered under its ambit maintain accurate book of records and ensure that adequate internal controls are in place to prevent acts which are in contravention of FCPA provisions. Oracle had been penalised in 2012 as well for maintaining a side fund which could potentially have been used to pay bribes. In both cases, Oracle chose to settle, which means it neither accepted nor denied SEC’s charges, but chose to pay the fines and close proceedings.
Oracle is not a solitary flash in the pan. There have been a number of instances in the past where the FCPA has cracked down on US companies for indulging in bribery and corruption in India. In 2017, Mondelez International paid a hefty $13 million (about ₹80 crore at the then exchange rate) to settle charges that its Indian subsidiary Cadbury India had paid bribes to government officials and politicians to get permission for a chocolate factory in Himachal Pradesh.
In 2018, Alere shelled out over $13 million in fines, penalties and disgorgements for having bribed Indian public officials to secure orders for malaria test kits. A couple of years back, the Chicago headquartered Beam Suntory, which manufactures alcoholic beverages, agreed to pay over $19 million to settle charges brought by the US Justice Department that its Indian subsidiary had bribed officials in India to secure permissions for a bottling line.
Here's the thing – in all these cases, where an overseas prosecuting agency clearly established cases of bribery in India – involving Indian public officials at the receiving end – there is nothing on record to show that the Indian anti-corruption machinery actually swung into action against the said public officials.
When it comes to corruption, India has a plethora of laws and agencies to tackle graft, particularly among public servants, although the 2018 amendment of the Prevention of Corruption Act brought private companies also under its ambit, as well as officials/employees of such entities directly responsible for paying out bribes.
In addition to the all-encompassing Prevention of Corruption Act, India has a plethora of laws and anti-corruption bodies. The Indian Penal Code had provisions relating to bribery and corruption back in 1860 itself (they are still on the books). Then there are provisions under the Companies Act, as well as the Prevention of Money Laundering Act, the Foreign Contribution (Regulation) Act. Then you have the
Lokpal and Lok Ayukta Acts (at the Centre and State levels) to create an anti-corruption ombudsman. There are Central ad State Vigilance Commissions specifically charged with taking action against corrupt public officials.
But very little punitive action takes place. According to the National Crime Records Bureau data for 2020 (latest available), of the 26,876 cases for trial under various anti-corruption acts, prosecuting agencies managed to secure only 369 convictions. And more than 96 per cent of the cases were pending trial.
This wide gap between what exists on paper and what actually happens on the anti-corruption front is probably why India is still a laggard in most corruption rankings. India ranks 82 out of 194 countries (with 1 being least corrupt) in Trace’s Bribery Index. We rank 68 out of 114 countries in the Corruption Risk Index 74 out of 129 in transparency.
India’s chief corruption fighter, the Central Vigilance Commissioner, summed up the reasons why in a recent address to CEOs: “The important causes of corruption in India are poor regulatory framework, exclusivist process of decision making aggravated by discretion and official secrecy, rigid bureaucratic structures and processes; and absence of effective internal control mechanisms, social acceptability and tolerance for corruption and absence of a formal system of inculcating the values of ethics and integrity."
Which is true enough but doesn’t explain the lack of actual punitive action by the many bodies set up to fight graft. Unless India’s anti-corruption bodies are prepared – or allowed – to actually use the teeth they have been legally empowered with, foreign regulators – who face no such shackles – will continue to be better at fighting corruption in India than Indian regulators.
Elsewhere in Mint
In Opinion, Ajit Ranade argues a high upswing in business or investment cycle is unlikely in the near term. Anjani Trivedi writes why venture capitalists looking to put their money to work should keep an eye on India. Pradeep S. Mehta tells why courts should appoint economists and finance experts. Long Story draws chip-making lessons for India from East Asia.
