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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Business Ethics, Code of Conduct and Anti-Bribery

Bharat Infra Pvt Ltd, incorporated in India, uses an independent liaison agent, Mr. Rao, to secure a municipal tender. Without the company's knowledge, Rao promises a cash payment to a municipal officer so that Bharat Infra wins the tender. Rao has not yet been prosecuted. Under Section 9 of the Prevention of Corruption Act, 1988, which statement is correct?

Bharat Infra can be punished with fine, because its agent Rao performs services for it and promised an undue advantage to win business. Prosecution of Rao is not required, and agent status does not matter. The company's only defence is proving it had adequate procedures in place.

  1. ABharat Infra can be liable only if Rao has first been convicted
  2. BBharat Infra can be punished with fine, as Rao is a person associated with it, unless it proves adequate proceduresCorrect
  3. CBharat Infra is not liable because Rao is not its employee
  4. DBharat Infra is liable only if its directors knew of the promise

Explanation

Section 9 punishes a commercial organisation with fine if any associated person gives or promises undue advantage to obtain or retain business. Under section 9(2), prosecution of the person is not required, and under Explanation 1 the capacity (employee or agent) does not matter. The adequate procedures defence is available to the company. Requiring conviction or employee status is wrong.

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