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

Kaveri Textiles Ltd, incorporated in India, uses an external clearing agent, Mr Rao, to obtain port permissions. Without the company's knowledge, Mr Rao gives cash to a customs officer to speed up a clearance for the company's benefit. The company had adopted a written anti-bribery code with training, due diligence on agents and reporting channels. Under Section 9 of the Prevention of Corruption Act, 1988, what is the company's best position?

The company may rely on the statutory defence that it had adequate procedures, in line with prescribed guidelines, to prevent associated persons from bribing. An agent is an associated person regardless of capacity, so non-employee status gives no exemption, but a well-implemented code, training and due diligence support the defence.

  1. AIt is automatically exempt because the agent is not an employee
  2. BIt may prove a defence that it had adequate procedures, in compliance with prescribed guidelines, to prevent associated persons from such conductCorrect
  3. CIt is liable only if a director personally paid the bribe
  4. DIt can escape only if Mr Rao has already been convicted

Explanation

Section 9 punishes a commercial organisation if a person associated with it gives undue advantage to a public servant to obtain business or advantage. A proviso allows the organisation to prove it had adequate procedures in compliance with prescribed guidelines. Agent status does not exempt it, since capacity does not matter.

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