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

Orchid Foods Ltd uses a distributor, Rao Traders, which performs services on Orchid's behalf in obtaining licences. Orchid argues that Rao Traders is an independent contractor and so not a person associated with it. Under Section 9 of the Prevention of Corruption Act, 1988, how is this argument viewed?

The argument is weak. A person who performs services for or on behalf of the organisation is associated with it irrespective of capacity, and this is decided on all relevant circumstances, not merely the label of the relationship in the contract.

  1. AIt succeeds, because only employees can be associated persons
  2. BIt succeeds, because a contract describing Rao as independent is conclusive
  3. CIt fails only if Rao is a subsidiary
  4. DIt is weak, because a person performing services for or on behalf of the organisation is associated, whatever the capacity, judged on all relevant circumstancesCorrect

Explanation

Section 9(3)(c) treats a person who performs services for or on behalf of the organisation as associated. Explanation 1 says capacity (employee, agent or subsidiary) does not matter, and Explanation 2 requires looking at all circumstances, not just the contractual label.

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