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

Veda Pharma Ltd, incorporated in India, uses an independent clearing agent to obtain a licence from a government department. The agent, without the company's knowledge, promises an undue advantage to a public servant to win business for Veda Pharma. Veda Pharma had adequate procedures in place in compliance with the prescribed guidelines. What is the position of Veda Pharma under the Prevention of Corruption Act, 1988?

Veda Pharma can rely on the statutory defence. Under section 9, a commercial organisation is liable for bribery by an associated person, but it may prove it had adequate procedures, in compliance with the prescribed guidelines, to prevent such conduct. Mere ignorance is not the defence; adequate procedures are.

  1. AIt is liable because an agent is never a person associated with the company
  2. BIt can plead as a defence that it had adequate procedures to prevent associated persons from such conductCorrect
  3. CIt is automatically exempt because it had no knowledge of the act
  4. DIt is liable only if the agent has first been convicted

Explanation

Section 9(1) makes a commercial organisation punishable with fine if an associated person gives or promises an undue advantage to obtain or retain business. The proviso gives a defence if the organisation proves it had adequate procedures in compliance with the prescribed guidelines. Lack of knowledge alone is not the statutory defence, and an agent can be an associated person.

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