CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Business Ethics, Code of Conduct and Anti-Bribery
Veda Textiles Ltd, incorporated in India, hires a freight agent to clear its export consignments at a port. Without the company's knowledge, the agent promises an undue advantage to a customs officer to speed up clearance, intending to retain an advantage in the conduct of the company's business. Under the Prevention of Corruption Act, 1988, what is the position of Veda Textiles Ltd?
Veda Textiles is liable to fine as a commercial organisation because its agent, a person associated with it, promised an undue advantage to a public servant to gain a business advantage. It can escape only by proving it had adequate procedures in place; the agent's status as non-employee is irrelevant.
- AIt is not liable, because the agent is an independent contractor and not an employee
- BIt is liable to fine as a commercial organisation, unless it proves it had adequate procedures in place to prevent such conductCorrect
- CIt is liable to imprisonment of its directors automatically, with no defence available
- DIt is liable only if the customs officer is first convicted of accepting the advantage
Explanation
Section 9 makes a commercial organisation punishable with fine if a person associated with it gives or promises an undue advantage to a public servant to obtain or retain business or an advantage in its conduct. The capacity of the person (employee, agent or subsidiary) does not matter. The proviso gives a defence of adequate procedures. The option relying on the agent's independent status is wrong because capacity is irrelevant.
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