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

Veerabhadra Steels Pvt Ltd, incorporated in India, uses a freelance liaison agent, Mr. Anand Rao, to obtain a mining clearance. Mr. Rao promises cash to a government officer so that the company retains its business advantage. The company says Mr. Rao is not on its payroll and so cannot be linked to it. Under Section 9 of the Prevention of Corruption Act, 1988, how is this argument viewed?

The argument fails. A person is associated with a commercial organisation if he performs services for or on its behalf, and the capacity is irrelevant, whether employee, agent or subsidiary. A freelance agent can therefore make the company liable, regardless of payroll status.

  1. AIt fails, because the capacity in which the person performs services is immaterial; an agent can be a person associated with the companyCorrect
  2. BIt succeeds, because only salaried employees can be persons associated with a commercial organisation
  3. CIt succeeds, because a freelance agent is always an independent contractor outside the section
  4. DIt fails only if Mr. Rao has already been convicted

Explanation

Under Section 9(3)(c) a person is associated if he performs services for or on behalf of the organisation. Explanation 1 says the capacity does not matter, whether employee, agent or subsidiary. The payroll argument therefore fails. Conviction is not required.

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