Global Investigations Review - The law and practice of international investigations

The Practitioner’s Guide to Global Investigations, Third Edition

India

03 January 2019

Archer & Angel

General context and principles

1 Identify the highest-profile corporate investigation under way in your country, describing and commenting on its most noteworthy aspects as it relates to your country.

At the beginning of the year, Punjab National Bank (PNB), one of India’s largest state-managed banks, declared that it had detected fraudulent transactions worth more than US$1.8 billion at one of its Mumbai branches. PNB is India’s second-largest public lender of the state-managed banks and the amount of the fraud is purportedly about 8.5 times PNB’s profits for the 2016–2017 financial year.

The bank has alleged that the fraud involves companies connected to the Nirav Modi Group, one of the biggest jewellery trading organisations in India. It involves major subsidiaries and affiliates, including, but not limited to, Firestar Diamond Inc in the United States, Firestar Diamond International Private Limited in India and the Gitanjali Group, also based in India. Both groups are engaged in the jewellery trade. According to PNB, junior-level branch officials ‘unauthorisedly and fraudulently’ issued letters of undertakings (LOUs) on behalf of companies connected to the Nirav Modi Group, such as Solar Exports, Seller Diamonds and Diamonds R Us. (An LOU is a letter of credit, in which a bank provides assurances for meeting the liability of its customers.)

These LOUs allowed the accused companies to obtain buyer credit (loans for purchasing raw material, which would be imported to India) from foreign branches of other Indian banks. With the LOUs, the Nirav Modi group obtained buyer credits and loans without providing any additional security. These buyer credits and loans (meant for the purchase of raw materials to be imported into India) were misappropriated for other means, such as making payments for loans from other banks.

The fraud has created a massive outcry in India’s banking sector. Even though PNB has promised to pay back the liabilities owed to other banks on account of the LOUs issued by PNB without conducting proper due diligence, it has also contested that other banks that have provided buyer credit to the Nirav Modi Group based on fake LOUs have acted without proper diligence, and PNB should not be held liable for the same.

Following PNB’s statement, the Central Bureau of Investigation, the Enforcement Directorate, the income tax authorities, the Central Vigilance Commission, the Ministry of Corporate Affairs (through the Serious Fraud Investigation Office (SFIO)) and the Ministry of External Affairs have started investigating the matter. A special court formed under the Prevention of Money Laundering Act has also issued non-bailable warrants against the owners of the Nirav Modi Group and the Gitanjali Group.

Firestar Diamond Inc, the flagship of the Nirav Modi Group in the United States, has filed for Chapter 11 voluntary bankruptcy in the New York Southern Bankruptcy Court. Reportedly, the company has claimed liquidity and supply chain challenges as the reason for bankruptcy. Further reports suggest that the prime accused in the PNB scam (i.e., the owners of the Nirav Modi Group) have not been mentioned in the bankruptcy petition.

Latest reports indicate that the Enforcement Directorate has filed a 12,000-page charge sheet against the Nirav Modi Group and has confiscated property worth US$750 million. Following the non-bailable warrant issued in India, a red corner notice was issued by Interpol against the founder and owner of the Nirav Modi Group.

In response to this case, the Indian government has enacted the Fugitive Economic Offenders Act 2018, which provides various aggressive measures to deter fugitive economic offenders from evading the process of law in India by remaining outside the jurisdiction of the Indian courts.

2 Outline the legal framework for corporate liability in your country.

In the case of Iridium India Telecom Limited v. Motorola Incorporated & Others, the Supreme Court of India held that corporations cannot claim immunity from criminal prosecution on the ground that they are incapable of possessing the necessary mens rea required for committing criminal offences. A corporation is virtually in the same position as any individual and may be convicted of common law as well as statutory offences, including those requiring mens rea. Criminal liability would be attributable to a corporation when an offence is committed, in relation to the business of the corporation, by a person or body of persons in control of its affairs and management. Since a corporation cannot be imprisoned, courts will levy a fine on the corporation guilty of wrongdoing. The directors and officers of a company are also liable for imprisonment depending upon the gravity of the offences (such as misrepresentation of financial data or fraud).

3 In your country, what law enforcement authorities regulate corporations? How is jurisdiction between the authorities allocated? Do the authorities have policies relating to the prosecution of corporations?

The Ministry of Company Affairs through the Registrar of Companies regulates private limited companies (i.e., closely held companies) and unlisted public companies. Listed public companies and public companies that propose to list their securities on the market are regulated by the Securities and Exchange Board of India (SEBI) as well.

SEBI monitors market activity and reports illegal activities to its Investigations Department, which investigates illegal activities, and refers them to the Enforcement Department, which enforces action against market participants that violate securities laws. It is important to note that SEBI has the powers of a civil court, such as ordering the discovery and production of books of accounts, summoning and enforcing the attendance of persons, examining registers and documents, and issuing commissions for the examination of witnesses.

The Registrar of Companies is tasked with ensuring that companies comply with company law. It has the power to initiate prosecution against defaulting companies.

The SFIO is a multidisciplinary organisation that investigates corporate fraud under the jurisdiction of the Ministry of Corporate Affairs. It initiates investigations of serious corporate and financial frauds committed by corporations in accordance with the provisions of the Companies Act 2013.

4 What grounds must the authorities in your country have to initiate an investigation? Is a certain threshold of suspicion necessary to trigger an investigation?

India has a number of regulatory authorities that have been empowered by various statutory laws to investigate and prosecute offenders. The grounds for initiating an investigation against a wrongdoer are many, and are usually specified in the statute empowering the authority.

Some of the important regulatory authorities are the Securities and Exchange Board of India (the securities market regulator), the Reserve Bank of India (India’s central bank and financial regulator), the Central Bureau of Investigation (tasked with investigating serious fraud, cheating and corruption cases), the SFIO (which prosecutes white-collar crimes), the Central Vigilance Commission (which supervises corruption cases in government departments), the Enforcement Directorate (which enforces exchange control and money laundering regulations, and undertakes the investigation and prosecution of fugitive economic offenders) and the Income Tax department.

5 Does double jeopardy, or a similar concept, apply to prevent a corporation from facing criminal exposure in your country after it resolves charges on the same core set of facts in another country?

Article 20 of the Constitution of India provides protection against double jeopardy. The doctrine of double jeopardy protects a person from being tried and punished twice for the same offence, but not from different offences arising out of the violation of different laws by the same set of facts.

However, a corporation facing criminal exposure in India after it resolves charges on the same core set of facts in another country may not avail itself of protection against double jeopardy. For example, in the Louis Berger case, the company and its executives are still being investigated in India despite having been prosecuted in the United States.

6 Does criminal law have general extraterritorial effect in your country? To the extent that extraterritorial effect is limited to specific offences, describe those which have extraterritorial effect, the statutory basis and any conditions that must be met for extraterritoriality to apply.

Indian criminal law has general extraterritorial effect. The Indian Penal Code (IPC) provides for the liability of the offenders committing offences beyond the territories of India. Under section 3 of the IPC, any person liable, by any Indian law, to be tried for an offence committed beyond India shall be dealt with according to the provisions of the IPC for any act committed beyond India in the same manner as if such act had been committed within India. Also, according to section 4, the IPC applies to any citizen of India in any place beyond India. The IPC also applies to people who are not citizens of India and, under section 4, it applies to any person on any ship or aircraft registered in India wherever it may be and any person in any place outside India committing an offence targeting a computer resource located in India.

Moreover, sections 4 and 188 of the Code of Criminal Procedure collectively deal with the jurisdiction of Indian courts to try to punish persons or entities for offences committed by them ‘outside India’. Under section 188, when an offence is committed by a citizen of India outside India, whether on the high seas or elsewhere; or by a person who is not an Indian citizen, on any ship or aircraft registered in India, he or she may be dealt with in respect of such offence as if it had been committed at any place within India at which he or she may be found. However, the central government’s sanction is required for a trial to commence.

7 Describe the principal challenges in your country that arise in cross-border investigations, and explain whether and how such challenges are dependent on other countries involved.

Key challenges in conducting cross-border investigations include obtaining information relevant to the investigation from a foreign government; tracing the money trail and obtaining bank records from abroad; and getting custody, or extraditing the accused from a foreign jurisdiction.

India has signed mutual legal assistance treaties (MLATs) with 39 countries for sharing information, and to obtain evidence from within the other country’s jurisdiction. In the absence of an MLAT, a letter rogatory (i.e., a formal request for information) is sent to a foreign court, or an informal request for information is made, but these requests for information lack predictability and oversight.

8 What bearing do the decisions of foreign authorities have on an investigation of the same matter in your country?

Decisions by foreign authorities on matters under investigation in India are of interest to Indian prosecuting agencies. This was best illustrated in the Augusta Westland investigation, in which the CBI sought a copy of the judgment passed by the Milan Court of Appeal that had found sufficient evidence to prove that the Augusta Westland deal was tainted by corruption. It had, among other things, observed that improper payments were wired to a former Indian Air Force Chief’s cousin to influence the procurement process for the supply of helicopters to the Indian Air Force.

These revelations had an immediate impact on the Indian investigation, and investigators scrambled to investigate and corroborate the facts noted by the Italian court. However, it is yet to result in any conviction in India.

9 Do your country’s law enforcement authorities have regard to corporate culture in assessing a company’s liability for misconduct?

The jurisprudence on corporate culture, as a tool to assess a company’s liability for mis­conduct, is at a nascent stage of development in India. The Satyam Computer Services and the PNB scandals brought to light the importance of ethics and its relevance in corporate culture. The culture at Satyam symbolised an unethical culture that eventually resulted in fudging of accounts and misappropriation of money by the company’s promoter.

An after-effect of the Satyam scandal has been the increasing emphasis placed by regulators on corporate governance standards. In this regard, India’s new Companies Act has prescribed higher governance standards to set the right culture in corporations.

10 What are the top priorities for your country’s law enforcement authorities?

In recent years, a raft of corruption cases and economic offences, most notably regarding 2G telecom/spectrum licences, the coal block allocation, the Commonwealth Games, Adarsh Housing Society, Augusta Westland, PNB and recent cases of big-money economic offences involving Sahara group and Kingfisher Airlines, have sharply drawn the focus of law enforcement agencies to corruption at higher levels of the government and towards companies involved in bank loan defaults, money laundering and fraud related to unauthorised collection of deposits. It appears this trend is likely to continue in the foreseeable future. The Indian government has also prioritised stamping out undisclosed income held by Indian citizens, both overseas and in India. This year, it passed the Fugitive Economic Offenders Act 2018 for prosecuting and seizing the property of absconding economic offenders.

11 How are internal investigations viewed by local enforcement bodies in your country?

Voluntary disclosure of wrongdoing by corporations is almost non-existent in India, which is perhaps attributable to the low rate of conviction in corruption cases. Therefore, there is little or no incentive for corporations to conduct and voluntarily disclose the findings of their internal investigations to the authorities.

Before an internal investigation

12 How do allegations of misconduct most often come to light in companies in your country?

Allegations of misconduct most often come to light by way of whistleblower complaints, suspicious activity reports, internal audit or litigation processes initiated against the com­pany’s parent company in another jurisdiction. However, whistleblowers are usually hesitant in revealing their identities and co-operating in any court proceedings for fear of repercussions and lack of adequate protection. Further provisions of the Companies Act 2013 also grant the Tribunal the power to look into and investigate a company’s affairs for misconduct, when an application by the requisite number of members of the company is filed before the Tribunal.

13 Does your country have a data protection regime?

Although India currently has no specific legislation on data protection, the Information Technology Act 2000, and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules 2011 thereunder, provide some rudimentary guidance regarding data protection and other computer-related offences.

A specific and robust data protection regime is expected to be notified soon by the Indian government, which will be based on the global data protection practices adopted by developed nations and bearing in mind the progression of India towards a digital future. An expert committee submitted its report and draft law (Bill) on a proposed data protection regime in India to the Ministry of Electronics and Information Technology on 27 July 2018.

The Bill proposes many changes to the existing data protection regime in India, which may have far-reaching ramifications for the technology industry. The Bill has widened the scope of the definition of sensitive personal data and plans to introduce two new bodies: the Data Protection Authority of India and a new Appellate Tribunal for adjudicating on matters relating to data protection. Its aim is to make the proposed Act applicable to the processing of personal data that has been collected, disclosed, shared or otherwise processed within the territory of India, whether collected by the government or any Indian company or individual. The Bill also stipulates that the proposed Act will apply to the processing of personal data by data fiduciaries or data processors not present within the territory of India, only if the processing is in connection with any business carried on in India, or any systematic activity of offering goods or services to data principals within the territory of India, or in connection with any activity that involves profiling data principals within the territory of India. The Bill includes provisions requiring data fiduciaries to conduct periodic audits and other reporting requirements.

14 How is the data protection regime enforced?

Presently, the provisions pertaining to data protection in India are enforced through the Information Technology Act 2000, which contains penalising provisions for the disclosure of personal information in breach of a lawful contract or without consent, negligence by a body who is possessing, dealing or handling any sensitive personal data or information in implementing and maintaining reasonable security practices resulting in wrongful loss or wrongful gain to any person. However, enforcement action under the existing regime has been negligible.

Separately, in a landmark ruling by the highest court in the country, the ‘right to privacy’ has been recognised as a fundamental right guaranteed by the Indian Constitution under Articles 19(1)(a) and 21 (i.e., freedom of speech and expression, and right to life and personal liberty, respectively). In this regard, the court has also upheld that ‘informational privacy’ is a part of the right to privacy, thereby giving a boost to data protection obligations in the country.

15 Are there any data protection issues that cause particular concern in internal investigations in your country?

The Information Technology Act 2000 and rules thereunder govern issues relating to data protection in India. Section 69 of the Act provides an exception to the general rule of maintenance of privacy and secrecy of information. It provides that where the government is satisfied that it is necessary in the interests of the investigation of an offence, it may direct any agency of the appropriate government to intercept, monitor or decrypt, or cause to be intercepted, monitored or decrypted, any information generated, transmitted, received or stored on any computer resource.

16 Are search warrants or dawn raids on companies a feature of law enforcement in your country? Describe any legal limitations on authorities executing search warrants or dawn raids, and what redress the company has if those limits are exceeded.

Search warrants or dawn raids on companies are provided for under specific laws, such as tax regulations and competition law. Authorities would normally look for two independent and respectable witnesses from the locality to observe that the raid is carried out according to the law. A list of items seized would be made and a copy of the list of items prepared will be given to the person where the search was carried out.

If search warrants or dawn raids are not carried out according to the law, the concerned person or company may approach the courts and challenge the action. Any prosecution based on the illegal raids can be challenged.

17 How can privileged material be lawfully protected from seizure during a dawn raid or in response to a search warrant in your country?

The company may object to the review or taking of copies of ‘privileged documents’, including confidential communications between the client and its external attorney, during a dawn raid. However, attorney–client documents are not protected in the strictest sense from police or other law enforcement agencies, should they be found during a dawn raid or a search under a valid warrant. It would depend on the law enforcement agency’s discretion whether to respect the company’s request not to access such documents.

However, any such documentation may not be produced as evidence during the course of court proceedings.

18 Are there any privileges in your country that would prevent an individual or company from providing testimony? Under what circumstances may an individual’s testimony be compelled in your country? What consequences flow in your country from such compelled testimony?

Article 20(3) of the Constitution of India provides that no person accused of any offence shall be compelled to be a witness against himself or herself. Further, section 161 of the Code of Criminal Procedure 1973 provides the following:

(1) Any police officer making an investigation, or any police officer not below such rank as the state government may, by general or special order, prescribe in this behalf, acting on the requisition of such officer, may examine orally any person supposed to be acquainted with the facts and circumstances of the case.

(2) Such person shall be bound to answer truly all questions relating to such case put to him by such officer, other than questions the answers to which would have a tendency to expose him to a criminal charge or to a penalty or forfeiture.

A person is required to assist a public servant in the execution of his or her public duty, such as a police officer executing a search warrant. Failure to assist may result in the public servant filing a criminal complaint against the person.

19 What legal protections are in place for whistleblowers in your country?

The Whistle Blowers Protection Act 2011 was passed by the Indian Parliament in May 2014. However, the Act is yet to be brought into effect. The Act provides for a mechanism of receiving and enquiring into complaints (also known as disclosures) relating to corruption, the commission of an offence, and wilful misuse of power and discretion by a public servant. However, the Act does not provide any protection to whistleblowers who make a complaint involving actions within a private organisation. The Act provides protection to whistleblowers and provides safeguards against their victimisation.

The Whistle Blowers Protection (Amendment) Bill 2015 has been tabled before Parliament, which puts further restrictions on public interest disclosures. The Amendment Bill adds other grounds on which information is exempt from disclosure, such as:

  • information relating to commercial confidence, trade secrets or intellectual property, the disclosure of which would harm the competitive position of a third party, unless such information has been disclosed to the complainant under the provisions of the Right to Information Act 2005;
  • information available to a person in a fiduciary capacity or relationship, unless such information has been disclosed to the complainant under the provisions of the Right to Information Act 2005;
  • information, the disclosure of which would endanger the life or physical safety of any person or identify the source of information or assistance given in confidence for law enforcement or security purposes;
  • information that would impede the process of investigation or apprehension or prosecution of offenders; and
  • personal information, the disclosure of which has no relationship to any public activity or interest, or that would cause unwarranted invasion of the privacy of the individual, unless such information has been disclosed to the complainant under the provisions of the Right to Information Act 2005.

It is expected that the Act would be brought into effect after the Amendment Bill has been passed by both houses of Parliament.

Moreover, the revised Clause 49 of the Listing Agreement has made it compulsory for companies listed on the stock exchange to have a whistleblower mechanism for their employees and directors.

20 What rights do employees possess under local employment law that determine how they are treated within a company if their conduct is within the scope of an investigation? What employment rights would attach if they are deemed to have engaged in misconduct? Does it differ for officers and directors of the company?

There are various labour-related statutes in India, which differ slightly from state to state. However, there is no at-will employment in India. Employers are expected to follow principles of natural justice and maintain proper documentation if action on the basis of internal investigation is to be initiated against an employee.

Officers (including key managerial personnel) as well as whole-time directors are also considered employees of the company and their terms of employment are governed as per their employment agreement. The only exceptions are the directors appointed by the board, who can only cease to hold the office of directorship under the circumstances provided for under the Indian Companies Act.

21 Are there disciplinary or other steps that a company must take in your country when an employee is implicated or suspected of misconduct, such as suspension or in relation to compensation? Can an employee be dismissed for refusing to participate in an internal investigation?

Depending on the type and gravity of the offence, various actions can be initiated against an employee, including suspension, warning, denial of pay rises and termination of employment, keeping in mind the employment contract and policies of each company. If a company has adequate proof of misconduct against an employee who refuses to participate in an internal investigation, the company may dismiss the employee, after following the principles of natural justice.

Commencing an internal investigation

22 Is it common practice in your country to prepare a document setting out terms of reference or investigatory scope before commencing an internal investigation? What issues would it cover?

Detailing the precise purpose and scope of an internal investigation is a common practice before commencing an internal investigation.

Terms of reference would include, among other things:

  • the reason for undertaking the investigation and its objectives;
  • what the investigation is required to examine;
  • how investigation findings should be presented, for instance, an investigator will often be required to present his or her findings in some form of investigation report; and
  • who the findings should be reported to, and who to contact for further direction if unexpected issues arise or advice is needed.

23 If an issue comes to light prior to the authorities in your country becoming aware or engaged, what internal steps should a company take? Are there internal steps that a company is legally or ethically required to take?

There is no statutory or legal prescription that requires a company to take any internal steps on becoming aware of any issue, except in the case of a complaint alleging sexual harassment in the workplace.

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 requires every branch or office of a company employing 10 or more persons to constitute an internal complaints committee. Complaints of workplace sexual harassment must be investigated by the internal complaints committee.

In all other cases, companies usually follow their internal code of conduct for reporting and dealing with any issue internally for investigation and resolution.

24 At what point must a company in your country publicly disclose the existence of an internal investigation or contact from law enforcement?

There is no statutory or legal prescription that requires a company to disclose the existence of an internal investigation, or contact from law enforcement agencies. In the case of a company whose securities are listed on a recognised stock exchange, care must be taken to comply with any disclosure obligation set out in the listing agreement signed between the company and the stock exchange.

25 When would management typically brief the board of a company in your country about an internal investigation or contact from law enforcement officials?

There is no legal or statutory prescription that requires management to brief the board of directors about an internal investigation or contact from law enforcement officials. The general principle should be to inform people on a need-to-know basis. Having said that, each company has a different policy on reporting matters to its board of directors.

26 What internal steps should a company in your country take if it receives a notice or subpoena from a law enforcement authority seeking the production or preservation of documents or data?

A company that is the subject of an inquiry must extend full co-operation and furnish complete and correct information and documents within the given time to the law enforcement authority.

If the law enforcement authority has requested the production or preservation of certain documents or data, the company should impose a document hold to ensure the preservation of documents and information that may be necessary for completion of the inquiry, or in anticipation of any future litigation. In a similar vein, appointing a document custodian to maintain control over the relevant documents and information would be advisable.

27 How can the lawfulness or scope of a notice or subpoena from a law enforcement authority be challenged in your country?

The company can file a writ petition before the High Court to challenge a notice or subpoena issued by a law enforcement authority and request the court to quash it. However, the High Court does not normally quash such a notice or subpoena unless, in its opinion, grave prejudice will be or is being caused to the person to whom it has been issued.

Attorney–client privilege

28 May attorney–client privilege be claimed over any aspects of internal investigations in your country? What steps should a company take in your country to protect the privilege or confidentiality of an internal investigation?

Professional communications between attorneys (or advocates) and clients are protected as ‘privileged communications’ under the Indian Evidence Act 1972 (the Evidence Act). Therefore, documents that are created during an internal investigation for the purpose of giving or obtaining legal advice (including advice as to what should prudently be done in the particular legal context) are privileged.

Privilege or confidentiality of an internal investigation may be protected by marking documents ‘confidential and privileged’; sending a note to all relevant staff at the start of an investigation reminding them not to create additional documentation, for instance, notes or emails commenting on the matters under investigation and which the company may have to produce because it is not privileged; and segregating privileged material from non-privileged material and taking care to ensure that privilege is not waived by including privileged information in a document that is not privileged.

29 Set out the key principles or elements of the attorney–client privilege in your country as it relates to corporations. Who is the holder of the privilege? Are there any differences when the client is an individual?

The Evidence Act, which has codified the law on attorney–client privilege, specifically refers to a ‘client’ and does not have different principles for a client that is a corporation or an individual. Therefore, the client enjoys a right to privilege with respect to information disclosed or documents provided to an external legal counsel for the purposes of an internal investigation.

30 Does the attorney–client privilege apply equally to in-house and external counsel in your country?

Professional communications between an external counsel and client are privileged; however, attorney–client privilege may not extend to communications exchanged between an in-house counsel and the company. The law on the subject is far from being settled.

From a practical perspective though, companies usually insert a confidentiality clause in the employment contract of in-house counsel to afford protection to any information disclosed to the counsel during the course of his or her employment, which usually serves as an effective deterrent. Any disclosure made by in-house counsel in contravention of such a clause could amount to breach of contract, for which the company may claim damages in some circumstances.

31 To what extent is waiver of the attorney–client privilege regarded as a co-operative step in your country? Are there any contexts where privilege waiver is mandatory or required?

Waiver of attorney–client privilege to obtain co-operation credit, as a concept, is non-existent in India. Also, there are no circumstances under which waiver of attorney–client privilege is mandatorily required by law.

32 Does the concept of limited waiver of privilege exist as a concept in your jurisdiction? What is its scope?

Limited waiver of privilege, as a concept, does not exist in India. However, privilege may be waived, in its entirety, by a party to a judicial proceeding who calls his or her lawyer as a witness, and questions the lawyer on a matter that might otherwise be privileged.

33 If privilege has been waived on a limited basis in another country, can privilege be maintained in your own country?

Waiver of privilege, on a limited basis, in a foreign jurisdiction will not affect privilege with respect to the same matter in India.

34 Do common interest privileges exist as concepts in your country? What are the requirements and scope?

The concept of common interest privilege does not exist in India.

35 Can privilege be claimed over the assistance given by third parties to lawyers?

Yes, privilege can be claimed with respect to assistance given by interpreters, clerks or assistants to lawyers.

Witness interviews

36 Does your country permit the interviewing of witnesses as part of an internal investigation?

There is no specific legislation governing how internal investigations are to be conducted in India, and as such there are no restrictions on interviewing witnesses as part of an internal investigation, which is fairly common.

37 Can the attorney–client privilege be claimed over internal witness interviews or attorney reports in your country?

Section 126 of the Evidence Act 1872 prohibits barristers and attorneys from disclosing to a third party any communication made to them by clients, any documents they come upon for the purpose of their professional engagement, and any advice given to clients, unless clients expressly consent to the disclosure. Therefore, companies enjoy a right to privilege with respect to information disclosed or documents provided to external legal counsel for the purposes of an internal investigation.

However, whether section 126 confers privilege on in-house lawyers is a grey area, with courts of different jurisdictions coming to different conclusions on this topic. The matter is yet to be conclusively put to rest by the Supreme Court (i.e., the highest court in India).

38 When conducting a witness interview of an employee in your country, what legal or ethical requirements or guidance must be adhered to? Are there different requirements when interviewing third parties?

At the outset, there are no set legal rules for conducting a witness interview of an employee in India and the purpose of the interview usually determines what kind of procedures must be followed.

Further, there is no concept of issuing Miranda or Upjohn warnings in India. However, in essence, the principles behind these warnings are usually recommended when conducting a witness interview. Personnel conducting the interview should clarify whom they represent at the outset, to prevent a scenario wherein an employee’s co-operation is solicited, with the employee understanding that the company’s in-house counsel represents them as well. Employees should also be informed if waiver of the privilege is likely. A recording of an interview should only be made after obtaining the consent of the employee.

The same principles apply when interviewing third parties.

39 How is an internal interview typically conducted in your country? Are documents put to the witness? May or must employees in your country have their own legal representation at the interview?

No procedure for conducting interviews has been prescribed under law. However, as good practice, an interviewer should usually:

  • interview the complainant or whistleblower;
  • interview the alleged accused;
  • interview other witnesses;
  • document the investigation;
  • reach a conclusion and prepare an investigation report;
  • send the investigation report to decision makers in the company;
  • take appropriate corrective action; and
  • communicate the results to the complainant and the accused.

There is no statutory requirement to present documents to the witness and each company can decide on this, having regard to the circumstances of each case. However, with respect to investigations pertaining to termination of an employee’s services, it is usually recommended that a thorough investigation process be undertaken, which includes presentation of documents, if any, to the employee.

There is no legal requirement for an employee to have legal representation at the interview. From a practical perspective, employees usually do not express interest in having their own legal representation during an interview and such demands are not common. However, if such a demand is raised, the company’s response may vary depending on the circumstances. For instance, if the investigation is being conducted by the company’s human resources personnel, then a request by the employee to have legal representation at the interview could be rejected. However, if the company’s interviewing panel comprises in-house or external legal counsel, the company could consider allowing the employee’s legal representative to accompany him or her.

At times, after an internal investigation is completed, a company may decide that an individual’s employment should be terminated, or that other disciplinary action must be taken. Depending on the company’s policies and the status of the individual, a show-cause notice may need to be issued to the individual, giving him or her an opportunity to raise a defence and show cause why disciplinary action should not be taken.

Reporting to the authorities

40 Are there circumstances under which reporting misconduct to law enforcement authorities is mandatory in your country?

The obligation to report to government authorities is determined case by case, having regard to the specific nature of the offence committed, and the corresponding Indian statute that has been violated. However, listed companies must check their disclosure obligations in accordance with the listing agreement signed with the stock exchange.

41 In what circumstances might you advise a company to self-report to law enforcement even if it has no legal obligation to do so? In what circumstances would that advice to self-report extend to countries beyond your country?

In India, the self-reporting mechanism is not very evolved. Few regulations provide leeway or an advantage for self-reporting in India, and it is very rare to find cases where voluntary self-reporting is beneficial.

However, it is advisable to report cases where misconduct or fraud might lead to criminal acts. More particularly, in cases relating to sexual harassment within the workplace, it is important to follow the mandate prescribed in the statute.

Cases of bribery and corruption may need to be reported to governments of countries where there are strict anti-corruption laws and legislations, such as the United States and the United Kingdom. However, it is advisable to seek counsel from attorneys in these juris­dictions before self-reporting.

42 What are the practical steps you need to take to self-report to law enforcement in your country?

In practice, it is important to conduct a proper investigation involving interviews and the preparation of an internal report, to get clarity on the alleged offence prior to reporting it to any law enforcement agency.

Responding to the authorities

43 In practice, how does a company in your country respond to a notice or subpoena from a law enforcement authority? Is it possible to enter into dialogue with the authorities to address their concerns before or even after charges are brought? How?

This depends on a number of factors, including the identity of the authority issuing the notice or subpoena. For instance, if a notice is issued by authorities from the legal metrology division, the company may discuss aspects of the violation and address the authorities’ concerns before charges are brought (through compounding of the offence). Similarly, if notice is issued to the company during the course of a police investigation, it might be possible to discuss the issues with the police official to aid the investigation. However, this option may not be available in every situation.

If a notice is received by a company from the court, the company can present its defence only after entering proceedings before the court of law, and no dialogue may be possible after the charges are brought.

44 Are ongoing authority investigations subject to challenge before the courts?

There is no restriction on internal investigations being challenged before the courts. For instance, if disciplinary action is initiated against an employee on the basis of an internal investigation, that action may be challenged by the employee before the court.

45 In the event that authorities in your country and one or more other countries issue separate notices or subpoenas regarding the same facts or allegations, how should the company approach this?

In India, there is no specific concept of consistent disclosure packages. In cases where separate notices or subpoenas have been issued to a company, it would have to deal with each of them separately.

However, there may be some scope to request the courts to admit information (e.g., a decision in a court of another country) that may have been provided in a different country, but even this would be at the discretion of the courts.

46 If a notice or subpoena from the authorities in your country seeks production of material relating to a particular matter that crosses borders, must the company search for and produce material in other countries to satisfy the request? What are the difficulties in that regard?

Technically, courts in India do not have extraterritorial jurisdiction. Therefore, if an Indian court seeks production of material relating to the Indian company’s foreign parent company, the Indian company is not obligated to procure such materials from other countries.

An example of this is the Louis Berger case, in which the company was prosecuted in the United States under the Foreign Corrupt Practices Act, and for which the Indian government has requested information from the US government on the findings.

47 Does law enforcement in your country routinely share information or investigative materials with law enforcement in other countries? What framework is in place in your country for co-operation with foreign authorities?

The Indian authorities do share information with law enforcement agencies in other countries case by case. The extent of co-operation with other countries is determined by the nature of the relationship between the countries.

48 Do law enforcement authorities in your country have any confidentiality obligations in relation to information received during an investigation or onward disclosure and use of that information by third parties?

There is no specific legislation or statute that completely prohibits disclosure of information received during an investigation and use of the same by the third parties. However, courts in India have criticised law enforcement bodies in the past for disclosing sensitive information received during an investigation related to an individual or an entity. If an extremely sensitive document is seized by investigating authorities, companies usually seek an order from the court specifically restraining disclosure of its contents by investigating authorities.

However, disclosure of any such information may be allowed if it is necessary in the general public interest.

49 How would you advise a company that has received a request from a law enforcement authority in your country seeking documents from another country, where production would violate the laws of that other country?

There is technically no legal power or legislation in place for an Indian law enforcement agency to request a company in India to provide documents from another country. We would normally advise them to refrain and to reject the request. However, the advice may change if other aspects are in play, such as the gravity of the offence and the charges.

50 Does your country have blocking statutes? What related issues are implicated by complying with a notice or subpoena?

There are no blocking statutes in India. India has legislation on the protection of sensitive personal data. However, the data protection statutes are aimed more at ensuring that sensitive data is not shared without the permission of the data provider.

Protection granted under these data protection laws does not apply when a government authority seeks the information. Companies must comply with court or government requests for information, provided it is available within the country.

51 What are the risks in voluntary production versus compelled production of material to authorities in your country? Is this material discoverable by third parties? Is there any confidentiality attached to productions to law enforcement in your country?

Any documents submitted on demand by law enforcement agencies or courts in India are technically confidential documents and may not be discoverable by third parties. The exception to this may be a scenario wherein an international agency (such as Interpol) seeks the help of Indian police agencies in respect of the records of an individual under investigation.

The material so reproduced before law enforcement agencies would be discoverable if it is reproduced in the final judgment by the court. Basically, it is at the discretion of the courts whether the information or material produced should form part of the judgment.

Confidentiality for voluntarily produced documents cannot be ensured.

Global settlements

52 Prior to any settlement with a law enforcement authority in your country, what considerations should companies be aware of?

The following points should ideally be considered while settling with an enforcement agency in India:

  • The settlement must be clear on whether the matter is being settled and whether charges, if any, are being dropped.
  • It should be made clear that future inquiries about the same matter should not take place.
  • The settlement should clarify that the case would not be reopened.
  • If there is a new inquiry, it should be for a fresh matter and not for the same.
  • It should be clear that the settlement cannot be used against the party as evidence for another matter.

53 What types of penalties may companies or their directors, officers or employees face for misconduct in your country?

Under the provisions of the Indian Companies Act, directors are described as officers in default unless a specific officer or director is designated by the company for overseeing compliance. Further, it defines the duties and responsibilities that directors should keep in mind while undertaking the operations of a company. For contraventions, the Act provides penalties on the part of the company as well as the directors that range between 100,000 and 2.5 million rupees. Some of the contraventions also result in an automatic vacation of office. In most cases, the penalties are monetary. However, a few provisions also provide for imprisonment, depending upon the gravity of the offences (such as misrepresentation of financial data or fraud).

54 What do the authorities in your country take into account when fixing penalties?

In India, authorities usually take into account the penalty prescribed by law and the gravity of the offence when fixing penalties.

55 Are non-prosecution agreements or deferred prosecution agreements available in your jurisdiction for corporations?

The concepts of non-prosecution agreements or deferred prosecution agreements are not available in India for corporations. These terms are not recognised under any statutes in the country.

56 Is there a regime for suspension and debarment from government contracts in your country? Where there is a risk of suspension or debarment or other restrictions on continuing business in your country, what are the options available to a corporate wanting to settle in another country?

Each government contract comes with its own terms, and there is no master document prescribing a regime for suspension and debarment from government contracts. Typically, a company can be suspended or debarred from future government contracts for non-fulfilment of contractual obligations in its dealings with any government body, or if the company has been found guilty of any major corporate misconduct in the past.

Usually a settlement in another country may not result in automatic suspension of a company or debarment in India, depending on the nature and magnitude of the offence and whether that offence is listed in the suspension criteria in the particular government contract.

57 Are ‘global’ settlements common in your country? What are the practical considerations?

In the recent past, India has not been involved in any global resolutions. There is currently no specific legislation for this in India.

58 Are parallel private actions allowed? May private plaintiffs gain access to the authorities’ files?

Parallel private actions may be permitted only under certain limited circumstances. For instance, parallel private antitrust action is allowed, subject to India’s antitrust law.

The Right to Information Act 2005 empowers a private person (whether a plaintiff or not) to request public information. This Act allows an Indian citizen to request from the government any government record or document, inter alia, not considered confidential.

Publicity and reputational issues

59 Outline the law in your country surrounding publicity of criminal cases at the investigatory stage and once a case is before a court.

In India, no specific law or policy guides publicity of criminal cases at the investigatory stage. In practice, the media may print any information at any time, be it at the investigatory stage or during the pendency of the case.

In our experience, we have seen the media reporting investigations into the functioning of a company almost as soon as the investigation starts.

60 What steps do you take to manage corporate communications in your country? Is it common for companies to use a public relations firm to manage a corporate crisis in your country?

Larger companies usually have their own in-house communications and publicity managers to deal with corporate crises. However, it is very common for companies in India to outsource this service to a third party who is better experienced at handling publicity tasks.

61 How is publicity managed when there are ongoing, related proceedings?

Since not all investigations by government agencies are made public, companies would normally attempt to ensure that no public disclosure is made at all. If the investigations or proceedings become public, it is customary to engage public relations agencies to work behind the scenes to manage the media. At times, consultants who specialise in government relations are also engaged for damage limitation.

Duty to the market

62 Is disclosure to the market in circumstances where a settlement has been agreed but not yet made public mandatory?

No, there is no such requirement. In the case of a company whose securities are listed on a recognised stock exchange, care must be taken to comply with any disclosure obligations set out in the listing agreement signed between the company and the stock exchange.


Footnotes

Srijoy Das is a partner and Disha Mohanty is a principal associate at Archer & Angel.

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