Vigil Mechanism

1. WHISTLE
BLOWING
MECHANISM
FCA VD Raju

2. Introduction:
Whistle blowing means calling attention to wrongdoing that is occurring within an organization to the public or to those in positions
of authority. One who discloses information about misconduct in their workplace that they feel violates the law or endangers the
welfare of others. One who speaks out, typically to expose corruption or dangers to the public or environment. Whistleblowers can be
employees, suppliers, contractors, clients or any individual.
Objective of Whistle Blowing:
To eradicate unethical behavior. To create a whistle-blowing culture.
Types of Whistle-Blowing:
Internal Whistle-Blowing : When the whistleblower reports the wrong doings to the officials at higher position in the organization.
The usual subjects of internal whistleblowing are disloyalty , improper conduct, indiscipline, insubordination, disobedience etc.
Example: Raju has evidence that his co-worker is committing fraud. Raju alerts his direct supervisor who then follows policies
regarding alleged misconduct.
External Whistle-Blowing: Where the wrongdoings are reported to the people outside the organization like media, public interest
groups or enforcement agencies it is called external whistleblowing.
Example: If on the other hand Raju filed a police complaint, he would be called as an external whistleblower.

3. Alumni: When the whistleblowing is done by the former employee of the
organization it is called alumni whistle blowing.
Open: When the identity of the whistleblower is revealed, it is called Open
Whistle Blowing
Personal: Where the organizational wrongdoings are to harm one person
only, disclosing such wrong doings it is called personal whistle blowing
Impersonal: When the wrong doing is to harm others, it is called impersonal
whistle blowing. •
Government: When a disclosure is made about wrong doings or unethical
practices adopted by the officials of the Government.
Corporate: When a disclosure is made about the wrongdoings in a business
corporation, it is called corporate whistle blowing.

4. Characteristics of a Whistleblower
Altruistically Motivated Utilitarian Uninterested in Altering Their Behavior
Allows Own Attitudes and Beliefs to Guide Them Often are Well Educated
and Holds Professional Positions
Effects of Whistle-Blowing
•Forced to leave organization / demotion
•Credibility ruined
•Family, health and/or life in jeopardy.
•Outrage and divisiveness of people directly or indirectly involved.
•Physical or psychological isolation.
•Organization experiences loss of money, restitution, productivity and positive reputations.
•Incarceration

5. CASE STUDY ON SATYENDRA DUBEY
Case Study – Satyendra Dubey
31 year old IIT Kanpur – civil engineer. He was Deputed as the director of the project undertaken by
National Highway Authorities of India. Assigned Prime Ministers “Golden Quadrilateral Project” – to
connect the four corners of India.
Findings in Golden Quadrilateral
Sloppy project reports, Huge advances were given to contractors. Contracts awarded on the basis of
forged documents. Loot of public money
What Did Dubey Do? Wrote a letter to his superior.
Wrote a letter to prime Minister. Wrote the same letter to the chairman of the NHAI. Wrote a second
letter requesting Anonymity.
The BlindDeaf Effect The PMO didn’t bother to investigate.
For in an act of murderous negligence , he handed over the letter with Satyendra's particulars to
Ministry of Road Transport and Highways At least 8 officials scanned the letter before passing it to
NHAI.
whistleblowing murder
In 2003 , Satyendra Dubey was found dead in Gaya .

6. Conditions For Protection
1. Disclosure is in the interest of justice, the company and its stakeholder.
2. The whistleblower must believe the misconduct to be substantially true.
3. The whistleblower must not act maliciously or make false allegations.
4. The whistleblower must not seek any personal gain
Implementation of Policy
This policy applies in areas of:
• Breach of law or any policy of the Company.
• Failure to comply with a legal obligation.
• Miscarriage of justice.
• Health and safety risks, including risks to the public as well as other employees.

7. • 5. Damage to the environment.
• 6. Sexual, physical or other abuses.
• 7. Actions which are unprofessional, inappropriate or in conflict with a general understanding of what is right and
wrong.
• Learning for Employees
DO’s
• 1.keep calm
• 2.Think about the risk and outcome before you act.
• 3.Remember you are a witness, not a complainant.
• Don’ts
• 1.Forget there may be an innocent or good explanation.
• 2.Became a private detective.
• 3.Expect thanks.

8. • Learning for Employers
Encourage staff to report concerns and ensure they understand they will be offered protections if they make a
disclosure in good faith.
• Implement a whistle blowing policy.
• Give special consideration to staff who are in their probationary period.
• Include whistle blowing awareness in induction.
• Takeaway for self Stand up for dignity – whistleblowing
It takes courage for an individual to raise concerns about poor practice or abuse within an organization.
• “Society desperately needs principled and courageous people, and it needs them to be successful in exposing
problems and exploring solutions”

9. • Whistleblowing in the workplace:
• Workplace whistleblowing occurs when an individual reports wrongdoing in an organization, such as financial misconduct or
discrimination. This person is often an employee but can also be a third-party such as a supplier or customer.
• Internal whistleblowing is when someone makes a report within an organization. Often companies implement whistleblowing
channels for this purpose so that employees and other stakeholders can speak up if they become aware of misconduct.
Employees can also report to their line manager.
• External whistleblowing is when a person blows the whistle publicly, either to the media, police or via social media
channels. People often choose the public option if they have little faith in their organization's investigation or reporting
procedure, have tried speaking up internally with no result or if there is no whistleblowing system in place.
• Such complaints focus on conduct prohibited by a specific law such as a criminal offence, discrimination or evidence of a
cover up. Speak up policies may however cover a broader range of issues related to compliance and ethics.
• Occupational whistleblowing is different to raising a workplace grievance. A grievance is a matter of personal interest and
does not impact on the wider public, whereas whistleblower revelations relate to more serious and widespread concerns as
outlined above.

10. Whistleblowing currently a Hot Topic Globally – Why?
Reporting corporate wrongdoing has grown in importance in recent years thanks to a series of high-
profile scandals and events. The global financial crisis of 2007-2008 revealed widespread
mismanagement in financial institutions and the Volkswagen Dieselgate scandal in 2015 saw the car
manufacturer illegally cheating emissions tests in the USA. Both of these events cost corporations
billions of dollars and are viewed as exactly the kind of incidents that effective internal
whistleblowing policies and channels might have helped prevent.
In 2017 the Metoo movement saw Hollywood stars blowing the whistle on the widespread sexual-
abuse allegations against Harvey Weinstein. This movement also supposedly led to an increase in
companies putting stronger safeguards and structures in place for staff seeking to flag illegal or
concerning behavior
The EU introduced the Whistleblowing Directive in 2019 as a response to more recent scandals such
as Luxleaks, Panama Papers and Cambridge Analytica. Once EU countries implement the Directive, all
companies with more than 50 employees will be required to establish a policy and system with legal
protection afforded to individuals seeking to expose wrongdoing.

11. Is whistleblowing beneficial - Why?
Whistleblowers provide an important service to both their organization and wider
society. If matters can be resolved internally before becoming public in the press
or on leak platforms, organizations can avoid reputational damage and fines that
can prove substantial. Enforcement action under the US Foreign Corrupt Practices
Act saw companies receive penalties totaling a record US$2.9 billion in 2019.
A whistleblowing system enables confidential reporting of irregularities. It also
helps with the bottom line: experience shows that companies and organizations
lose around 7 percent of their annual turnover due to violations. Internal reports
can help to uncover a significant proportion of these cases and minimize financial
damage as a result.

12. Whistleblowers feared – Why? - 5 myths under the microscope
There are many myths that make companies, governments and other organizations skeptical – or even
fearful – about implementing a whistleblowing system. Many worry that whistleblowers will have a
negative effect on their reputation, or that their reporting channels might be abused by disgruntled
employees to send unfounded accusations. There is also the fear that the system might be “too
effective” and they will be flooded with reports.
Luckily these fears are unjustified. If a company has an effective internal whistleblowing system, very few
reports are ever raised externally. And while there are certainly individuals whose intentions are
questionable at best, the reality is that most whistleblowers are simply trying to do the right thing.
Studies show that companies receive an average of 34 reports per year (cf. Whistleblowing Report 2021).
The larger the company, the greater the probability that concerns will be reported, but this might not be
a bad thing: it simply means there is a healthy speak-up culture in place in the organization.

13. Myth 1: Whistleblowers harm reputations
Whistleblowers only harm companies if they report corporate misconduct directly to the public or the media. It is therefore important that
organizations encourage individuals to report their concerns internally. Companies are advised to set up internal whistleblowing channels and
actively communicate these so that employees and other stakeholders are aware of them. They mean that employees can report their concerns
directly to the appropriate department to help identify and remedy issues at an early stage. This reduces the risk of reputational damage.
Myth 2: Whistleblowers end up in court
If a whistleblower reports their concerns directly to an external body (e.g. the media), they may be liable to prosecution if, for example, they
disclose corporate secrets. Exceptions apply if the person in question acts in the public interest. Such exceptions are, for example, enshrined in
the reporting procedure detailed in the new EU Whistleblower Directive. All whistleblowers that use internal company channels such as a digital
software to report concerns shouldn’t have anything to fear.
Myth 3: Employees use whistleblower systems to anonymously send unfounded reports about their colleagues
According to the Whistleblowing Report 2019, which surveyed nearly 1,400 companies from Germany, France, the UK and Switzerland, less than 9
percent of reports received by companies were aimed at harming individual employees or the company. The study shows that half of all reports
refer to compliance-related issues and the remaining complaints usually reveal other problems in the company. Nevertheless, it is important
when introducing whistleblower systems to clearly communicate that abusive usage will not be tolerated.

14. Myth 4: Anyone who sets up a whistleblower system will be flooded with reports
Studies show that companies receive an average of 34 reports per year (cf. Whistleblowing Report 2021). The larger the company, the greater the
probability that concerns will be reported. However, receiving lots of reports is not necessarily a bad sign. While it may indicate that there are
widespread issues within the company, it may also simply mean that employees have confidence in the whistleblowing arrangements and feel
comfortable reporting.
Similarly, a small number of reports can indicate that there are very few issues but it can also be a sign that the reporting system doesn’t work as it
should, employees have no confidence in the channel or simply do not know where they should report misconduct. Organizations should therefore
transparently communicate their reporting channels and handling processes in order to reduce barriers to raising concerns.
Myth 5: Whistleblowers should fear retaliation
If the whistleblower provides their name when reporting, the employer must keep the individual’s identity confidential (as far as possible). If the identity
of the individual is for some reason disclosed, the employer must provide protection from retaliation. The European Union also explicitly includes the
protection of whistleblowers (including bullying and intimidation) in the Directive adopted in April 2019.
In reality, however, low levels of bullying are difficult to both detect and prevent while employees may fear their name getting out. Allowing anonymous
usage can provide an additional level of security that helps employees feel comfortable reporting, especially on highly sensitive issues. It’s also still
possible to communicate with anonymous individuals to collect more information with modern whistleblowing systems.

15. • When is a whistleblower protected?
• Whether someone chooses to speak up when they see
wrongdoing is a personal decision. Many whistleblowers are
motivated by wanting to do the right thing. However, even though
employers are prohibited from seeking revenge after an employee
has exposed wrongdoing, a whistleblower’s career may still suffer.
Low-level workplace bullying is difficult to detect. Whistleblowers
often stand alone and friends they thought they could trust in their
workplace might turn their back on them in order to protect their
own reputation. Even if an anonymous system is in place, those
exposing wrongdoing still need courage and determination. The
policy should prohibit direct or indirect retaliation such as
dismissals, demotions and other discrimination against current and
former employees, applicants, supporters of the whistleblower and
journalists.
• The whistleblower can choose to report an incident internally first
within the organization or directly to the relevant supervisory
authority. If nothing is done in response to such a report or if the
whistleblower has reason to believe that there is a public interest,
they can also go directly to the public. They should protected in all
of these cases

16. • Whistle Blowing Policy –INDIA:
• The whistleblower policy in India is aimed to safeguard the interest of the general public. Employees who reveal fraud,
corruption or mismanagement to the senior management are called internal whistleblowers. Employees who report fraud or
corruption to the media, public or law authorities are external whistleblowers. Indian whistleblowers are protected under the
Whistleblower Protection Act India.
• Laws relating to whistleblowing and protection of whistleblowers are inadequate in India. However, the Companies Act,
2013 lays down provisions for whistleblowing and corporate governance in India and the elimination of fraud by establishing
adequate vigil mechanism.
• Sections 206 to 229 of the Companies Act, 2013 lay down laws relating to Inspection, Inquiry, and Investigation
incorporate.
• Section 208 of the Act empowers an Inspector to inspect company records and furnish any recommendations to conduct
investigations.
• Section 210 states that the Central Government may order an investigation into the affairs of the company in the following
cases:
• On receipt of a report by Registrar or Inspector of the company.
• On intimation of a Special Resolution passed by a company that the affairs of the company must be investigated.
• To uphold the public interest.
• The Serious Fraud Investigation Office (SFIO), a statutory body is created under Section 211 of the Act which has the power
to arrest any person for fraud in the company. The auditors have the responsibility to report to the Central Government if they
have reason to believe a fraud committed or being committed to the company.

17. • Draft Rule 12.5 of the Companies Act, 2013 and Section 177(9) makes it compulsory for listed
companies, companies accepting deposits from public and companies borrowing more than Rs. 50
crore from banks or public financial institutions to have a whistleblowing policy and establish a
vigil mechanism for directors and employees to report their genuine concerns. A vigil committee
has to be set up to ensure the vigil mechanism in the company and whistleblower policy is
effectively implemented in the company.
• Additionally, the Securities and Exchange Board of India (SEBI) amended the Principles of
Corporate Governance in 2003. Clause 49 of the Listing Agreement now includes the formulation of
a Whistleblower policy in Indian companies. A company may establish a mechanism for employees
to report concerns regarding unethical behavior, actual or suspected fraud or violation of the
company’s code of conduct or ethics policy. However, it is currently not mandatory for companies
to have a whistleblowing policy in place.
• Whistle Blowers Protection Act, 2011 (renamed as Whistle Blowers Protection Act, 2014 by the
second schedule of the Repealing and Amending Act, 2015, is an Act of the Parliament of India
which provides a mechanism to investigate alleged corruption and misuse of power by public
servants and also protect anyone who exposes alleged wrongdoing in government bodies, projects
and offices. The wrongdoing might take the form of fraud, corruption or mismanagement. The Act
will also ensure punishment for false or frivolous complaints.
• The Act was approved by the Cabinet of India as part of a drive to eliminate corruption in the
country's bureaucracy, and passed by the Lok Sabha on 27 December 2011. The Bill was passed by
Rajya Sabha on 21 February 2014 and received the President's assent on 9 May 2014.
• Intent: An Act to establish a mechanism to receive complaints relating to disclosure on any
allegation of corruption or willful misuse of power or willful misuse of discretion against any public
servant and to inquire or cause an inquiry into such disclosure and to provide adequate safeguards
against victimization of the person making such complaint and for matters connected therewith
and incidental thereto.

18. • The Act seeks to protect whistle blowers, i.e. persons making a public interest disclosure related to an act of corruption,
misuse of power, or criminal offense by a public servant.
• Any public servant or any other person including a non-governmental organization may make such a disclosure to the
Central or State Vigilance Commission.
• Every complaint has to include the identity of the complainant.
• The Vigilance Commission shall not disclose the identity of the complainant except to the head of the department if
deemed necessary. The Act penalizes any person who has disclosed the identity of the complainant.
• The Act prescribes penalties for knowingly making false complaints.
• Background:
• There have been multiple instances of threatening, harassment and even murder of various whistleblowers. An
engineer, Satyendra Dubey, was murdered in November 2003; Dubey had blown the whistle in a corruption case in the National
Highways Authority of India’s Golden Quadrilateral project.
• Two years later, an Indian Oil Corporation officer, Shanmughan Manjunath, was murdered for sealing a petrol pump that
was selling adulterated fuel.
• A Karnataka official SP Mahantesh, said to be a whistle-blower in controversial land allotments by societies was murdered
in May 2012. Mahantesh was working as Deputy Director of the audit wing in the state’s Cooperative department and had
reported irregularities in different societies involving some officials and political figures.
• A senior police officer alleged that Mayawati's government was corrupt and had embezzled large amounts of money.
Shortly thereafter, he was sent to a psychiatric hospital.
• The activists demanded that a law should be framed to protect the whistleblowers, to facilitate the disclosure of
information and uncover corruption in government organizations.

19. Whistle Blowing Policy –INDIA:
Despite the passing of the Whistle Blowers Protection Act, 2014 ("Act"), by both Houses of Parliament, the
Whistle Blowers Protection Act, 2014 has yet not been notified. The Act provided for the legislative intent to
provide a legal mechanism for the reporting of illegal, unethical and illegitimate practices by members of an
organization. However, the scope of the Act is limited to public servants and public sector undertakings.
The Act provides for the whistle blower to disclose his/her identity, however, such a requirement at time
may create discomfort for such whistle blower, as such persons usually prefer to remain anonymous in
order to protect themselves against any discrimination at their respective work place or any adverse actions
that may be taken against them, due to them reporting any malafide actions.
The legal framework in India pertaining to whistleblowing, protection of whistleblowers and its enforcement has largely been geared towards listed
companies. The Companies Act, 20131 provides for a 'vigil mechanism' for directors and employees of listed companies and other companies
prescribed therein2, to seek recourse for the reporting of malfeasance and prevent victimization.
An audit committee serves the dual purpose of scrutinizing, reviewing and analyzing a company's financial activities, while also serving as an ethics
watchdog. Its creation is mandated3 for every listed company and such other class or classes of companies, as may be prescribed only.
The Securities and Exchange Board of India ("SEBI") requires the listed companies to have incentive-based whistle blower policies that rewards
employees for reporting insider trading taking place within the company. SEBI recently strengthened this monetary incentive to 10 crores, with the aim
of empowering whistle blowers and strengthening its resolve against insider trading.
Amidst increasing cases of unlawful practices being exposed by employees in listed companies, the status of whistleblowing policies in unlisted,
private companies, has become all the more pertinent to address. For private companies, the whistleblowing regime remains mostly policy-driven.
This regime is supplemented by the Companies (Auditor's Report) Order, 2020, which facilitates enhanced financial transparency in the running and
day-to-day affairs of a company, by virtue of increased cooperation with auditors, with an emphasis on whistle-blower complaints and their disposal
in particular. The implementation of the same by private companies remains largely inconsistent.

20. • ROLE OF BOARD OF DIRECTORS:
• The Board of Directors are obliged to act in good faith and promote the objects of the company
in a manner which benefits the members as a whole and in the best interests of the company, its
employees, the shareholders, the community and for the protection of environment. They are to
exercise their duties with due and reasonable care, skill and diligence and shall exercise
independent judgment.
• In a legal chasm, the proactive role played by the board of directors in the constitution and
functioning of a robust and effective whistleblower mechanism can be harmoniously construed
within the ambit of the duties of the directors envisaged under law. This protects the interests of
the stakeholders of the company. Similarly, the board of directors play a crucial role as acting as an
example of highest standards of care, honesty and integrity, which encourages the rest of the
employees and managerial personnel to abide by their duties towards the interests of the
organization and society as a whole.
• Instances of whistleblowing complaints in listed companies are becoming increasingly common
and such complaints can be seen to be made in certain prominent and well-established companies
in India. In 2021, one of India's largest drug making companies paid a settlement of INR 56 lakhs in
lieu of allegations of fund diversions by the company via its distributor. A prominent Indian bank
also paid settlement fees of INR 28.4 lakhs to an employee on claims of being subjected to
victimization by being transferred to work under officials who he had filed a whistleblowing
complaint against. The most recent whistleblowing news to come to light was for Amazon India,
which led to the wheels of its own investigative process into motion.
• This increases the onus on the Board of Directors, who are not only tasked with setting up a
vigilance mechanism, but also ensuring its effective implementation in letter and spirit. To this end,
the board must ensure awareness about such policies is created throughout the company through
repeated training programmes, workshops and campaigns.

21. • CASES OF WHISTLE BLOWING IN INDIA
• CASE – 1 Satyendra Dubey
• An IIT Kanpur graduate in his mid thirties was supervising construction of the golden
quadrilateral project in the koderma division of Jharkhand. He had a reputation for being
an honest and upright officer. He was promoted as project director and was likely to be
posted there. Dubey exposed mis handling of funds by three of his engineers which led
to the suspension of the contractor. He had written to the National highway authority of
India (NHAI) and to the prime minister’s office (PMO) describing the financial irregularities
in the project. Dubey was shot dead on November 26, 2003. He had arrived at gaya
railway station from Varanasi. He did not find his driver at the gaya station. When he
called up his home he was told that the vehicle has some mechanical problem. He asked
his driver to stay at home and took a rickshaw. When he did not reach home, the driver
went at looking for him, and found dead near AP colony in Gaya.
• Unanswered Questions from Satyendra Dubey’s case:
• Would Satyendra have lived today if he had kept quiet or if his name had not been
leaked out?
• What if he had chosen to look the other way as many of us do?
• What if he had chosen to remain ‘loyal’ to the organization that employed him, the
NHAI, and not fight for greater public good?
• Why is the system unable to protect individuals like Satyendra Dubey?
• Why do have so many anti-corruption movements now and then, and then forget
about them after some time?
• Why do we forget people like Satyendra Dubey?

22. • Manjunath Shanmugam.
• The name takes us back to 2005, when the murder of the Indian Oil Corporation
sales officer made headlines. He had stumbled upon the selling of adulterated fuel
taking place in two petrol pumps at Lakhimpur Khiri, Uttar Pradesh — a known
hotbed of petroleum adulteration — and ordered them sealed.
• When dealers started operating them again, he conducted a surprise raid and was
shot.
• He went there to perform his duty. He came back with six bullets, dead.
• He got killed for exposing the racket of adulteration of petrol and the mafia behind
it.
• SP Mahantesh:
• He was the Deputy Director at the Directorate of Co-operative audit in Karnataka.
• Karnataka officer S P Mahantesh was killed because be blew the whistle on
cooperative housing scams.
• Mahantesh was posted as deputy director of the audit watchdog because of his clean
track record. Days after he assumed work, scams in cooperative societies began tumbling
out. He helped to bust scams in judicial employees’ housing co-operative society and
BEML employees co-operative society.

23. CONCLUSION:
In nutshell, it can be said that role of encouraging whistle blowing lies with both companies and
law. Companies have to provide for the pre requisite culture, support of top management and
high level corporate leadership for whistle blowing. And government needs to not only frame but
ensure the implementation of laws governing whistle blowing mechanisms and systems.
In general, the level of whistle blowing activity is likely to depend not just on the legal protection
granted to whistle blowers but also on the regulatory response to whistle blowing.
Although the Act has yet to come in force by a notification of the Central Government in the
Official Gazette the provisions of the Act on the bare perusal of the Act seem inadequate and
thus there are chances that the zeal of the Whistleblowers to make disclosure will be affected.

24. THANK YOU