Today’s post is from Sherbir Panag and Ishita Parashar who are both members of the Law Offices of Panag & Babu – India’s largest white collar crimes law firm.
On 4 February 2024, the Central Bureau of Investigation (CBI) – India’s premiere investigation body, filed a charge sheet against the former chairman and managing director of Air India, along with executives from SAP and IBM’s Indian subsidiaries. A charge sheet is the formal conclusion of an investigation, and marks the commencement of a trial. To be clear the charge sheet is reflective of the investigative body’s conclusion on the charges and is not the formal charges that are framed by a court, to which the accused responds.
The genesis of this matter dates back to 2016 when the Central Vigilance Commission (CVC) received a complaint concerning Air India’s procurement of software systems. Allegedly, this procurement was carried out without adhering to the prescribed tender procedures. The CVC assigned this to Air India’s Central Vigilance Officer to assess, following which it issued an Office Memorandum to the CBI to conduct an inquiry. On 12 January 2017, the CBI registered a First Information Report (FIR), which is the first formal step in India to set the criminal justice system in motion.
While the charge sheet itself is confidential and hence not in the public domain, the FIR is publicly available and outlines the following:
- The controversy pertains to the procurement and selection of enterprise resource planning (ERP) software providers by Air India, and notes limited efforts to rectify issues with Air India’s existing ERP software – ORACLE.
- SAP and IBM were subsequently chosen on a nomination basis by Air India, as opposed to via an open tender.
- The FIR was registered alleging offences of criminal conspiracy and cheating under the Indian Penal Code, 1860, and disproportionate assets (when compared with known sources of income) held by public servants under the Prevention of Corruption Act, 1988 (PCA). Air India being a government company or public sector undertaking at the time of the offence, would fall within the contours of the PCA.
At this stage, it would be inappropriate to draw any definitive conclusions or lessons from the case, as the matter is sub judice. It is imperative, to reiterate that a charge sheet is not tantamount to a conviction nor equivalent to the charges formally framed by a court. As such there remains the possibility that the court may upon hearing the accused’s arguments on the charge sheet, dismiss the matter or discharge the accused person without framing any charges at all.
We have noted some commentary on the case which has addressed India’s complex procurement system as a potential root cause. Without speaking to the merits of the case the details of which are not known, it would be imprudent to make such sweeping statements. India’s public procurement norms are quite transparent, heavily reliant on digital infrastructure and have several built-in systems to address bribery and corruption risks including pre-contract integrity pacts.
To the contrary we would say that this matter comes on the heels of a fairly consistent and aggressive prosecution posture for white collar crime offences, which we have seen in India over the past decade and a half; the common themes of which are:
- Investigations continue to be long drawn and protracted, but it would be inaccurate to conclude or infer that they are abandoned. Indian courts have growingly become less sympathetic to dismissing cases merely due to the length of the investigation.
- India does not have a centralised investigative / prosecution system and as such different enforcement bodies have different statutory mandates, which typically results in a multitude of proceedings – as the same set of facts would entail multiple statutory breaches. Therefore, a typical case of bribery may involve 2-3 other enforcement authorities investigating allied offences such as fraud / misrepresentation of books and records of the company by the Serious Frauds Investigative Office; money laundering by the Enforcement Directorate; and tax law violations by the Income Tax Department.
- Pre-trial actions of search and seizure, arrests and attachments of properties have become commonplace and are at an all-time high. They are no longer the exception to the norm.
Trends in enforcement actions by the Indian and U.S. governments, make a strong case for compliance programs that are sound and backed by corporate leadership, as opposed to mere lip service or liability reduction measures; that have little commitment or behaviour alteration impact.