This document outlines a whistleblowing policy as required under the Companies Act 2013 in India. It defines whistleblowing as reporting misconduct within an organization and notes that certain companies must establish vigilance mechanisms. It describes internal and external whistleblowers and protections provided under the Sarbanes-Oxley Act. The objectives, barriers, and steps for creating a whistleblowing culture are discussed. Key differences between listing agreement and Companies Act requirements are also summarized.

1. WHISTLE BLOWING POLICY
Under Companies act 2013

2. Introduction
• The term “whistle-blowing” originates from the practice of
British policemen who blew their whistles whenever they
observed commission of a crime. Whistle blowing means
calling the attention of the top management to some
wrongdoing occurring within an organization.
• A whistle blower may be an employee, former employee or
member of an organization, a government agency, who have
willingness to take corrective action on the misconduct.

3. • As per Sec.177 of the Companies Act,2013, certain companies have to
establish Vigil/Whistle-blowing mechanism to report any unethical
behavior or other concerns to the management.

4. Types of Whistle Blower:
1. Internal:
A Whistle Blower may be within the organization who discloses any
illegal, immoral or illegitimate practices to the employer. He/she may
be:
• Employee
• Superior officer or
• Any designated officer

5. 2.External :
A whistle Blower may be outside the organization who discloses any
illegal, immoral or illegitimate practices to the company. He/She may
be;
• Lawyers Media
• Law enforcement
• Watchdog agencies

6. Sarbanes-Oxley Act,2002(SOX):
• An Act enacted by U.S. congress in 2002 to protect investors by
improving the accuracy and reliability of corporate disclosures made
pursuant to the securities laws, and for other purposes.
• It is a set of standards that all U.S public companies and public
accounting firms must comply and adhere with good quality reporting.
• SOX is an essential law which has brought discipline in financial
reporting process. The transparency brought by this act is boosting
investor’s confidence that further helps building a strong capital market
in the economy

7. • Clause 49 of the listing agreement is pretty much on the lines of
Sarbanes Oxley Act of 2002 provided by SEC for companies listed on
US stock exchanges. According to Clause 49, the top management
becomes directly accountable for all financial statements and internal
controls of the organization, which is also the bottom line in case of
Section 302 of Sarbanes Oxley Act of 2002.

8. Applicability:
Whether SOX is applicable in India?
Yes, all companies, including Indian, which are listed on US stock
exchanges, are required to comply with the requirements of the Act.
Corporate governance in India too has taken a folio from provisions of
Sec. 404 of the Act.

9. Provisions of SOX for whistle-blowers
• Make it illegal to “discharge, demote, suspend, threaten, harass or in
any manner discriminate against” whistle blowers Establish criminal
penalties of up to 10 years for executives who retaliate against whistle
blowers Require board audit committees to establish procedures for
hearing whistle blower complaints Allow the secretary of labour to
order a company to rehire a terminated employee with no court hearing.
Give a whistle blower the right to a jury trial, bypassing months or
years of administrative hearings

10. Objectives of Whistle blowing
• To encourage employees to bring ethical and legal violations they are
aware of to an internal authority so that action can be taken
immediately to resolve the problem
• To minimize the organization’s exposure to the damage that can occur
when employees circumvent internal mechanisms
• To let employees know the organization is serious about adherence to
codes of conduct

11. Barriers of whistle blowing
• A lack of trust in the internal system
• Unwillingness of employees to be “snitches”
• Belief that management is not held to the same standard
• Fear of retaliation
• Fear of alienation from peers

12. Steps for Creating a Whistle-blowing Culture
• Create a Policy Get Endorsement From Top Management Publicize the
Organization’s Commitment Investigate and Follow Up Assess the
Organization’s Internal Whistle-blowing System

13. Vigil Mechanism- Listing Agreement Vs
Companies Act,2013: -
Listing agreement
• It is a non-mandatory requirement under clause 49 of the listing
agreement The company may establish a mechanism for employees to
report to the management concerns about unethical behavior, actual or
suspected fraud or violation of the company’s code of conduct or ethics
policy. It provide for adequate safeguards against victimization of
employees who avail of the mechanism and also provide for direct
access to the Chairman of the Audit committee in exceptional cases.

14. Companies act 2013
• It is mandatory for
• All the listed companies and
• Companies which accept deposits from the public
• Companies which have borrowed money from Banks and PFI in excess of
Rs.50 crores under section 177(9) read with Companies (Meetings of
Board and its Powers) Rules, 2014.
• Companies which are required to constitute an audit committee shall operate
the vigil mechanism through the audit committee and if any of the members
of the committee have a conflict of interest in a given case, they should
recuse themselves and the others on the committee would deal with the
matter on hand.

15. • For other companies, the Board of directors shall nominate a director
to play the role of audit committee for the purpose of vigil mechanism
to whom other directors and employees may report their concerns.
• It provide adequate safeguards against victimization of employees and
directors who avail of the Vigil mechanism and also provide for direct
access to the chairperson of the Audit committee or the director
nominated to play the role of audit committee, as the case may be, in
exceptional cases.

16. • Once established, the existence of the mechanism may be
appropriately communicated within the organization. The details of
establishment of Vigil mechanism shall be disclosed by the company
in the website, if any, and in the Board’s Report. In case of repeated
frivolous complaints being filed by a director or an employee, the
audit committee or the director nominated to play the role of audit
committee may take suitable action against the concerned director or
employee including reprimand.

18. Conclusion:
• Now the Corporate(s) will have to institute rigorous policy to allow
employees to bring unethical and illegal practices to the forefront and
also train managers and executives on how to encourage openness.
Some of the companies already have a Whistle-Blower policy as a
good corporate governance practice and now most of the companies
are started to frame this policy to comply with section 177 of the
Companies Act 2013 &Corresponding Rules.

19. Whistle blowing policy under SEBI guidelines
• The Securities and Exchange Board of India (‘SEBI’) vide its circular
dated August 26, 2003 amended the Principles of Corporate
Governance incorporated in the standard Listing Agreement. Clause
49 of the Listing Agreement to the Indian stock exchange now also
mentions the formulation of a Whistleblower policy for companies.
Following is the text from Annexure I D of the Clause 49 of the
Listing Agreement.

20. • The company may establish a mechanism for employees to report to
the management concerns about unethical behaviour, actual or
suspected fraud or violation of the company’s code of conduct or
ethics policy. This mechanism could also provide for adequate
safeguards against victimization of employees who avail of the
mechanism and also provide for direct access to the Chairman of the
Audit committee in exceptional cases. Once established, the existence
of the mechanism may be appropriately communicated within the
organization.

21. • At present, a listed company in India can establish as a non mandatory
requirement, a whistle blower mechanism for employees to report their
concerns about unethical behavior, actual or suspected fraud or
violation of the company’s code of conduct. However, it is currently
not mandatory for companies to have a whistle blowing policy in
place. Besides this, the company also has a mandatory requirement to
disclose, in its report on corporate governance, the extent of adoption
of such non-mandatory practice. It is heartening to see that numerous
companies have started to adopt the practice of formulating a whistle-
Blower Policy either in their quest to uphold the highest corporate
governance standards or in the fear of being regarded as late entrants
to the ‘well-governed companies’ group.