CHINKS IN WHISTLEBLOWER ARMOUR
On October 22, 2019, the Infosys share price tumbled 16 per cent, wiping out ₹44,000 crore in market cap, after a complaint accusing Chief Executive Officer Salil Parekh of indulging in unethical practices came to light. Two anonymous whistleblower complaints sent simultaneously to the US Securities and Exchange Commission (SEC) and Infosys board members accused Parekh and the Chief Financial Officer, Nilanjan Roy, of indulging in accounting fraud, among other things. An investigation by the company’s audit committee later found no wrong-doing. But the damage was done. It took Infosys shares, which ended October 22 at ₹643 against the previous session’s close of ₹767, almost three months to recover the losses.
In a similar case, in June last year, two shareholders of Indiabulls Housing Finance filed a whistleblower complaint with the Supreme Court accusing the Chairman, Sameer Gehlaut, of siphoning off public money through shell companies. The news shaved ₹7,000 crore off the company’s market cap. In November, the Ministry of Corporate Affairs gave the company a clean chit.
While the whistleblower mechanism, introduced in the Companies Act in 2013, is a useful tool in pursuit of higher corporate governance standards, instances like these beg a between the then ICICI Bank Managing Director Chanda Kochhar and Videocon Group Chairman Venugopal Dhoot, agrees that the whistleblower policy can be misused like other anti-corruption tools such as RTI. Gupta’s complaint that Videocon was given undue advantage in grant of loans had led to action against Kochhar. However, in spite of such obvious successes, the whistleblower mechanism is facing a crisis of credibility, due to several reasons. One is the several lacunae in the system. Then there have been cases where it has been used to settle scores, prompting many to demand punishment for those who use it with malicious intent.
