Whistleblower Policy (Vigil Mechanism)

Whistleblower Policy (Vigil Mechanism)
13 August 2020

Whistleblower Policy (Vigil Mechanism)

The Company has adopted a Code of Conduct for Directors and Senior Management Executives (“the Code”), which lays down the principles and standards that should govern the actions of the Company and its employees. Any actual or potential violation of the Code, howsoever insignificant or perceived as such, would be a matter of serious concern for the Company. Vigil Mechanism shall provide for adequate safeguards against victimization of persons who use such mechanism and also make provision for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases. Further sub-section (9) of section 177 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 provides that the following classes of Companies are required to establish a vigil mechanism.

The term “whistle-blowing” originates from the practice of British policemen who blew their whistles whenever they observed the commission of a crime. Whistleblowing means calling the attention of the top management to some wrongdoing occurring within an organization.

A whistleblower may be an employee, former employee, or member of an organization, a government agency, who have a willingness to take corrective action on the misconduct. As per Section 177 of the Companies Act, 2013, certain companies have to establish a Vigil/Whistle-blowing mechanism to report any unethical behavior or other concerns to the management.

Define who is Whistleblower?

A whistleblower is a person or any individual or a group of people who identify and expose anything such as scam, fraud, leakage, hidden information, or activity that is deemed illegal or not correct or unethical within an organization that may be a public or a private business entity.

What is Whistle Blower policy Meaning and Whistleblowing Procedure in Business:

In an organization, whistleblowing policy means that the company gives freedom and allows its employees to report or telling the management the Facts and putting a Stop on all unethical immoral or illegal work.  Whistle Blowing policy meaning and its objective is to create an open work environment practice within the organization to encourage the employee to raise the voice on wrongdoings and enhance the belongingness.

The Corporate Whistleblower Policy and procedure in the business allow or extends these rights to their work or employees to rises their voice or complain about any misconduct, bad or harmful behavior, illegal and unethical activity, Loss of Intellectual properties such as Brand and Patent or sharing business information which is highly private and confidential.  The Whistleblowing Policy and procedure are laid down in a manner that provides the provision to anyone who is the part of an organization or system to blow the whistle against anything but to do so one has also follow the right whistleblowing process and procedure given in the Corporate Policy.

This policy is meant to guide individuals or employees as to how to whistleblow on a company level at the time of an incident or discovered any improper act or wrongdoing within the organization.  Any matter which is being taken care of under harassment, complaints, disciplinary action should not be taken under whistleblower policy. 

Types of Whistleblowing 

Two types of whistleblowing exist in the policy and these are namely internal and external whistleblowing. Internal when the concern is raised within the organization and external when the concern is raised outside of the organization for instance to media etc. but in both types of whistleblowing cases It is an employee only who plays the role of whistleblower and raise the concern or expose the unfair practices.

The whistleblowing policy includes concerns raised to prevent loss to the organization and to protect the company from any bad image.  Beneath said approach is Whistleblower strategy test. Alongside the shriek blower arrangement test, it is essential to have a culture in the association which bolsters the informant strategy. Some steps can be taken for promoting a whistleblower culture:

  1. Make a whistleblower policy and announce it and encourage to “Blow the whistle”
  2. Stress on communication about bans on retaliation for whistleblowing activities.
  3. The message of incorporation of the whistleblower must percolate down from top to bottom i.e. from top management to entry-level employees.
  4. There should be a commitment to implementing the whistleblower
  5. In the event that there is an inappropriate act, it must be altogether researched through whistleblower

Having a corporate whistleblower is important from various angles. It generates the environment of trust and integrity within the organization. However, it is the foremost responsibility of top management to provide safety and security to the whistleblower.  

Mandatory Requirement for the Establishment of Whistle Blower Policy (Vigil Mechanism)

As per Section 177(9) of Companies Act, 2013 read with the Companies (Meetings of Board and its Powers) Rules, 2014 following companies are mandatorily required to establish Vigil Mechanism:

  1.  All the listed companies ;
  2. Companies which accept deposits from the public;
  3. Companies that have borrowed money from banks and public financial institutions in excess of fifty crore rupees.

The details of the establishment of the Vigil mechanism are required to be disclosed by the company on the website of the Company if any and in the Board’s Report.

 Administration of Vigil Mechanism
  1. Companies having established Audit Committee: The companies which are required to constitute an audit committee shall oversee the vigil mechanism through the 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.
  2. Other companies that do not require to have Audit Committee: In other companies, the Board of directors shall nominate a director to play the role of the audit committee for the purpose of vigil mechanism to whom other directors and employees may report their concerns.
Functioning under Whistleblower Policy (Vigil Mechanism)

The vigil mechanism provides for adequate safeguards against victimization of employees and directors who avail of the vigil mechanism and it also provides 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.

It is essential to note that 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 the audit committee may take suitable action against the concerned director or employee including reprimand.