Quick answer
Under section 9 of the Prevention of Corruption Act, 1988 (inserted in 2018), a commercial organisation commits an offence if any person associated with it bribes a public servant to obtain or retain business. The company faces a fine, and its defence is proving it had adequate procedures. Section 10 can reach the managers in charge.
Key takeaways
- Since the 2018 amendment, a company can itself be guilty when an employee, agent or other associated person bribes a public servant on its behalf.
- The statutory defence is “adequate procedures” in line with guidelines prescribed by the Central Government, so documented, working controls matter.
- Section 10 extends liability to persons in charge who consented to or connived at the offence: imprisonment of three to seven years and a fine.
- The risk sits with third parties and sales, logistics and liaison teams, so training must reach them, not only the compliance function.
- A policy nobody can evidence in practice is not a defence. Training records, due diligence files and reporting data are.
For years, Indian anti-corruption compliance focused on the individual: the public servant who took the bribe and the person who offered it. The 2018 amendment to the Prevention of Corruption Act changed the question for boards. It is no longer only “did our people pay a bribe?” but “can we show we did everything reasonable to stop anyone acting for us from doing so?”
What does section 9 of the Prevention of Corruption Act say?
Section 9, inserted by the Prevention of Corruption (Amendment) Act, 2018, makes a commercial organisation guilty if any person associated with it gives, or promises to give, an undue advantage to a public servant intending to obtain or retain business, or an advantage in the conduct of business, for that organisation.
The offence attaches to the company because of what an associated person did. It does not require proof that the board knew. The penalty on the organisation is a fine, but the reputational, contractual and debarment consequences usually cost far more.
Who counts as an “associated person”?
The Act describes an associated person as someone who performs services for or on behalf of the organisation, whatever the capacity. That can include employees, agents, contractors, subsidiaries and other intermediaries, and the test turns on the services performed rather than on the formal relationship. This is why customs brokers, liaison agents, consultants and logistics partners belong in your risk assessment alongside your own staff.
What is the “adequate procedures” defence?
A commercial organisation can defend itself by proving that it had adequate procedures, in compliance with guidelines prescribed by the Central Government, designed to prevent its associated persons from committing the offence. The burden is on the company. Because the content of the guidelines is a matter for the Government, confirm the current position with your legal counsel and build your programme so that you can show your reasoning and your evidence.
How does section 10 affect directors and managers?
Where a section 9 offence is committed by a commercial organisation and it is proved that it was committed with the consent or connivance of a director, manager, secretary or other officer, that person is also guilty. Section 10 provides for imprisonment of not less than three years, extendable to seven years, and a fine.
The practical lesson is that approving, tolerating or ignoring an obvious red flag is dangerous. An approver who signs off an unexplained “facilitation” line item is the kind of person this provision is aimed at.
| Provision | Who it targets | Consequence |
|---|---|---|
| Section 8 | Any person who gives or promises an undue advantage to a public servant | Imprisonment of up to seven years, or a fine, or both |
| Section 9 | A commercial organisation whose associated person bribes a public servant to obtain or retain business | Fine on the organisation; defence of adequate procedures |
| Section 10 | A director, manager, secretary or other officer who consented to or connived at a section 9 offence | Imprisonment of three to seven years and a fine |
Where does bribery risk actually enter an Indian company?
Rarely through a briefcase of cash. It enters through ordinary-looking transactions handled by people who were never trained to see them as bribery risk.
Where the Risk Hides
- Agents paid “success fees” with no clear service
- Customs, licensing and inspection “facilitation” charges
- Gifts and hospitality to officials, split across invoices
- Consultants with links to the decision-maker
- Urgent approvals that skip due diligence
- Staff who think third-party conduct is not their problem
What Adequate Procedures Look Like
- Risk-based due diligence before onboarding any intermediary
- Contracts with anti-bribery clauses and audit rights
- Gifts and hospitality register with pre-approval for officials
- Payments matched to documented services
- Role-based training for sales, procurement, finance and logistics
- A reporting channel and a visible response to red flags
What should a defensible anti-bribery programme include?
Build around the question a court or investigator would ask: what did the company do, specifically, to stop this? Five elements answer it.
A top-level commitment that is visible
A board-approved anti-bribery policy, communicated by leaders who are seen declining shortcuts, sets the tone. A policy that appears only in the intranet is hard to defend.
Risk assessment by function and geography
Map where your people and intermediaries interact with public servants: customs, tax, pollution boards, municipal approvals, licensing, public tenders. Rate each interaction and focus the controls where the risk is highest.
Due diligence and contracts for third parties
Know who your agents are, who owns them, what they will actually do and how they will be paid. Put anti-bribery obligations and termination rights in the contract, and refuse payments that cannot be tied to a real service.
Training that reaches the exposed roles
Generic annual e-learning is not enough for the logistics coordinator or regional sales head. Use realistic scenarios about facilitation payments, gifts at festival time and pressure from agents. Our Anti-Bribery & Corruption course is built around situations like these, and our anti-bribery training hub brings the related guides together.
Reporting, monitoring and evidence
Provide a safe route to raise concerns, review payments to intermediaries, and keep records of training, approvals and investigations. For a real-world illustration of how a scheme can hide in plain sight, read how a vendor kickback scheme survived three internal audits.
What should you do this quarter?
List every third party that interacts with a government body on your behalf. For each, ask three questions: have we done due diligence, does the contract carry anti-bribery terms, and does anyone in the team know what to do if asked for a “fee”? Where the answer is no, fix it before the next audit, not after the next incident.
Frequently asked questions
Can a company be prosecuted in India for a bribe paid by its agent?
Yes. Under section 9 of the Prevention of Corruption Act, 1988, a commercial organisation is guilty if a person associated with it bribes a public servant to obtain or retain business for it. The company can defend itself by proving it had adequate procedures.
What are adequate procedures under the Prevention of Corruption Act?
The Act provides a defence for a commercial organisation that proves it had adequate procedures, in compliance with guidelines prescribed by the Central Government, to prevent associated persons from bribing public servants. Take legal advice on the current guidelines and document your controls.
Are directors personally liable under section 10?
Where a section 9 offence is proved to have been committed with the consent or connivance of a director, manager, secretary or other officer, that person is also guilty and faces imprisonment of three to seven years and a fine.
Are facilitation payments to officials allowed?
The Act does not carve out a general exception for small facilitation payments to public servants. Treat them as high-risk, prohibit them in policy and train staff to escalate such requests.
Who needs anti-bribery training?
Everyone should know the policy, but the highest-risk roles, such as sales, procurement, logistics, finance and anyone managing agents or dealing with regulators, need deeper, scenario-based training with records kept as evidence.
Sources
Show that your anti-bribery controls work in practice, not only on paper.
See how role-based anti-bribery and corruption training helps your sales, procurement and logistics teams spot third-party risk and say no. Book a walk-through with our team.
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