Tracing India’s Whistleblower Laws: SEBI’s IPO Rule Marks a New Chapter

Whistleblowers always have been the most common factor in exposing corruption, frauds, scams, and serious wrongdoings within various organisations, corporations and institutions. Whistleblowers brings wrongs to the light which otherwise would remain buried in the dark. The courageous whistleblowing has saved public money, protected human right and led to introduction of major reforms. However, whistleblowing comes at a personal cost – including life threats, job loss, criminal prosecution. The evolution of Indian Whistleblower Protection Laws has largely been introduced as a result of public demand. There was also widespread public outage following increased cases of corruption, fraud and illegal activities in large corporations, both public and private. Before any formal legislation existed, whistleblowers operated in a legal vacuum, without assurance of safety or institutional support.

One of the major cases that caused such outage was the 2003 murder of Mr. Satyendra Dubey, an Indian engineering service agent who exposed wrongdoings within the National Highway Authority of India (NHAI). This case drew widespread media international attention and caused debate on need for legal safeguards for whistleblowers. Then in 2004, under the Public Interest Disclosure and Protection of Informers (PIDPI) introduced a public sector specific resolution to protect whistleblowers. This mechanism was also handed over to the Central Vigilance Commission. The Whistleblowers Protection Act was originally passed in Lok Sabha in 2011 and by Rajya Sabha in 2014. It became effective since May 12, 2014, after receiving assent of the president. This was the first time India had introduced a dedicated law governing protection of whistleblowers. In 2015, the government introduced an amendment that was (allegedly) limiting the scope of the legislation by not allowing disclosure related to national security under Official Secrets Act. The government was widely criticised for the same. As of now, the full operational framework of the Act still requires necessary rules for its implementation.

To draw a parallel, the United States has had a very structured evolution of whistleblower protection laws dating back to the time of American Civil War. During that time False Claims Act of 1863 was introduced which was also known as Lincoln’s Law. This act aimed to disclose government frauds offering monetary rewards to whistleblowers. Over time, more sector-specific laws followed. The Whistleblower Protection Act of 1989 formally codified protections for federal employees. Furthermore, the Sarbanes-Oxley Act of 2002 was passed after the Enron scandal, extended protections to employees of publicly traded companies. There was also the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 further strengthened incentives and anti-retaliation provisions for corporate whistleblowers.

Whistleblowing has played a critical role in upholding transparency, accountability and principles of dharma in the workplace. They play a critical role since they are the first responders when it comes to exposing crimes, fraud and illegal conducts within the organisation. However, the fear of things like retaliation, targeting and victimization often hold them back from exposing such activities A recent step in this direction is SEBI's mandate requiring companies to disclose whistleblower complaints in their IPO filings. This move not only reinforces transparency but also reflects a shift toward greater accountability in the corporate sector. By mandating such disclosures, SEBI is ensuring that potential investors are informed about unresolved internal issues, while also indirectly promoting a culture where whistleblower concerns are taken seriously.