This is the updated version of the previous articles titled Corruption and Technology Related Due Diligences in India. Corruption and the regulatory measures to prohibit corrupt practices have assumed new meaning with the passing of the Jan Lokpal and Lokayuktas Act, 2013 by the Parliament of India. Similarly, the Serious Frauds Investigation Office (SFIO) has also been given wide powers under Indian Companies Act, 2013 (PDF).
The Ministry of Corporate Affairs (MCA) has also issued some Rules under Chapter XIV of Indian Companies Act, 2013 pertaining to Inspection, Inquiry and Investigation by Indian authorities and SFIO. The Suggestions Regarding Rules Pertaining to Inspection, Inquiry and Investigation (SFIO) by Perry4Law (PDF) has already been provided by us in this regard. Now the Central Government Permission is not required by CBI to prosecute senior bureaucrats for corruption cases monitored by Supreme Court of India.
The recent spate of corruption related disclosures in India has sent a strong message to Indian and foreign companies to ensure that their business are strictly in compliance with Indian and foreign laws. Naturally, companies that have entered into merger and acquisitions (M&A) in the past are now looking forward to ensure that nothing fishy happened during such M & A transactions.
These Indian and foreign companies are worried about the potential legal and tax liabilities arising out of various scams and corporate frauds and they are engaging law firms to do a due diligence analysis on the M&As or foreign direct investments (FDIs) they’ve made in India. Law firms are carrying out legal due diligence exercises to detect any loopholes that could result in liabilities on behalf of their clients to avoid litigation possibilities arising out of deals done in the past.
Some multinational companies are also doing legal due diligence to ensure that the Indian subsidiaries and companies they are about to invest or have already invested in are complying with the foreign laws like Foreign Corrupt Practices Act (FCPA) 1977 of the US and the UK Bribery Act 2010.
Even companies that are now exploring the possibility of M&A are taking precautions before entering into such partnerships. While there is no particular department for dealing with all the aspects of corporate business at a single place (Ministry of Corporate Affairs deals with corporate matters) yet department of information technology (DIT) is the chief department that deals with technology related issues. These include cyber law, cyber security, e-commerce, e-governance, spectrum allocation, telecom licensing, etc.
However, till now companies were not very cautious in their dealings in cyberspace and technology related fields. The information technology act 2000 (IT Act 2000) is the cyber law of India that prescribes various cyber law due diligence in India for areas like e-commerce, e-governance, Internet intermediary liability in India, social media due diligence in India, etc.
However, companies are in controversy these days in India. For instance, doubts have been raised regarding the manner in which Reliance and Airtel blocked websites in India. Similarly, some have even suggested that DIT must investigate the case of blocking of websites in India by Reliance, Airtel and other Internet service providers (ISPs).
Similarly, companies like Google, Facebook, etc are already in cyber law legal tangle in India. Indian government is claiming that these companies failed to comply with Indian laws, including cyber law of India. While the guilt or innocence of these companies is still to be established yet this episode has shown the importance of cyber due diligence for Indian companies.
Cyber crimes at social media websites in India are increasing and these social media platforms cannot ignore the same especially once they are made aware of the same. The social media websites investigation in India is going to increase and more and more e-discovery for social media in India would be conducted. Even cyber law due diligence for banks in India is going to increase.
Another area that requires a special mention is the contemporary practice known as e-legal due diligence in India. This requires domain specific techno legal expertise and a sound knowledge of both technical and legal aspects. It is an advanced and improved form of traditional legal due diligence in India that is done in an offline environment. With companies now shifting their data and information to data centers and virtual data rooms (VDRs), e-legal due diligence in India and abroad would be the norm.
Perry4Law and Perry4Law Techno Legal Base (PTLB) strongly recommend that Indian and foreign companies must conduct a thorough corruption and technology related due diligence analysis in India as soon as possible.