Unit 3

Corruption

Dr. Nazia Akhtar

Meaning of Corruption

Corruption refers to the abuse of entrusted power/ trust for private gain. It
involves dishonest or fraudulent conduct.

Theories of corruption provide frameworks for understanding the causes,

mechanisms, and effects of corrupt behavior in societies. Here are some
prominent theories:

1. Principal-Agent Theory

This theory views corruption as a problem of information asymmetry and

misaligned incentives between principals (e.g., government or organization
leaders) and agents (e.g., public officials or employees).

• Information Asymmetry: Agents have more information about their

actions than principals, leading to opportunities for corrupt behavior.
• Incentive Misalignment: Agents may act in their own interest rather than
in the interest of the principals, especially when monitoring is weak and
incentives are not aligned.

2. Collective Action Theory

This theory suggests that corruption persists because it is a collective action

problem where individuals see little incentive to act against corruption if others
are not doing the same.
 • Social Norms: When corruption is widespread, it becomes normalized,
and individuals may not see the value in acting honestly if they believe
others are not.
• Coordination Problem: Fighting corruption requires coordinated efforts,
and without a critical mass of individuals willing to act, efforts to curb
corruption may fail.

3. Public Choice Theory

This theory applies economic principles to political processes, viewing

corruption as a result of rational self-interest among political actors.

• Rent-Seeking Behavior: Public officials may engage in rent-seeking,

using their positions to extract economic rents through bribery or
favoritism.
• Market for Corruption: Corruption is seen as a market transaction
where public officials sell services or favors in exchange for bribes.

4. Cultural Theories

These theories attribute corruption to cultural factors, suggesting that societal

norms and values influence the prevalence of corrupt behavior.

• Cultural Acceptance: In some cultures, gift-giving and patronage are

accepted practices, blurring the lines between acceptable and corrupt
behavior.
• Moral and Ethical Norms: Societal attitudes towards authority, wealth,
and individual versus collective responsibility can impact corruption
levels.

5. Institutional Theories
These theories focus on the role of institutions in shaping the environment for
corruption.

• Weak Institutions: Corruption thrives in environments with weak legal

and regulatory frameworks, where enforcement is lax and accountability
mechanisms are ineffective.
• Institutional Design: The structure and functioning of political and
administrative institutions can either deter or facilitate corruption.

6. Economic Theories

Economic conditions and policies are seen as key determinants of corruption.

• Economic Inequality: High levels of inequality can lead to corruption as

individuals seek to improve their economic status through illicit means.
• Regulatory Burden: Excessive regulations and bureaucratic red tape
create opportunities for corruption as individuals or businesses seek to
circumvent rules through bribery.

7. Political Theories

These theories examine the relationship between political systems and

corruption.

• Democracy versus Autocracy: The nature of the political system

(democratic or autocratic) can influence levels of corruption. Some
theories argue that democracies have lower levels of corruption due to
accountability mechanisms, while others suggest that democracies can
also be prone to corruption through patronage politics.
• Political Competition: The level of political competition and the nature
of electoral systems can impact corruption. High competition can either
 reduce corruption through accountability or increase it through patronage
and vote-buying.

8. Behavioural Theories

These theories focus on individual and group behavior as factors contributing to

corruption.

• Psychological Factors: Personal traits, such as risk tolerance and moral

compass, influence individuals' propensity to engage in corrupt acts.
• Group Dynamics: Peer influence and group loyalty can drive corrupt
behavior, especially in environments where group norms favor such
actions.

Understanding these theories helps in designing effective anti-corruption

strategies by addressing the underlying causes and mechanisms of corrupt
behavior in different contexts.

Corruption is a complex and multifaceted phenomenon that can take various

forms and manifest in different ways across societies and institutions. Here are
some key aspects of the nature of corruption:

1. Forms of Corruption

Corruption can be categorized into several forms, including:

• Bribery: Offering, giving, receiving, or soliciting something of value to

influence the actions of an official.
• Embezzlement: Misappropriation of funds or property entrusted to
someone's care.
• Fraud: Deception intended to result in financial or personal gain.
 • Extortion: Forcing someone to give up money or other valuables through
coercion or threats.
• Nepotism and Cronyism: Favoring relatives or friends in employment
and other opportunities.
• Patronage: Granting favors, contracts, or appointments to supporters in
return for political support.

Levels of Corruption

Corruption can occur at various levels:

• Petty Corruption: Everyday abuse of entrusted power by low- and mid-

level public officials in their interactions with ordinary citizens, such as in
service delivery, obtaining licenses, or police encounters.
• Grand Corruption: Acts committed at a high level of government that
distort policies or the functioning of the state, allowing leaders to benefit
at the expense of the public good.
• Systemic Corruption: Corruption that is pervasive and entrenched in the
political and economic systems, becoming the norm rather than the
exception.

Scope of Corruption

Corruption can affect various levels and sectors:

1. Government: Public officials may accept bribes to award contracts,

influence legislation, or avoid enforcement of laws. In 2010, the Indian
Commonwealth Games were marred by a corruption scandal involving
inflated contracts and embezzlement of funds, leading to significant
financial losses and delayed preparations.
 2. Business: Companies may engage in corrupt practices to secure contracts,
evade regulations, or gain unfair advantages. The Volkswagen emissions
scandal (Dieselgate) involved the company's use of software to cheat
emissions tests, misleading regulators and consumers
3. Judiciary: Judicial corruption includes bribery of judges, court staff, and
manipulation of judicial processes. In some countries, patients may be
required to pay bribes to receive timely medical treatment or to access
better services
4. Healthcare: Corruption can involve bribery for faster service,
embezzlement of funds, and procurement fraud. In some countries, patients
may be required to pay bribes to receive timely medical treatment or to
access better services.
5. Education: It includes buying admissions, grades, or academic positions.
The 2019 college admissions bribery scandal in the United States saw
wealthy parents paying bribes to secure college admission for their
children.
6. Non-profits: Misuse of donated funds for personal gain.

Extent of Corruption in India

Corruption in India is a widespread issue that affects various sectors and levels
of society. It ranges from petty bribery in daily life to large-scale corruption
scandals involving high-ranking officials and vast sums of money.

Notable Corruption Scandals

1. 2G Spectrum Scam (2010): The 2G spectrum allocation scam dates back

to 2008, the government then allegedly sold 122 licences on a first-come-
first-serve basis (FCFS) to specific private telecom operators. In 2009 ,the
Central Vigilance Commission directed the Central Bureau of
 Investigation (CBI) to investigate claims that there were illegalities in the
allocation of licences, following which the CBI filed a first information
report against unknown officers of the Department of Telecommunications
(DoT), private persons and companies. In 2011, the CBI alleged that there
was a loss of Rs 30,984 crore to the exchequer as a result of discrepancies
in the allocation process. In February 2012, the Supreme Court cancelled
the 122 telecom licences that were allocated on a FCFS basis, stating that
this method was prone to misuse. The Court emphasised that the "non-
discriminatory method" of auction should be adopted for the allocation of
bnatural resources like spectrum to ensure fairness and transparency.
2. Commonwealth Games Scam (2010): In 2010, New Delhi witnessed the
Commonwealth Games (CWG) scam, one of the major Indian scams,
involving a pilferage of around Rs 70,000 crore. It was estimated that only
half of the allotted amount was spent on Indian sportspersons. The athletes
were allegedly asked to shift to shabby apartments from the ones that were
allotted to them by the authorities. Reports of the Central Vigilance
Commission, in-charge of investigation of the CWG scam, revealed that
Suresh Kalmadi, the Chairman of the organising committee of the Games,
offered a contract of Rs 141 crore to Swiss Timings for its timing
equipment which was unnecessarily high by Rs 95 crore. All the accused,
including Kalmadi, were charged of criminal conspiracy, cheating, forgery
for purpose of cheating and were also charged under sections of the
Prevention of Corruption Act.
3. Coal Allocation Scam (2012): The Coal Block Allocation Scam, also
known as the Coalgate Scam, is a scandal that occurred during the tenure
of the UPA government in India. The scam involves the distribution of coal
blocks to public and private companies between 1993 and 2010. The
Comptroller and Auditor General (CAG) raised concerns about the process
in 2012, alleging that the government made arbitrary administrative
 decisions and didn't follow competitive bidding protocols. The CAG also
claimed that the government had the legal authority to auction coal blocks
in 2005, but chose not to, resulting in public and private companies gaining
₹10,673 billion (US$130 billion). The CAG also suggested that individuals
behind mining companies may have bribed government officials and
ministers to receive lucrative contracts and leases.
4. Vyapam Scam (2013): Involved rigging of entrance exams for
professional courses and government jobs in Madhya Pradesh, leading to
numerous deaths and arrests.
5. Uttar Pradesh NRHM Scam: NRHM Scam is an alleged corruption
scandal, in which top politicians and bureaucrats are alleged to have
siphoned off a massive sum estimated at 100 billion (US$1.5 billion) from
the National Rural Health Mission Fund, a central government program
meant to improve health care delivery in rural areas. At least five people
are said to have been murdered in an attempt to coverup large-scale
irregularities. Several former ministers of then ruling party, being
investigated by the Central Bureau of Investigation
6. Uttar Pradesh Food Grain Scam: The scam took place between years
2002 and 2010, in Uttar Pradesh state in India, wherein food grain worth
₹350 billion (US$4.2 billion), meant to be distributed amongst the poor,
through Public Distribution System for Below Poverty Line (BPL) card
holders, was diverted to the open market. Some of it was traced to the
Nepal and Bangladesh borders, as in 2010 security forces seized Rs 11.7
million worth of foodgrains like paddy and pulses being smuggled to
Nepal, another Rs 6062,000 worth of grains were confiscated on the Indo-
Bangladesh border.
Factors Contributing to Corruption

1. Bureaucratic Complexity: It refers to the excessive and complicated

administrative processes and regulations that govern various aspects
of public and private sector operations. Complex procedures and red
tape create bottlenecks that officials can exploit by demanding bribes
to expedite processes or provide approvals. In many developing
countries, obtaining business permits or licenses involves navigating
through multiple layers of bureaucracy, often leading to demands for
unofficial payments to speed up the process.
2. Lack of Transparency: Opacity in government functioning and decision-
making processes fosters corruption. Absence of openness and clarity in
the actions, decisions, and operations of government and public
institutions. This opacity prevents stakeholders from accessing
information that is critical for accountability.
3. Weak Enforcement: Ineffective enforcement of anti-corruption laws and
regulations. This includes insufficient resources, lack of political will, and
ineffective institutions responsible for combating corruption. When anti-
corruption laws are not effectively enforced, the perceived risk of
being caught and punished for corrupt activities is low, emboldening
individuals to engage in corruption. Moreover, The deterrent effect of
anti-corruption laws is significantly weakened when enforcement is
sporadic and inconsistent.
4. Cultural Factors: Cultural factors refer to the societal norms, values,
and attitudes that shape behavior and perceptions about corruption.
In some cultures, corruption is seen as an acceptable or even necessary
part of life. In cultures where corruption is socially accepted,
individuals are more likely to engage in and tolerate corrupt practices.
 n certain countries, gift-giving and informal payments to officials are
culturally ingrained practices, making it challenging to distinguish
between acceptable social customs and corrupt acts.
5. Political Influence: Political interference often leads to the
appointment of individuals based on loyalty and connections rather
than competence, creating a fertile ground for corruption. undermines
the independence and impartiality of administrative institutions,
making them more susceptible to corrupt practices.
6. Erosion of Ethics: A decline in ethical standards and values among
individuals and within organizations fosters an environment where
corrupt practices are more likely to occur. When individuals prioritize
personal gain over ethical behavior, they are more likely to engage in
bribery, fraud, and other forms of corruption. This erosion of ethics
undermines trust in public institutions and the rule of law.
7. Easy Access to technology: While technology can enhance
transparency and accountability, it can also be exploited for corrupt
purposes. For instance, technology can be used to manipulate records,
conduct illegal transactions, or hide illicit activities. Corrupt
individuals may use technology to create sophisticated schemes that
are harder to detect and trace. This includes using encrypted
communication, digital currencies, and complex financial networks to
launder money and evade law enforcement.
8. Economic Disparity: Significant economic disparities create
conditions where both the wealthy and the poor may resort to
corruption for different reasons. The wealthy might use their
resources to influence decisions in their favor, while the poor may
engage in petty corruption to meet basic needs. Economic disparity
fosters a sense of injustice and fuels the perception that corruption is
 a necessary means of survival or advancement. This perpetuates a
cycle of corruption where the marginalized engage in corrupt acts out
of necessity, and the affluent do so out of greed and influence.
9. Loop holes in Laws: Gaps and ambiguities in legal frameworks can be
exploited by individuals and organizations to avoid accountability and
legal consequences. These loopholes may arise from outdated laws,
poor drafting, or intentional omissions.
10. Challenges in Prosecution: The need for prior sanction for prosecution
can be misused to protect corrupt officials, delaying or preventing legal
action. Insufficient resources and potential corruption within investigating
agencies can hinder effective investigation and prosecution.In some cases,
the penalties may not be stringent enough to deter corrupt activities,
especially if the gains from corruption outweigh the risks.

Impact of Corruption

1. Economic:
o Loss of public funds and resources.
o Discourages foreign and domestic investment.
o Hinders economic growth and development.
2. Social:
o Widens inequality and social injustice.
o Erodes public trust in institutions.
o Impacts the delivery of essential services.
3. Political:
o Undermines democratic processes.
o Leads to political instability and governance crises.
4. Environmental:
o Results in poor environmental management and regulation.
 o Encourages illegal activities like mining and deforestation.

Efforts to Combat Corruption

1. Legislation:

• Right to Information Act (2005): It mandates timely response to citizen

requests for government information.Enhances transparency and
accountability in government functioning. The basic object of the Right to
Information Act is to empower the citizens, promote transparency and
accountability in the working of the Government, contain corruption, and
make our democracy work for the people in a real sense.
• Lokpal and Lokayuktas Act (2013): Establishes anti-corruption
ombudsmen at the central and state levels to inquire into allegations of
corruption against certain public functionaries and for related matters.
• Prevention of Corruption Act, 1988. It is an Act of the Parliament of
India enacted to combat corruption in government agencies and public
sector businesses in India. It provides for penalties in relation to corruption
by public servants and also for those who are involved in the abetment of
an act of corruption. Amendment of 2018 criminalised both bribe-taking
by public servants as well as bribe-giving by any person.
• Whistleblower Protection Act, 2014: The act establishes a mechanism
to receive complaints related to disclosure of allegations of corruption or
wilful misuse of power or discretion, against any public servant, and to
inquire or cause an inquiry into such disclosure.

2. Digitalization: Implementation of e-governance initiatives to reduce

human interface and opportunities for bribery.
 3. Institutional Reforms: Strengthening anti-corruption agencies like the
Central Vigilance Commission (CVC) and the Central Bureau of
Investigation (CBI).
4. Public Awareness: Campaigns and initiatives to educate citizens about
their rights and encourage reporting of corrupt practices.

Despite these efforts, corruption remains a significant challenge in India,

requiring continuous and multifaceted strategies to combat it effectively.

The Prevention of Corruption Act, 1988

The Prevention of Corruption Act, 1988, is an Act of the Parliament of India

enacted to combat corruption in government agencies and public sector
businesses in India. Here’s a brief overview:

Objective

The primary objective of the Act is to prevent and combat corruption among
public officials and ensure that public duties are discharged transparently and
efficiently.

Key Provisions

Definition of Public Servant: The Act broadly defines a "public servant" to

include any person in the service or pay of the government, or remunerated by
the government for the performance of any public duty.

Bribery: Acceptance or offering of any gratification other than legal

remuneration as a motive or reward for doing or forbearing to do any official act.

Misappropriation: Dishonest or fraudulent misappropriation or otherwise

converting for one's own use any property entrusted to a public servant.
Criminal Misconduct: Includes acceptance of illegal gratification, abusing
position to obtain a valuable thing or pecuniary advantage, and possession of
disproportionate assets.

Offences and Penalties

1. Public Servant Taking Gratification (Section 7)

A public servant accepting gratification other than legal remuneration.

Imprisonment for a term not less than three years, extendable up to seven
years, and a fine.

2. Public Servant Induced by Illegal Means (Section 11)

A public servant obtaining any valuable thing or pecuniary advantage

without consideration or for inadequate consideration. Imprisonment for a
term not less than six months, extendable up to five years, and a fine.

3. Criminal Misconduct by a Public Servant (Section 13)

Includes various forms of corruption, such as misappropriation of property,

obtaining valuable things without adequate consideration, or possessing
disproportionate assets. Imprisonment for a term not less than four years,
extendable up to ten years, and a fine.

4. Habitual Offender (Section 14)

A public servant habitually accepting or obtaining gratification.

Imprisonment for a term not less than five years, extendable up to ten years,
and a fine.

5. Abetment (Section 12)

 Abetting any offence under this Act. Same as for the offence abetted.

Investigation

• Authority to Investigate: The Act authorizes certain officers from the

Central and State Governments, such as police officers of the rank of
Inspector and above, to investigate offences under the Act.
• Investigation Procedure: The investigation procedures include:
o Lodging of the First Information Report (FIR).
o Collection of evidence.
o Examination of witnesses.
o Seizure of relevant documents and materials.

Sanction for Prosecution

• Requirement for Sanction: Before prosecuting a public servant under the

Act, prior sanction from the appropriate authority is mandatory.
• Authorities Granting Sanction: The appropriate authority could be the
Central Government, the State Government, or any authority competent to
remove the public servant from their office.
• Purpose of Sanction: The requirement of sanction is intended to protect
public servants from frivolous and vexatious litigation, ensuring that they
can perform their duties without undue harassment.

The Prevention of Corruption Act, 1988, thus, establishes a legal framework for
addressing corruption through defined offences and penalties, structured
investigation processes, and a mechanism to safeguard public servants from
unwarranted prosecution while enabling action against genuine cases of
corruption.

1. Powers and Duties of Special Judges:

 o The Act provides for the appointment of special judges by the state
government to try offenses under the Act.
o Special judges have the authority to grant immunity to accomplices
in return for their full and true disclosure.
2. Investigation:
o Empowerment of police authorities to investigate offenses under the
Act.
o The Central Bureau of Investigation (CBI) and anti-corruption
bureaus of states play a significant role in investigating corruption
cases.
3. Sanction for Prosecution:
o Prior sanction from the competent authority is required for the
prosecution of public servants.

Amendments

The Act has been amended over the years to strengthen its provisions:

2018 Amendment: Prevention of Corruption (Amendment) Act, 2018 was

enacted to enhance transparency and accountability of the government and make
anti-graft provisions under the law stringent. Introduced significant changes, such
as making giving bribes an offense, mandating prior approval for investigation
against public servants, and specifying punishment for a public servant who
enriches themselves illicitly. Key provisions of Prevention of Corruption
(Amendment) Act, 2018:

• Bribe-giving as an offence : Through this act, Bribe-giving was made

offence with punishment of 7 year except when people are forced to give
bribe. It will empower people to refuse to give bribes. So, It is the right
step in curbing corruption and making India Corruption free.
 • Pre Investigation Approval : Police officer cannot begin probe without
prior approval of relevant authority or government
• Sanction for prosecution : Sanction needed for prosecuting former officials
for offences done while in office.
• Criminal Misconduct : Only two forms of criminal misconduct was
included i.e. misappropriation of property entrusted to public servant and
intentionally enriching oneself illicitly.
• Confiscation of property : Under this act, there is provision for attach and
confiscate the property.
• Prevention of Corruption (Amendment) Act, 2018 as a tool to make India
Corruption free:
• After making Bribe-giving as an offence, It will empower people to refuse
to give bribes. So, It is the right step in curbing corruption and making
India Corruption free.
• Under this act, only two forms of criminal misconduct was included. In
Earlier Act i.e Prevention of Corruption Act (PCA), 1988 there were five
forms of criminal misconduct. This is done to protect the public officials
from being wrongly prosecuted for officials duty.

Impact

The Prevention of Corruption Act, 1988, has been a crucial legislative measure
in India's anti-corruption framework, aiming to deter public officials from
engaging in corrupt practices and ensuring integrity in public services. This Act,
along with various other laws and regulations, forms the backbone of the anti-
corruption legal structure in India, striving to build a more transparent and
accountable governance system.
 Santhanam Committee Report

The Santhanam Committee Report holds significant importance in the history of

the CVC in India. This report, named after its chairman, Shri K. Santhanam, was
pivotal in shaping the establishment and functioning of the CVC. The Report
provided exhaustive insights into the prevalence of corruption, its causes, and the
measures required to combat this social problem. The committee conducted a
comprehensive analysis of corruption in various sectors, including government
agencies, public sector businesses, and the judiciary.

The report's corruption definition was one of its most important aspects. It defined
corruption as "behaviour by officials in the public sector, whether politicians or
civil servants, in which they improperly and illegally enrich themselves or those
close to them, or induce others to do so by misusing their position." This
definition provided the groundwork for comprehending and recognising corrupt
practises in a variety of domains. In addition, the report emphasised the
significance of preventive measures in combating corruption. It suggested the
establishment of a vigilant and transparent system in which corruption is actively
discouraged and quickly detected.

The committee proposed establishing a Central Vigilance Commission (CVC) as

the apex body charged with preventing corruption and promoting integrity in
public administration. In addition, the Santhanam Committee emphasised the
need for a robust and impartial anti-corruption agency. It was suggested that the
CVC be granted the authority to conduct investigations, investigate complaints,
and impose sanctions against fraudulent officials. The committee emphasised the
significance of safeguarding whistleblowers and providing them with adequate
protections in order to encourage the reporting of corrupt practises without fear
of retaliation. In addition, the report recommended the development of a code of
conduct for public servants that would outline the expected ethical standards and
professional conduct. It emphasised the significance of training and educating
public officials about ethical values and the repercussions of corruption.

Systemic reforms were emphasised in the Santhanam Committee Report, which

was another significant aspect. To reduce discretion and opportunities for
misconduct, the committee suggested streamlining administrative procedures,
simplifying rules and regulations, and implementing technology-driven solutions.
It emphasised the importance of accountability and openness in public
procurement, financial administration, and decision-making processes.The
Santhanam Committee Report had a significant impact on the CVC's operations
and India's overarching anti-corruption efforts. The report's recommendations
paved the way for the establishment of the CVC in 1964, which was charged with
preventing corruption and promoting integrity in public administration.

The report's findings and recommendations continue to impact India's anti-

corruption efforts. Over time, subsequent committees and commissions have built
upon the work of the Santhanam Committee, resulting in the evolution of the
country's anti-corruption framework. In conclusion, the Santhanam Committee
Report played a vital role in India's fight against corruption. Its comprehensive
analysis, recommendations, and emphasis on preventive measures have shaped
the Central Vigilance Commission's operations and had a lasting impact on the
country's struggle against corruption.