!

Article

Vigilance Managementin Public Sector Enterprises

K. P. Sasidharan*

Mr. K. P. Sasidharan

ate objective ofadministration

should be empowering PSEsto do business within the ex-tant framework of systems,rules and procedures moreefficiently, effectively, ethi-cally, equitably, economicallyand profitably by optimumutilization of productiveresources in a tran&aariobjective and stakeholcentric approach.

Every year, on the vigilanceawareness day, all thepublic servants pledge

solemnly, "we shall continuous-ly strive to bring integrity andtransparency in all spheres of ouractivities. We also pledge thatwe shall work unstintingly foreradication of corruption in allspheres of life."

The World Bank defines'Corruption' as the abuse of pub-lic office for private gain. Andbribe is an amount received by apublic servant other than legal re-muneration for the performanceof official duties. The majorcauses of corruption as identifiedby Santhanam Committee consti-tuted by the Government of Indiaon anti-corruption are red tapeand administrative delay, com-plex regulations cumbersomeprocedures, scope of personaldiscretion, scarcity of goods andservices and lack of transparency.Section 161 of IPC describes cor-ruption as:

'Whoever, being or expecting tobe a public servant, accepts orobtains, or agrees to accept, orattempts to obtain gratificationwhatever, other than legal remu-neration as a motive or a rewardfor doing or for bearing to do any

official act or for showing or forbearing to show, in the exerciseof his official functions favor ordisfavor to any person with theCentral or State Government orParliament or Legislature of anyState or with any public servantas such.

Central VigilanceCommission (CVC)The CVC was set up by theGovernment of India in 1964 con-sequent to the recommendationof the Committee on Preventionof Corruption, known as theSanthanam Committee. CVC isthe apex body exercising generalsuperintendence and control overvigilance matters in administra-tion and probity in public life.The Commission was accordedstatutory status in 1998 by "TheCentral Vigilance CommissionOrdinance, 1998" and in 2003 theCentral Vigilance CommissionAct, 2003 came into effect.

The Commission's jurisdiction isco-terminus with the executivepowers of the Union and can un-dertake any inquiry into any trans-action in which 'a public servant issuspected or alleged to have actedfor an improper or corrupt pur-pose; or cause such an inquiry or

*K P Sasidharan, is an alumnus from the London School of Economics, member ofthe Indian Audit & Accounts Service,a premier higher civil service in the country. Heis currently working as Director General in the office of the Comptroller and AuditorGeneral of India.

18 KALEIDOSCOPE November 2013

Article

investigation to be made into anycomplaint of corruption, grossnegligence, misconduct, reckless-ness, lack of integrity or otherkinds of mal-practices or misde-meanors on the part of a publicservant.' to avert ad-hoc decision-making and non-transparent styleof functioning. The Commissiontenders appropriate advice to theconcerned disciplinary authori-ties in all such matters. As deci-sion-making in most of the PSEsis related to two levels - below theBoard level, the CVC's jurisdictionmay be restricted to that level andcases involving vigilance angle inrespect of all employees who aretwo levels below the Board levelmay not ordinarily be referred toCVC.

Chief Technical Examiner'sOrganization (CTEO) is theTechnical Wing of CentralVigilance commission. It under-takes intensive technical inspec-tion of major Civil, Electricaland Horticulture works, select-ed at random, under executionby the Central GovernmentsDepartments, Public SectorUndertakings and Central finan-cial Institutions / Banks etc. CTEOsubmits reports on intensive ex-amination of works for necessaryaction in respect of infirmities,irregularities and malpracticesnoticed.

Changing Role of VigilanceAdministrationTo have a clear understanding ofvigilance administration aimedat elimination of corruption inpublic life, it is imperative to gothrough the vigilance manual,related publications and mate-rial available on the website ofCentral Vigilance Commission(CVC), the apex autonomousbody, entrusted with policy,

planning, implementation, moni-toring and continuous review ofthe vigilance administration. It isimportant to remember that therole and responsibilities of PublicSector Enterprises (PSE) havebeen gradually evolving over theyears. While becoming self-reliantand profitable ventures, contrib-uting substantially for nation'sGross Domestic Product, takingon ever increasing competitivechallenges from the multination-als and private sector in a liberal-ized economy, the focus of PSEshas shifted towards greater au-tonomy and transparency in theirfunctioning. Therefore, CVC hasbeen increasingly pro-active andit emphasizes not only detectiveand punitive vigilance but alsocorrective, predictive and preven-tive vigilance measures.

Detective Vigilance

It includes

• Effective use and scan ofComplaints, Inspection Reports,Audit Reports, Press Reports, CBIReports, Judicial Remarks, sourceInformation;• Detection of Corrupt prac-tices, Malpractices, Negligence,Misconduct;

• Better surveillance of publiccontact points;• Close watch on officers at sen-sitive posts, of doubtful integrityand detect fraud;• Scrutiny of decisions takenby officials having discretionarypowers; and• Organizing traps/ raids withthe help of Police/CBI

Punitive VigilancePunitive vigilance flows out ofDetective Vigilance. It includes:

• Investigation and collectionof evidence and speedy depart-mental inquiries;• Swift and deterrent actionagainst the real culprits;• Strong action against thecorrupt official who brings po-litical, communal and unethicalinfluences;• Appreciation of vigilancefor taking action against corruptofficials;• Wide publicity of punishmentmeted to the corrupt officials.

Corrective Vigilance

It includes

• Analysis of results of detec-tive vigilance;

KALEIDOSCOPE November 2013 j 19

Article

THINK ABOUT IT.

• Exploration of the reasonsand contributory factors;• Finding solution to stoprecurrence and activate alarmsignals;• Updating the practices tokeep pace with times;• Transparency in procedures& decision making;

• Plugging of the loopholes andupdating and building in newwhistle blowing arrangements;• Prepare case study and edu-cate employees; and• Attempt to bring in transpar-ency in procedures and decisionmaking.

For Corrective Vigilance to beeffective the organization has tohave an effective Vigilance net-work and the Management has tohave respect for the advice of theVigilance Department.

Predictive Vigilance

It includes

• Foreseeing in activity prej-udicial to the interests of theorganization;

• Suggesting in advance cor-rective measures to be taken bythe management against acts of

misconduct, corruption, lapseswhich may occur in the wake ofmodification of rules, regulations,technology, circumstances etc.

Preventive Vigilance

It includes

• Analysis of rules and regula-tions of the organization;• Identifying complexities inthe procedures;• Identification of sensitiveareas;• Identification of corrupt offi-cials/ practices;• Reduce/Eliminate multiplic-ity of decision making levels;• Preparation of best practicescharts &manuals;• Review of Annual PropertyReturns;• To ensure rotation of officialsin sensitive positions;• Regular/ Surprise checks andinspections;• Reduce areas of discretionand patronage; and• Vigilance Awareness Progra-mmes - To educate officers totake clean, honest, effective andtransparent decisions.

In the changed liberalized Indian

economic scenario, the vigilancehas a proactive role. The objec-tive of vigilance administrationin PSEs is being perceived by theCentral Vigilance Commission(CVC) as more of managerialfunction rather than an inhibit-ing administrative hindrance:"Vigilance is basically and ad-mittedly a managerial functionand, therefore, it is an integralpart of the duties of an execu-tive. Vigilance departments ofPSEs should work in cooperationwith other Divisions/Units of theCorporation at all levels. Besides,the vigilance departments of PSEsshould also work in coordinationwith the CVC, the administrativeministry and the CBI."

Need for Simplificationof Systems, Rules andProceduresIn order to avert ad-hoc decision-making process and non-trans-parent style of functioning inPSEs, CVC has been emphasiz-ing to codify the systems, rules,procedures and criteria in criticaldomains like award of contracts,purchases, stores, operations, fi-nance and human resources man-agement. To ensure transparencyin public procurement, it is impor-tant to adopt benchmarked bestpractices in procurement withadded emphasis on strengthen-ing e-procurement process.

Application of Communicationand Information Technology is in-evitable for improving vigilanceadministration. In the changedscenario, PSEs have to be increas-ingly customer centric, perfor-mance driven, result oriented,and ensuring value for money byoptimum utilization of produc-tive resources, quality servicedelivery and enhanced bottomline. While adhering to ethical

20 KALEIDOSCOPE November 2013

Article

business practices PSEs must op-erate efficiently, effectively andeconomically by continuouslylearning, adopting appropriatemodern technology in all areas ofmanufacturing and operation, be-ing innovative and reformative inits ways of doing business strictlywithin the prescribed frame-work of systems, regulations andprocedures.

Many PSEs have identified de-ficiencies in systems and pro-cedures including failure incontract management during pre-ventive vigilance inspection andtaken measures to amend rectifythem. Online Vigilance ClearanceSystem based on digital signatureby competent authorities avail-able through Intranet in PSEs likeCONCOR enhances the credibil-ity and transparency of vigilanceadministration as Non ObjectionCertificate is required for vari-ous purposes like confirmation,promotion, voluntary retirement,deputation, issue of passport andforeign visit.

In PSEs vigilance should be anintegral part of the managerialfunction with a view to enhancemanagerial efficiency, effective-ness and productivity. As risktaking is an integral part of busi-ness decision making, every losscaused to the entity may not be-come the subject matter of a vigi-lance inquiry. It would be unfairto question the technical meritsof managerial decisions on hind-sight, but motivated or recklessdecisions that adversely impact-ed the organization should be in-vestigated. It is important to askthe fundamental question: Didthe business loss arise in spiteof bona-fide commercial or op-erational decision or due to anymala fide, motivated or recklessperformance of duties? Would

a person of common prudence,working within the framework ofthe prescribed rules, regulationsand procedures take the decisiontaking into account the prevail-ing circumstances? Consideringthe complexities involved in com-mercial decision making process,it may be desirable for the inves-tigating agency CBI to obtain ex-pert advice. A Central AdvisoryBoard constituted to assist CBI forthis purpose, with the approvalby CVC can provide consideredopinion within reasonable time,failing which the CBI would becompetent to decide the matterwithout advice.

What is Vigilance Angle?A vigilance angle could be percep-tible in cases characterized by:

• commission of criminal of-fences like demand and accep-tance of illegal gratification, pos-session of disproportionate assets,forgery, cheating, abuse of officialposition with a view to obtainingpecuniary advantage for self orfor any other person; or• Irregularities reflecting ad-versely on the integrity of thepublic servant; or• lapses involving any of thefollowing;

Gross Negligence

a. recklessness;b. failure to report to competentauthorities, exercise of discretion/powers without or in excess ofpowers/jurisdiction;

c. cause of undue loss or a con-comitant gain to an individualor a set of individuals/a party orparties; andd. flagrant violation of systemsand procedures.

The Chief Vigilance Officer (C VO)

in an organization is authorizedto decide whether there existsa vigilance angle in a particularcase.

Investigation by the CentralBureau of Investigation(CBI)The Special Police Establishment(SPE), Central Bureau ofInvestigation, constituted by theGovernment of India, under theDSPE Act, 1946, inquires and in-vestigates into offences pertainingto corruption and other malprac-tices involving public servants.The SPE takes up cases based oninformation collected by themor received from the public andalso investigates cases referred tothem by CVC and the administra-tive authorities. If the informa-tion discloses, prima - facie, com-mission of a cognizable offence,a regular case (RC) is registeredunder section 154 of the CriminalProcedure Code (Cr.P.C) ancl ifthe information prima facie dis-closes commission of irregulari-ties, warranting further enquiry,a preliminary enquiry (PE) isfirst registered. If the PE revealscommission of a cognizable of-fence, a regular case is registeredfor further investigation with acopy thereof is sent to the Headof Department and/or the ad-ministrative ministry as well asthe Commission if the publicservant concerned comes withinthe advisory jurisdiction of theCommission. The SPE generallydoes not take up inquiries into orregister a case where minor pro-cedural flaws are involved andexpected to take note of an indi-vidual officer's positive achieve-ments while recommending RDAso that a single procedural errordoes not cancel out a life time'sgood work.

KALEIDOSCOPE November 2013 21

Cooperation with CBIThe CVOs in PSEs and the con-cerned officer in the CBI shouldinteract as frequently and effec-tively depending on the exigen-cies of work. There should be aquarterly meeting between theCBI and CVO at the level of ZonalJoint Director of CBI to monitorand to take stock of the cases andexchange information for expedi-tious investigation and prepara-tion of the 'Agreed List'.

Standard tender procedure, pol-icy guidelines and manuals maybe supplied to the CBI to decidewhether criminal or departmen-tal misconduct is committed.Such standardized proceduresand guidelines should also be up-dated periodically to help judg-ing criminal liability, misconductor innocence of an official in aparticular case. The CVO shouldscreen all the complaints beforesending the same to the CBI andCBI should ordinarily be sentonly cases involving transactionsnot less than Rs. 25 lakhs or oth-erwise possessing national or in-ternational ramifications. Othercases may be sent to the localpolice. Public Sector Enterprisesshould cooperate with CBI dur-ing the course of investigationmaking available the requisitedocuments promptly and direct-ing the concerned employees toappear before the investigatingofficer. Assistance of technical ex-perts to the Investigating Officer,if considered necessary, may alsobe provided to the extent possiblein accordance with extant instruc-tions on the subject.

CBI generally recommends pros-ecution in cases of bribery, cor-ruption or other criminal mis-conduct; it also considers makingsimilar recommendations in casesinvolving a substantial loss to the

Government or a public body.The Commission's advice forprosecution, however, is requiredonly if the sanction for prosecu-tion is necessary under any law-promulgated in the name of thePresident.

Prosecution proposals should beable to meet the legal and tech-nical requirements laid down bythe Courts. In cases, where theCBI recommends regular depart-mental action (RDA) for major/minor penalty action or 'such ac-tion as deemed fit' against the of-ficials and the Commission is tobe consulted, the CVO should en-sure that the comments of the de-partment/PSE on the CBI reportare furnished to the Commissionwithin one month of the receiptof the CBI's investigation report,failing which the CVC will pro-ceed to examine the case and ten-der advice. Further action in suchcases may be taken as per theCommission's advice.

Action on ComplaintsInformation about corruption,malpractices or misconduct onthe part of public servants maycome to the CVO's notice throughvarious sources including com-plaints received from the public,or through the administrativeMinistry, CBI and the CVC; de-partmental inspection reportsand stock verification surveys,scrutiny of property returns andthe transactions reported by theconcerned employee under theCDA Rules, audit reports, reportsof parliamentary committees andinformation received. In the firstinstance, the decision with regardto the existence of a vigilance an-gle in a case may be taken by theCVO. The CMD or his nominee,may, if there are valid reasons,within a period of 15 days, differ

from the CVO. In case of differ-ence between CVO and CMD,the matter may be referred to theCommission. After registeringthe information as a complaint inthe Vigilance Complaint Register,he would then process the matterfurther to decide as to whetherthe allegations are general orvague and deserve to be filed orthe matter requires further in-vestigation. In the latter case, hewould also have to decide as towhether the investigation into theallegations should be entrusted tothe CBI or local police or taken updepartmentally.

The case may, with the approvalof the CMD, be entrusted to theCBI, if the allegations:

• are criminal in nature (e.g.bribery, corruption, forgery, crim-inal breach of trust, possession ofassets disproportionate to knownsources of income, cheating, etc.;or

• require inquiries to be madefrom non-official persons; or

• involve examination of pri-vate records; or

• need expert police investiga-tion for arriving at a conclusion;or

• need investigation abroad.

In exercise of its extraordinaryjurisdiction, the Commission has'the power to call for a report inrespect of any case with a vigi-lance angle of any public servantbelonging to an organization fall-ing within its jurisdiction. A com-plaint involving a Board-levelappointee, alone or with others,may be forwarded to the CVO ofthe administrative ministry, whowould decide whether the infor-mation involves a vigilance angleor not and would process the mat-ter further. He would also decide

22 KALEIDOSCOPE November 2013

whether the investigation into theallegations should be entrusted tothe CBI or taken up departmen-tally. No action should be takenon any anonymous or pseudony-mous complaints.

If the allegations contained in acomplaint should be looked intodepartmentally, the CVO shouldproceed to make a preliminaryenquiry by himself or entrust itto one of the Vigilance Officers orsuggest to the administrative au-thority to entrust the investigationto any other suitable officer. Theobjective is to determine whether,prima-facie, there is some sub-stance in the allegations. Duringthe course of preliminary enqui-ry, the concerned employee maybe given an opportunity to tenderhis version of the facts. In the ab-sence of such an explanation, theconcerned employee may be pro-ceeded against unjustifiably.

After the preliminary enquiry hasbeen completed, the investigat-ing officer should prepare a self-contained report, containing interalia the material to controvert thedefense, and his own recommen-dations. Where a case involvesboth criminal misconduct as wellas flagrant violation of systemsand procedures, further investi-gation should be done by the CBI.The PSE concerned may simulta-neously initiate appropriate dis-ciplinary proceedings. The CBI'sfocus will limit to the criminalaspects of the case.

Investigation of Complaintsagainst Board LevelAppointeesIf a complaint against a Board-level appointee is directly receivedby the PSE, the CVO shall sendthe same to the CVO of the min-istry for consideration. In caseswhere CVC calls for investigation

and report against a Board-levelappointee, the CVO of the min-istry shall initiate inquiries andmay in this regard obtain factualinformation from the CVO of thePSE. Thus, CVO of the PSE underno circumstances should initiateaction against the Board-level ap-pointee on his own initiative.

The disciplinary authority wouldconsider the investigation reportand the first stage advice of theCVO and decide, on the basisof the facts disclosed in the pre-liminary enquiry, whether thecomplaint should be dropped orwarning administered or regu-lar departmental proceedingslaunched. If any of the employeesinvolved in the case falls withinthe Commission's jurisdiction, thelatter's advice would be requiredand any decision of the disciplin-ary authority at this juncture maybe treated as "tentative".

Before making references to theCommission, the CVO may clas-sify references into Vigilance Aand B. Vigilance-A comprisescases where the lapses commit-ted are serious and a prima-faciecase exists for initiation of RDAfor major penalty proceedings;Vigilance-B are less serious cases

involving primarily procedurallapses, which in the opinion ofthe CVO, do not reflect adverse-ly on the integrity of the officialconcerned. Vigilance-B cases or-dinarily will not invite any ad-ministrative disabilities normallyassociated with the registrationof a vigilance case against an of-ficial, though these cases will con-tinue to be monitored through theVigilance Complaints Register tilltheir disposal. They cases techni-cally fall within the ambit of theterm 'vigilance' though the offi-cial is not accountable for a seri-ous misdemeanour or negligence.An official can be proceededagainst for a minor penalty butmay not suffer any disability byway of posting, training, place-,ment on 'Agreed List' during thependency of the disciplinary pro-ceedings. If he is found account-able in the disciplinary proceed-ings, he will be duly punishedbut for all other purposes (exceptpromotion for which a separatesealed cover procedure exists) hewill be treated at par with othercomparably placed employeesfacing minor penalty proceedingsin a non-vigilance case.

CVO may identify sensitive posts

KALEIDOSCOPE November 2013 23

Article

and ensure rotation of staff insuch posts every three years.The CVO may also reviewthe functioning of public deal-ing departments. Each PSE mayalso draw up a Citizen's Charterprescribing time-limits for pro-cessing of applications and vari-ous categories of work involvingpublic dealings. CVO may moni-tor the implementation of theCitizen's Charter and furnish acompliance report in this regardto the CVC.

Investigation /InquiryReportThe Investigating Officer (IO)should indicate the allegationscontained in the complaint, thegist of the investigation carriedout by him as well as documen-tary and oral evidence that hehas relied upon. The IO shoulddetail the procedure and guide-lines which the Suspected PublicServant (SPS) was required tocomply with and should give hisfindings in the last paragraph ofthe report clearly bringing out theaccountabilities of the officials.Seized documents and state-ments of the witnesses and theSPS recorded during the inves-tigation should accompany theinvestigation report. The reportof the IO should thus be compre-hensive and well documented. Asper the current instructions of theGovernment, the preliminary in-quiry should be completed with-in three months.

Complaints against the CVO ina PSE may be investigated bythe CVO of the administrativeministry and a report along withthe original record together withcomments of the Secretary of theMinistry/Department may be re-ferred to the CVC for proper and

independent examination of thecase. Complaints against vigilanceexecutives other than the CVO ofthe PSE may be investigated bythe CVO of the PSE and a final de-cision may be taken with the ap-proval of the CMD. If the allega-tions are prima facie establishedagainst such vigilance function-aries, they should be shifted tonon-sensitive positions and if ondeputation should be repatriatedto the parent organizations withappropriate recommendation totheir disciplinary authorities withregard to the disciplinary actionto be initiated against them.

New Initiatives towardsAnti-Corruption StrategyThe Commission has been issu-ing various circulars and guide-lines for improving the vigilancemanagement in public service.Some of the initiatives deal withrotation officials working insensitive areas, disclosure ofinformation under Right toInformation Act (RTI) in com-pliance with Delhi High Courtdecision, conduct of CVOs func-tioning, transparency in works,purchases, consultancy contractsawarded on nomination basis,second stage consultation withCVC in disciplinary cases, sub-mission of Annual Report ofvigilance work by CVOs, revisedthreshold values for submission ofQuarterly Progressive Reporting,adoption of Integrity Pact,Standard Operating Procedures,Constitution of Committees ofExperts for scrutiny of pros-ecution sanctions, reporting offraud cases and whistle blowingcomplaints.

With the advent of CompaniesAct, 2013, a new investigationprocedure has been provided

under Section 210 to 229. Thenew act also includes whistleblowing provisions ensuringanonymity of the whistleblower. The act also providesstatutory backing to the SeriousFraud Investigation (SFIO)under Sections 211 and 212.Even after adoption of bestsystems of Internal Control(1C), Internal Audit andInformation CommunicationTechnology based best bench-marked practices like COSOand COBIT frameworks orEnterprise Risk Management(ERM) may not absolutely safe-guard against fraud, it is impor-tant for PSEs to incessantly con-centrate on effective monitoring,inspection and audit to improvethe control environment orientedtowards reducing the circum-stances conducive for occurrenceof fraud triangle.

As the famous criminologistDonald R. Cressey points out,fraud takes place when thereis a fraud triangle. The threeessential factors for an ordinaryperson or an employee to commitfraud are motivation, rationaliza-tion and opportunity. Appropriatevigilance management systemshould thus drive PSEs to en-sure application of effective in-ternal controls, enterprise riskmanagement system, aiming atprevention of formation of fraudtriangle in an organization. Theultimate objective of vigilance ad-ministration should be empower-ing PSEs to do business withinthe extant framework of systems,rules and procedures more effi-ciently, effectively, ethically, eq-uitably, economically and profit-ably by optimum utilization ofproductive resources in a trans-parent, objective and stakeholdercentric approach.

24 KALEIDOSCOPE November 2013