Sie sind auf Seite 1von 31

Chapter 2-Literature Review and Conceptual Framework

2.1 Introduction

‘The foundation and inspiration for substantial, useful research’24are called

the literature review. There are three purposes that are served by the literature review.

First of all, the review of literature serves as the starting point of the research by

identifying the terminology and information related to the research by familiarizing

the research subject because the literature review provides the existing knowledge on

the research.25 Next, it helps the researcher to find out the best research practices and

techniques by enabling the researcher to critically review the current scholarly

materials.26 Finally, it helps the researcher to differentiate the research from the rest of

the studies, thus declaring it an original contribution in the research area by fitting the

research in the appropriate context. In this regard, the present chapter covers extent

literature previously conducted in the research context which provides the premise for

the present research.

The examination of the academic knowledge in the domain of anti-corruption

measures serves as the goal of this review of theliterature. This chapter provides a

conceptual framework of corruption for the thesis, corruption from the perspectives of

socioeconomic, political, and institutional aspects. This chapter focuses on the

theories of corruption, concepts and definitions of corruption, types of corruption,

thereason behind theincrease in corruption, thecause of corruption, major factors of

corruption, previous work, and framework. The study findings can be seen through
D. N. Boote and P. Beile, “Scholars Before Researchers: On the Centrality of the Dissertation
Literature Review in Research Preparation”Educational Researcher. 34.6 (2005): 3–15, Available:
David Thomas and Ian Hodges, Doing a Literature Review in Designing and Managing your
Research Project, vols. (London: Sage, 2010).105

the analytical lenses provided by this chapter. Thus, the base for this research is laid

by the research works of other scholars.

2.2 Corruption

The Present section discusses the theories of corruption from various


2.2.1 Theories of Corruption

(a) Economists’ Perspective

According to Granovetter27, classical theories of corruption are “dominated by

economic treatments that focus on identifying structures of incentives that make

corruption likely and assessing the impact of corruption on economic efficiency.” The

prominent theory in this perspective is the incentive theory or the principal-agent

relationship. This theory states that there are a supervisory principal and an agent. The

principal who can be a government auditor or a senior civil servant oversees the duties

of the agent who can be a junior civil servant. The corruption can arise in this setup

when the agent has more privilege of access to critical administrative information than

the principal, and the agent tries to get the pay-offs by illegally providing the critical

data to those outside the setup or administration without the knowledge of the

supervisor.28,29 Here the relationship is predominantly “defined by how incentives are

arranged, and the actors are otherwise indistinguishable or representative

individuals”.30,31 With respect to the domain taken for the analysis, the agent and

M. Granovetter, “The Social Construction of Corruption”in On Capitalism. Ed. V. Nee and R.
Swedberg, vols. (Stanford University Press, 2004), 152–172. p.152
S Rose-Ackerman, Corruption: A Study in Political Econom, vols. (London: Academic Press, INC,
Granovetter, “The Social Construction of Corruption.” p.152
Rose-Ackerman, Corruption: A Study in Political Econom.
Granovetter, “The Social Construction of Corruption.” p.152

principal can be different. For instance, the principal can be the government or voters

whereas the agent can be apublic official or senior government official.

The principal’s interest may not be interfered by the agent’s action of getting a

payoff for the personal use, as put forward by the supporters of agency theory.

According to Rose-Ackerman32, and Aidt33, in fact, interests of the principal will be

effectively accomplished by such payoffs. But the principal’s interest will be

undermined by the inaccessibility of critical data. In order to consolidate the position

and see that the interests are fulfilled, the principal is left with three choices. They are

providing directives, incentives either positive or negative and saving the costs

incurred with regard to supervision or monitoring.34 The agent may try to defeat the

principal’s monitoring by refusing to undertake the directives provided by the

principal without compromising his or the principal’s interests. In other words,

according to Groenendijk35, the agent will earn the incentives set up by the principal

and still the concealment costs will be incurred. The agent will be advantaged by the

supervisor’s ignorance.36 As commented by Rose-Ackerman37, the third party (favour

seeker) who influences the agent by offering the payoff is left out in the agency theory

by focussing only on principal and agent. The researchers say that the third party may

act in such a way that can provide him/her with the advantage.

This agency theory explains the corruption done by the agents alone, and this

does not explain the public services that are affected by such corruption and other

Rose-Ackerman, Corruption: A Study in Political Econom.
Toke Aidt, “Economic Analysis of Corruption: Asurvey”The Economic Journal. 113.11 (2003): 632
– 652.
Nico Groenendijk, “A principal-agent model of corruption”Crime, Law and Social Change. 27.3/4
(1997): 207–229, Available:
J. M. M Mbaku, Corruption in Africa: Causes, Consequences, and Cleanups, vols. (United Kingdom:
Lexington Books, 2007).
Rose-Ackerman, Corruption: A Study in Political Econom.

informal payoffs. In order to realise the corruption existing in the public-sector

establishments, the third-party angle as proposed by Rose-Ackerman is crucial.

Further according to Rose-Ackerman38, “bribery may indicate that society has

structured the agency relationship inefficiently. If customers commonly bribe agents,

perhaps it would be more efficient to have customers hire the agents to deal with their

old principals.” Rose-Ackerman39defines that the informal payoffs that the principal

does not receive as illegal and this is the problem with this analysis. However,

according to Granovetter40, the informal value or contextual legitimacy that comes

with the illegal payoffs is not addressed.

The inventive theory considers the presence of benevolent principal which

does not exist in practice. Also, there are probabilities that principal may be corrupt

with respect to the study of Aidt.41 There may be corrupt/non-corrupt agent,

corrupt/non-corrupt principal and corrupt/non- T corrupt third party. If the principal is

corrupt, according to Wade42, the agent and third party may become corrupt;

otherwise, they may lose their positions. Hence, there could be a vicious cycle of

corruption. According to Brinkerhoff and Goldsmith43 and Lewal44, in these

situations, the corruption is thought of as a normal course of the society.

S. Rose-Ackerman, Corruption and Government: Causes, Consequences and Reform, vols. (United
Kingdom: Cambridge University Press, 1999).P.94
Rose-Ackerman, Corruption: A Study in Political Econom.
Granovetter, “The Social Construction of Corruption.”
Aidt, “Economic Analysis of Corruption: Asurvey.”
Wade, “The system of administrative and political corruption: Canal irrigation in South India.”
D. W. Brinkerhoff and A.A. Goldsmith, Clientelism, Patrimonialism and Democratic Governance:
An Overview and Framework for Assessment and Programming, vols. (USA, U.S: Agency for
International Development Office of Democracy and Governance, 2002).
G. Lewal, “Corruption and Development in Africa: Challenges for Political and Economic
Change”Humanity & Social Sciences Journal. 2.1 (2007): 1–07.

(b) Moralists versus Functionalists’ Perspectives

According to Gould (1991:468; cited by Mohammad Mohabbat Khan 45 in a

paper prepared for TI Bangladesh), moralists view corruption as “an immoral and

unethical phenomenon that contains a set of moral aberrations from moral standards

of society, causing loss of respect for and confidence in duly constituted authority.”

Moralists observe that corrupt practice “stems from the social norms that emphasize

gift-giving and loyalty to family or clan, rather than the rule of law”.46

However, the functionalists differ from the moralists in their view of

corruption. They say that corruption plays an important role in the operation of public

sector establishments in such a way that it can boost the activities of the establishment

thereby achieving the optimal efficiency47. According to the publication of Johnston

, functionalists “point to possible benefits of corruption, suggesting that it can speed

up cumbersome procedures, buy political access for the excluded, and perhaps even

produce de facto policies more effective than those emerging from legitimate

channels.” The prevalent political system or the structure of the institution is taken as

the base for the analysis of corruption by the functionalists. They look at the other

side of the coin by seeing the efficiency in the delivery of services offered by the

public-sector establishments. According to the views of Tanzi49 and Fjeldstad 50

, the

M.M Khan, “Political and Administrative Corruption: Concepts, Comparative Experiences and
Bangladesh Case”A paper for Transparency Intentional –Bangladesh Chapter. (n.d.), Available:
Gabriella R. Montinola and Robert W. Jackman, “Sources of Corruption: A Cross-Country
Study”British Journal of Political Science. 32.01 (2002): 147–170, Available: 148
Mushtaq H. Khan, “The efficiency implications of corruption”Journal of International Development.
8.5 (1996): 683–696, Available:
M Johnston, “The Political Consequences of Corruption: A Reassessment” (1986): (459–477.p. 459
V. Tanzi, “Corruption around the World Causes Consequences, Scope, and Cures, IMF Staff
Papers”International Monetary Fund. 45.4 (1998): 559–594.

functionalists also concur that weak establishments have much of corruption.

Functionalists are of the view that corruption is not as grave as the moralists perceive.

(c) Patron-client relationship

In analysing the corruption, the theory involving the patron-client relationship

is another popular theory. This theory analyses the corruption by exploring the nature

of the political system and the role of administration in the emerging economies. This

theory is predominantly used by the economists and political scientists. According to

this theory, the functionality of the public-sector establishments and related systems in

place is eclipsed by the active informal networks developed by the relationship

between the patron and the client51. According to Khan, M. H. (1998, the

opportunities (like jobs) and resources are created by the patron (who can be a civil

servant or politician) who expects the cooperation or support (for example, in the

form of attendance at the meetings or votes). This paves the way for the creation of

network comprising of patrons and their sub-patrons, clients, middlemen.

(d) Social Aspects of Corruption

According to Lancaster and Montinola 52, the corruption can be understood in

a particular social context because certain corrupt practices like bribery are “morally

loaded terms” in the settings of socioeconomics and politics. Like any other political

Odd-Helge Fjeldstad, The pursuit of integrity in customs: Experiences from sub-Saharan Africa,
vols., CMI Working Paper, 2009, Available:
G Hyden, African Politics in Comparative Perspective, vols. (Cambridge: Cambridge University Press,
Thomas D. Lancaster and Gabriella R. Montinola, “Comparative political corruption: Issues of
operationalization and measurement”Studies in Comparative International Development. 36.3 (2001):
3–28, Available:

or socio-economic practices, corruption is a part of stakes in the system, societal

power relations, interests, and norms practiced by the group of people53, 54, 55 , 56, 57, 58.

About the corruption in West Bengal villages (in India), Ruud59 comments that

“…in the wider context of social life, the simple act of corruption (for the moment

understood as an illicit deal involving the holder of a public position) is only one

among many outcomes of habitual practices”. Researching the corrupt practices as the

social problem and the corrupt people should take into account the “contextual

information on [actors’] social positions, interests and stakes in the system as well as

on the political, economic and social conditions within which they function.”

Pavarala60: The role of non-elite groups in the creation and resolution of social

problems in a specific setting is ignored by Pavarala’s study61.

V Pavarala, Interpreting Corruption: Elite Perspectives in India, vols., Working Paper (New Delhi,
Arild Engelsen Ruud, “Corruption as Everyday Practice. The Public—Private Divide in Local Indian
Society”Forum for Development Studies. 27.2 (2000): 271–294, Available:
Daniel Jordan Smith, “Kinship and Corruption in Contemporary Nigeria”Ethnos. 66.3 (2001): 344–
364, Available:
Giorgio Blundo and Jean-Pierre Olivier de Sardan, Everyday corruption and the state, vols. (United
Kingdom: Zed Books, 2006).
Joseph C.A. Agbakoba, Developing Appropriate Administrative Instruments For The African
Cultural Environment, vols. (AEGIS European Conference on African Studies, 2007), Available:
Fjeldstad, The pursuit of integrity in customs: Experiences from sub-Saharan Africa.
Ruud, “Corruption as Everyday Practice. The Public—Private Divide in Local Indian Society.” p.271
Pavarala, Interpreting Corruption: Elite Perspectives in India. P.25
Onyango Gedion, “Administrative And Political Grassroots Corruption In Rural Kenya: It Takes Two
To Tango”University of Bergen, 2012, Available:

2.2.2 Concept and Definition of Corruption

The phenomenon of corruption and its discernible implications has rendered

its usage and understanding as essentially negative and detrimental to progress. The

growing awareness of the existence of corruption has simultaneously generated a

voluminous literature on it that has transcended academic disciplines and explored

exhaustively its causes, effects, and role in the economic, political, social, and cultural

milieu in general and in specific regions and countries. As Paul Heywood observes,

‘By the mid-1990s, it appeared that no nation was immune to the corrosive impact of

political corruption. Academic interest in the phenomenon experienced a parallel

upsurge, characterized by a proliferation of conferences devoted to the issue, with

related publications’62.

According to Klitgaard (1984: 4, cited in Harrison63,64), corruption is the

summation of monopoly and discretion excluding the accountability. In all these

years, the political scientists and sociologists have researched the corruption.

Corruption is defined as the wielding of power for the preference, earning aprofit,

thebenefit of a group, or prestige which breaks the moral conducts or breaches the

law65,66). Social anthropology also presents substantial literature on corruption that

explains nepotism, bribery, graft, etc. However, there is no common theory to explain

the corruption. Moreover, the studies are scattered. At the end of the 1990s, Robin

Paul Heywood, “Political Corruption: Problems and Perspectives”Political Studies. 45.3 (1997): 417–
435, Available: p.1
Elizabeth Harrison, “Corruption”Development in Practice. 17.4-5 (2007): 672–678, Available: 676
Robert Klitga, International Cooperation Against Corruption, vols., 1997, Available:
Julius Gould and William Lester Kolb, A Dictionary of the Social Sciences, vols. (New York: Free
Press of Glencoe, 1964).p.142
Edward Van Roy, “On the Theory of Corruption”Economic Development and Cultural Change. 19.1
(1970): 86–110, Available: P.86

Williams observed that “the 1990s have been the decade of corruption as an academic

and policy topic and there is no indication that popular, academic, professional or

political interest is beginning to flag. The literature is voluminous and varied, but

most accounts share a common characteristic: a reluctance to say what they mean by

corruption. This issue is either avoided completely or dismissed in a cursory


A few major trends can be elicited by the brief overview of the available

literature. Many definitions highlight focus on the private interest and public

establishment. These definitions mean that in order to achieve the private gain, the

political office is abused. This definition needed a rethinking when the private firms

like World com and Enron involved in the scandals. Hence, corruption was defined by

the establishments like Transparency International as the practice of abusing the

trusted authority for the sake of public gain68. Secondly, ethnocentrism, functionalism,

and evolutionism are the three categories in which the theory of corruption falls into.

Several researchers follow ethnocentrism extensively. The deviation from the

morality is seen as the corruption in the ethnocentric viewpoint. In functionalistic

view, the ends or purposes served by the specific institutions are focussed; moreover,

the social science research forms the basis for functionalism. Evolutionism sees the

corruption as the centre of social and economic change (Van Roy, 1970: 88–90).

Thirdly, the donor development discourse initiated by World Bank along with the

structural adjustment programme in third world countries produced more literature on

the corruption. In addition, the anti-corruption portals also generate aconsiderable

quantity of literature on the anti-corruption. Fourthly, the comprehension of

Robert Williams, “New Concepts for Old?”Third World Quarterly. 20.3 (1999): 503–513, Available: P. 503
Harrison, “Corruption.” P. 674

corruption in many third world nations has led to various concepts and definitions of

governance and development. As per the comment from69, as long as the mechanism,

causes, scope and effects of corruption are not clearly realised, it is difficult to know

the way the third world countries are governed.

The main difficulty is to define corruption which is considered to be a

complex issue in our country. The definition given for corruption in simple terms is

“the abuse of entrusted power for private gain” (Transparency International India


2.2.3 Types of Corruption

Corruption can be classified as grand, petty and political, systematic, and so

on depending on the amounts of money lost and the sector where it occurs.

(a) Systemic corruption

The corruption that is deep-rooted and pervasive which happens in a routine

manner within and between the companies, public sector establishments, or

individuals is called the systemic corruption . Be it economic or social or political

system; corruption has been remaining integrated into all these areas thereby gets a

reason to sustain. Systemic corruption is not confined to a particular category, instead

of a situation, where major institutions and processes of the state remain used by

corrupt individuals and groups. Thus, people don’t have any option to deal with

corrupt officials.

Philip Oldenburg, “Middlemen in Third-World Corruption: Implications of an Indian Case”World
Politics. 39.04 (1987): 508–535, Available: P. 509
World Bank, Helping Countries Combat Corruption The Role of the World Bank, vols. (New Yeak:
The World Bank, 1997). P. 9-10

(b) Sporadic (individual) corruption

Sporadic corruption, on the contrary, is the opposite of systemic corruption,

where it occurs at times. Hence, there is no threat to economy or mechanism for

control in this type of corruption. However, it might cripple the resources of the


(c) Political Corruption

Political corruption involvestransaction between players in private and public

sectorwhere collective goods are channelized illegally for personal gains.Usually,

political corruption is counted as high-level corruption, where it is distinguished

clearlyfrom bureaucratic as the former oneinvolves political decision-makers.

Political corruption takes place at the higher echelons of the political system,

wherepoliticians and state agents at the helm ofenforcing the laws use theirauthority

to get wealth andstatus.Moreover, political corruption involves the misallocation of

resources but distorts the decision-making process.When the laws and regulationsof

of the state are subjected to misuse by the rulers to meet their interests, it is known as

political corruption. This clearly indicates about violation of law and are subjected

todownright encroachment by the rulers.

Political corruption is a manipulation of policies, institutions and rules of

procedure in the allocation of resources and financing by political decision-makers,

who abuse their position to sustain their power, status and wealth, voting

irregularities, nepotism and cronyism, rule of a few false political promises paying

journalists for favorable coverage of candidates and parties influencing voters by the

distribution of money, food and drink, holding on to power against the will of the

people 71.

(d) Grand corruption

As the name indicates, it involves the act of corruption at a superior level of

government that alter the laws and the functions of the respective state which allows

the political officials to gain profit at the expense of the public.At the time of

implementation of policy, high level or “grand” corruption takes place.It doesn’t give

much indication of the amount of money syphoned off, rather formulation of rules and

policies at the higher levels.

(e) Petty Corruption

Petty corruption refers to everyday abuse of entrusted power by low- and

midlevel public officials in their interactions with ordinary citizens, who often are

trying to access basic goods or services in places like hospitals, schools, police

departments and other agencies.

There are various instances of small-scale, bureaucratic or petty corruption

from the implementation aspect, lic officials meet the public on a daily basis. Petty

corruption involves bribery related to the implementation of existing laws, rules and

regulations, thereby it differs. Usually, the modest sum is involved in this type of

corruption and has also been called “low level” and “street level”. This petty

corruption takes place on a day-to-day basis in organizations hospitals, local licensing

authorities, schools, police, tax authorities, and so on.

Upender Kandukuri, “Corruption in India”International Journal of Multidisciplinary Research. 1.5
(2015): 1–10.

(f) Legal and moral corruption

The word corruption is originated from rumpere, means to break. As per this

approach, corruption means clear infringement of thelaw. Thus, there is a need to state

all the laws in brief without any doubt on meaning and discretion to the public

officials. Corruption is interpreted legally by differentiating between a corrupt activity

and what is not. Suppose an act of an official comes under theprohibition of laws,

then it is corrupt; otherwise, it is not corrupt even though it remains unethical.72

2.2.4 Reason behind increase in corruption

Corruption is one of the biggest menaces that go against the welfare of society.

Corruption is primarily seen in the areas of jobs, businesses, promotions, election

campaigns, sports etc. There are so many probable reasons that lead to increasing in

corruption. Those could be low pay scales/ wages, inadequate job opportunities, lack

of strict and fast punishments, lack of transparency in affairs and deals, lack of

independent investigating agency, lack of ample powers to the judicial system, lack of

accountability and so on73.

Another aspect of the problem is the unethical conduct by people in ministerial

positions. Their pressure on senior government officials, especially at the level of the

secretary, is certainly a factor. Moreover, the obnoxious part is that some of this

personnel join with the ministers in power to get their share of spoils. Like these,

various aspects of corruption exists at each and every level of people working in

Elaine Byrne, “Definitions and Types of Corruption,” 2009, online, Internet, 10 Oct. 2017. ,
N R Ranga, “Causes of Corruption|10 Main Reasons in India & Developing countries”Mind
Controversy. , 2017, online, Internet, 3 Oct. 2017. , Available:

governmental organizations . Thus, the need is to curb corruption by means of

implementing a robust legal mechanism.

2.2.5 Causes of Corruption

Heidenheimer et al.75have identified three main types of definitions of

corruption: public-office-centred, market-centered and public-interest-centred

definitions. However, this article adopts the public-office-centred definition of

corruption by the United Nations Development Programme76as ‘the misuse of public

power, office or authority for private benefit*through bribery, extortion, influence

peddling, nepotism, fraud, speed money or embezzlement’.

Corruption in India is not a new phenomenon as it exists both in small scale

and large scale. Due to the presence of corruption in all the walks of life, the civil

service in India which is known as steel frame gets another terminology, i.e. the ‘steel

frame’. As per the study by Prasad77, it is a matter of concern to curb corruption in

administration as there are increasing stances of corruption taking place at higher

echelon in the organization.In spite of increase in cases of corruption in India, it

doesn’t make any serious impact on the population78. For instance, in January 2008,

the revelation bythe World Bank investigation relatedto fraud and corruption in five

The Hindu, “The stained steel frame”The Hindu. , 2016, online, Internet, 7 Oct. 2017. , Available:
Arnold J. Heidenheimer and Michael Johnston, Political Corruption: A Handbook, vols., 2nd ed.
(New York: Transaction Publishers, 1989).
United Nations Development Program, “Fighting Corruption to Improve Governance”United Nations
Development Program. , 2017, online, Internet, 3 Oct. 2017. , Available:
ghting-corruption-improve-governance-FYROM.html+&cd=1&hl=en&ct=clnk&g. p.7
Kamala Prasad, Indian Administration: Politics, Policies, and Prospects, vols. (New York: Pearson
Education India, 2006). p. 311
Laurence E Larry and Laurence E. “Larry” Lipsher, The Tax Analects of Li Fei Lao, vols.
(, 2013).

Indian healthcare projects financed by US$568 million in loans, where it didn’t make

much impact79.

There is another reason of corruption in India as it has no effective watchdog

to combat corruption80. There is no rigorous mechanism in place to detect and punish

the accused in corruption. Thus, the perception of the public is that indulging

corruption activities in public services will remain undetected or hardly there will be

any punishment. Alexander81stated on the corruption in the Indian Civil Service,as the

corrupt officials get away easily without getting punished for their offences82.

2.2.6 Major factors of corruption

The significant factor for any corrupting activity gets the initiative fromthe

human being. The tendency of people is to enjoy all the luxuries and comfort in their

lives. Thus, to fulfil this aspect, people indulge in various kind of corrupting activities

that would yield monetary or material benefits. In our education system, there is

hardly any importance onmoral and spiritual values. As a result, the value of society

deteriorates.Another reason to indulge in corrupt practices is low paid salary to

employees, hence resorts to illegal earning.Even if there is punishment, but is not

enough. Leaders affiliated to various political parties are assumed as perpetrator of

corruption and lead a luxurious life without any concernabout the society. People

Leslie H. Palmier, The control of bureaucratic corruption: case studies in Asia, vols. (United State:
Allied Publishers, 1985). p. 280
P.C Alexander, The Perils of Democracy, vols. (Bombay: Somaiya Publications, 1995).
Jon S.T. Quah, “Curbing Corruption in India: An Impossible Dream?”Asian Journal of Political
Science. 16.3 (2008): 240–259, Available:

even if aware of the corrupt activities don’t raise their voicesagainst anti-social

elements83. Ineffective Operation of Criminal Law against Corruption

The apex court has done a commendable job in upholding rule of law in the

administration of criminal justice, where it has given enough authority to the top

investigation agencies84 in dealing with corruption cases involving politicians,

bureaucrats and public men. However, the wheels of criminal justice have got struck

up by legal luminaries as they defend the anti-social elements. As a result, the trial

procedure gets affected as the proceedings remain stayed in one way or the other. At

times, there is a backtracking that takes the situation back to the square one. Most of

the trial proceedings are without any conclusion like in scams and bribery cases. This

reflects about delay in delivering verdict through the provision in the constitutional

warrants speedy justice. There are certain reasons behind the ineffectiveness of anti-

corruption laws as there is political uncertainty and clandestine operation of the

powerful accused for winning over the witnesses and browbeating the prosecuting.85

The Act so far has been failed to provide justice even in the petty cases of

corruption. There is no positive sign in the criminal justice system through

investigation of corruption cases is conducted by a senior police officer 86 and the case

are tried by a senior-judicial officer having long experience. In this regard, the anti-

corruption Act, 1988 is counted as the strong arm of criminal law that has been

reduced to the status of ineffective legislation which gets infringed by the mafia

having high clout patronizing corruption through the influence it wields in all the

Civil Service India, “Corruption In India”Civil Service India. , 2017, online, Internet, 4 Oct. 2017. ,
The Supreme Court has now given free hand to C.B.I. in corruption cases
Section 20 of the Prevention of Corruption Act, 1988
Section 17 of the Act

aspects of life due to nexus among politicians, bureaucrats and influenced public men.

However, Supreme Court’s directions regarding successful working of the Act have

been not taken into consideration.87

(i) Purpose of the pact

The main aim of the Integrity pact is to decrease the level of corruption at the

procurement level by the agreement formed between the bidder and the government

agency for a particular project. Two main objectives can be attained:

To facilitate companies and to come out of bribes by insisting that their

opposition parties will also avoid bribe and the external agencies dealing with licenses

and the government agency’s procurement will overhead to eradicate corruption with

the help of transparency in all aspects.

To enable the government agencies by diminishing the costs and the effect of

corruption on the public acquisitions and licensing. Thus, a powerful tool called

Integrity Pact paves way for transparency in bidding process, licensing process and

public acquisitions by all public and private agencies. It results in efficiency and also

develops trust among the public with respect to government and private agencies.88 Corruption at International level

Corruption is omnipresent so as to enumerate. More positive feedback is given

on corruption with respect to underdeveloped countries to explore the issues caused

by other complications. It is unfruitful to analyse with examples. It is not the fact that

only poor countries are overhead with corruption, also the developed countries also

Law mantra, “Adequacy of Legal and Regulatory Framework to Combat Corruption in India”Law
mantra. , 2017, online, Internet, 3 Oct. 2017. , Available:
Transparency India, “Integrity Pact”Transparency India. , 2017, online, Internet, 3 Oct. 2017. ,

face the problem of corruption. Many examples are beyond the scope to define at this

stage. A few examples can be mentioned due to the type of corruption and considered

to be the major issue in developed and underdeveloped countries.89

Many of the grand corruption prevail with more destruction and damage

which are exposed upon the development of underdeveloped and developing

countries. The process of creating agreements voluntarily among the bidders and the

government prevents the corruption into a particular project. This process is known as

“Islands of integrity”. In 1990, as a base of this process, the Integrity Pact (IP) was

formed by the Transparency International to secure the public from corruption. Any

type of procurement body can make use of it to safeguard them. international Aspects

After the "group of twenty" meetings in London in early April 2009, the

Organisation for Economic Cooperation and Development (OECD) used "white-out"

oil its blacklist of uncooperative tax havens made up of four countries: the

Philippines, Malaysia, Costa Rica and Uruguay, these countries became willing to

cooperate on illegal fund banking secrecy, and to make a disclosure. But the OECD-

which is made up of mostly European countries—also maintains a "grey" list, which

includes its founding member Switzerland among a host of small island economies

that are tax havens. Predictably, Switzerland has protested angrily.

According to the OECD, these tax havens-zero-tax jurisdictions that have no

transparency and refuse to provide information to foreign tax authorities-enable

individuals and companies to avoid the tax obligations of their home countries thereby

Financial Transparency, “Transparency International: 2011 Corruption Perceptions Index
Released”Financial Transparency. , 2017, online, Internet, 3 Oct. 2017. , Available:

depriving those governments of revenue that could go to building schools, hospitals

and other public services. But it is the size of "lost" revenues that is starling estimates

put the value of assets held in tax havens as much as $11.5 trillion!

Today there are more than 70 tax haven nations worldwide. Furthermore,

about forty countries openly advertise themselves as tax havens to woo depositors.

Some have gone so far as to offer "perquisites" such as asylum or immunity to

criminals, to those who invest sufficient funds. They permit the formation of

companies without any proof of identity perhaps even by remote computer

connections. Such extremes are however found in those emerging nations where the

stability and security of the financial, legal, political systems are questionable.

The concessions and benefits may come in different forms. It may be a zero

income tax for all (British Virgin Islands Business Companies), a complete tax

exemption for all international business operated by non-residents (Seychelles or

Belize International Companies), an ultra-low income tax for international businesses

(Seychelles Special License Companies, pay 1.5% tax), local tax exemption for non-

residents of that jurisdiction (Gibraltar, Channel Islands); zero tax on receipt and

distribution of dividends (holding companies in Cyprus, Denmark, Netherlands), tax

holidays for certain types of investments (Portugal, Iceland); favorable tax treatment

through treaties and agreements with the investor's home country (Cyprus,

Netherlands, Malta), etc.

The Swiss Bankers Association (SBA), quoting Swiss National Bank figures,

said the value of securities in custody accounts of the country's bank stood at 3.82

trillion Swiss francs (about US$3.35 trillion) in 2008. Founded in 1912, SBA has

nearly 363 institutional members and about 16,000 individual members, Swiss

National Bank, which is the nation's central bank, does not reveal the country-by-

country breakdown of these figures, the SBA spokesperson said. Of the total,

securities held on behalf of foreign institutional, corporate and private clients touched

more than 2.19 trillion Swiss francs (about US$ 1.92 trillion). The Swiss Federal

Department of Justice and Police (FDJP) said in a report that the number of

Suspicious Activity Reports (SARs) in connection with money laundering jumped

from 795 in 2007 to 851 in 2008. This included nine related to suspected terror

financing and involved assets worth over one million Swiss francs (US$ 884,600).

As the global crackdown gains momentum with cooperation from different

countries, the world can hope for more and more money and valuables stashed away

in tax havens to see the light of the day, sooner than later, thanks to the concern over

terrorist funding globally. In addition, some countries offer superior legal protection

from creditors and potential litigants who might attempt to seize an individual's

wealth. This is the other most important reason why offshore jurisdictions are so

popular-asset protection.

For those who face prosecution and imprisonment in their home country.

OECD suggests $11.5 trillion in all tax havens. In 2006, the most recent year

of the Global Financial Integrity-[GFI] study, developing countries lost an estimated

$858.6 billion to $1.06 trillion in illicit financial outflows. Even at the lower end of

the range of estimates, the volume of illicit financial flows coming out of developing

countries increased at a compound rate of 18.2 per cent over the 5 year period

analyzed for the study. ON average, for the five-year period of this study, Asia

accounts for approximately 50 per cent of overall illicit financial flows from all

developing countries.

Financial flows in the context of this report includes the proceeds from both

illicit activities such as corruption (bribery and embezzlement of national wealth,

criminal activity, and the proceeds of licit business that become illicit when

transported across borders in contravention of applicable laws and regulatory

frameworks. In the study illicit financial flows from developing countries: 2002-06 of

the Global Financial Integrity [GFI], authors Dev Kar and Devan Castwright Smith

estimate that the average amount stashed away from India annually during 2002-06 is

$27.3 billion. This means that during that 5 year period, the amount stashed away was

27.3 x 5 = 13.6 billion. It is not as if that all these amounts had gone to Swiss banks

but also has gone to different tax and secret shelters. Since the share of Swiss banks in

dirty money is estimated at being a third of the global aggregate some $45 billion out

of the 136.5 billion stashed away from India could have been hoarded in these years

in Swiss banks. [p. 30 of the Report].

The International Narcotics Control Strategy Report-Money Laundering and

Financial Crimes [March 2009 US Department of State] suggests that 30-40 per cent

of the inflows may be by "Hawala" market. The report also suggests investigating

NGO funding [nearly Rs. 65,000 crores from 1996 to 2006—Rs. 12700 crores in

200607 alone! Despite strict regulations pertaining to inflows on half of nearly 34,000

registered bodies submit details to Union Ministry of Home Affairs.

In the G-20 meet in April 2009, China forcefully argued for not disclosing the

tax haven list since it worried that Hongkong and Macao would be listed. Hence, in

the OECD list issued and noted by G-20, Hongkong and Macao were not

included!India did not argue at all against tax havens in the Meet or in the Preparatory

Meet earlier. Obviously, Indian politicians worried that names of beneficiaries may

come out. Financial Intelligence Unit-India (FIU-IND) has been admitted as the

member of the Egmont Group as its recent Penary Session at Hamilton, Bermuda.

Membership of the Egmont Group, apart from meeting an important

requirement of the Financial Action Task Force (FATF), will facilitate and enhance

exchange of information by FIU-IND with its counterpart FIUs.

In India the same UBS paid a paltry penalty a Rs. 55 lakhs to the SEBI for

not—yes for NOT—disclosing the names of the secret PN holders whose funds it had

invested, and settled the case, a month back!The PN is mechanism through which

unnamed investors are allowed to participate in the stock market. The G-20 Summit

the communique issued on 2 April 2009, in paragraph 15, entitled, "Strengthening the

Financial System," pledged themselves "to take action against non-cooperative

jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our

public finances and financial systems. The era of banking secrecy is over. We note

that OECD has today published a list of countries assessed by the Global Forum

against the international standard for exchange of tax information?"

"Overview of the OECD's Work on International Tax Evasion," the OECD

lists studies that state that between $1.7 trillion to $11.5 trillion from 185 UN member

countries are today parked in the 70 tax havens of the globe. Hence, the e-mail

circulated estimate for India at $1.5 trillion attributed to the Swiss Bank Association

has been officially denied by the Association as "fabricated." In a sarcastic comment,

the Association spokespersons said the issue has become "good election fodder" and

that the amounts being mentioned were "quite incredible." "I just don't know the

methodology on how they arrived at figures, the Association spokesman James Nason

said. The basic point however is: even if the amounts are just tens of billions of

dollars, and not one and a half trillion dollars, they should be brought back to India.

And the fact is that other countries, much smaller countries with none of the

pretensions of being a "super power, have already succeeded in getting their money

back. Since October 2008, when the OECCD released its paper, several countries

have succeeded in recovering billions of dollars.

But the UPA government instead had allowed Ottavio Quattrochi to take his

money out of banks—where it was lying frozen on court orders. Thus, such a

Government which castrated the CBI to let him get away from Argentina with the loot

cannot be trusted to bring the billions of dollars stashed away in tax havens. It needs a

decisive new government.

However, for five reasons why it's not going to be easy: even for a new


 India needs to have tax/fund information sharing as part of bilateral

agreements with tax havens.

 Also needs supporting agreements to repatriate funds of suspected felons. This

would of course take grit.

 Some Tax havens also need to relate their banking secrecy rules.

 India would have to furnish names of suspected fraudsters and establish

illegality of bank account holder's fund source or quote a law passed by


 Fraud component in each individual case will need to be proved, which a

lengthy process is. "Fishing" will not work.

The Swiss Ambassador to India, Dreyer addressing a press conference in 2007

to commemorate the 60 years of Indo-Swiss Friendship Treaty had said: "Switzerland

was accused of giving shelter to black money and there has been a lot of inflow of

such wealth from India and other countries of the world. He added: "I would not say it

would be stopped 100 per cent (under a new law). But through this measure, it would

be controlled up to a certain limit," [On 15-03-2008 in NDTV Profit]. He was

referring to an agreement that Switzerland had signed with the World Bank and the

UN-led global initiative to money deposited by corrupt persons in Swiss Banks, and

the confiscation and return of the money to their country of origin.

The Liechtenstein tax haven came into focus recently Germany's intelligence

agency paid an unnamed informer more than USD 6 million for confidential and

secret data about clients of LGT group a bank owned by the Liechtenstein royalty.The

revelations therefrom have already led to the resignation of the head of Deutsche

Post—the former German mail service—which is currently the world's largest

logistics company in world. The Lichtensteing leaders are furious and have focused

all their ire at the theft of the data rather than on the facts of the case.

The German Government has also announced that it would share information

on accounts held in the tax havens with any Government that wanted it. They had a

list of 1400 clients of whom 600 only Germans. The spokesman for the German

Finance ministry Thorsteing Albig has indicated that they would respondent to such

request without charging any fees for the information Finland, Sweden and Norway

have expressed interest in the data obtained by the Berlin intelligent agency.

Even where foreign governments offer to help, the Indian government has

fought shy of availing the offer. In may 2008, the German Government offered to

share information relating to illegal Indian bank account in Lechstein, which

information had tumbled out while Germany was investigating their own citizens'

accounts. Despite Prime Minister Dr. Manmohan Singh's assurance to me in writing

(see p. 26), nothing to date has been done despite pious noises of the Government. legal regime to control corruption

There has been a burgeoning field of law-making at both the national and

international levels on the subject of corruption. The United Nations, the World Bank,

the International Monetary Fund (IMF), the Council of Europe, the European Union

(E.U.), the Organisation of American States (OAS), the Organisation for Economic

Co-operation and Development (OECD), the Global Coalition for Africa (GCA), and

the International Chamber of Commerce are some of the universal organizations

which work on policies and methods against corruption and nepotism.

The concerted drive at the multilateral level to confront the problem of

corruption has given birth to a number of anti-corruption legal instruments, which

together constitute the current international legal regime to combat corruption. Such

enthusiastic law-making activity began with the 1995 European Union Convention on

the Protection of the European Communities’ Financial Interests and its two

additional protocols.

In continuation with this process, in 1996 Inter-American convention and

OECD convention on bribery of Foreign Public Officials in International Business

Transactions in 1997 and finally during 1999 Council of Europe Criminal Law

Convention on Corruption was initiated. Here, the European Union forms the main

basis for the law-making process. Francois Mitterrand, Helmut Kohl, Jacques Chirac

and even Tony Blair are all under the cloud of graft allegations and inquiries.

These processes stated above paved a pathway globally to battle against

corruption at national level. But, this law-making process is not stronger enough to

tackle the universal issue of corruption. In accordance to this process, a basic human

right to a corruption less society was proposed and concurrently an argument was

done to breach of this right is considered as a crime with respect to international


2.3 Previous Work

The present section analyses the previous literature conducted on the topic

especially with reference to corruption from socio-legal perspective. This section

facilitates the researcher to identify the strengths and weakness of the present studies

and thereby enable the researcher to identify the gaps.

In the research article published by Simon Weschle 91, the personal and

electoral corruption in India has been dealt with. This article takes into account the

politicians who indulge in the corruption with different welfare consequences and for

several reasons. This research uses the survey experiment method. This research

recommends that when the voters have to decide on the wrong politicians, the overall

welfare consequences play a role. This study concludes that if the fruits of corrupt

practices are shared with the voters, they are less willing to punish the corrupt


Puja Mondal, “An International Legal Regime to Combat Corruption”Your Article Library. , 2017,
online, Internet, 3 Oct. 2017. , Available:
Simon Weschle, “Punishing personal and electoral corruption: Experimental evidence from
India”Research & Politics. 3.2 (2016): 205316801664513, Available:

In the research done by V K Borooah92, a quantitative approach has been

employed to measure the size of the corrupt practices of various officials in rural

India. This research assigned a rating for the corrupt officials (with regard to bribery),

when they were approached for a variety of purposes. This research concludes that

when the households approached the officials for their works, bribes had to be paid in

18% of the cases, averaging a bribe of Rs. 147. Moreover this research concludes that

the corruption in India has increased in the last 15 years.

In a study performed by Akhil Gupta93 titled “Narratives of corruption:

Anthropological and fictional accounts of the Indian state”, the ethnographic approach

was undertaken. This study considers the data from the researcher’s fieldwork, a

novel of official belonging to Uttar Pradesh of India, and accounts of corruption of an

anthropologist. This study concludes that narratives dealing with corruption and

actions of the agencies and bureaucrats related to these narratives are quite


In the research by S Y Quraishi94, the researcher deals with controlling the

corruption in election in India. This research says that the election is the starting point

of corruption and regulative ideal should be in place when it comes to election related

expenditure and the stakeholders’ accountability. This study concludes that the

Election Commission of India (ECI) has done its role well in the elections and also

ECI will fight the corruption and cleanse the elections in India.

Vani K. Borooah, “Deconstructing Corruption”Journal of South Asian Development. 11.1 (2016): 1–
37, Available:
Akhil Gupta, “Narratives of corruption”Ethnography. 6.1 (2005): 5–34, Available:
S. Y. Quraishi, “Controlling Electoral Corruption in India”Indian Journal of Public Administration.
57.3 (2011): 422–428, Available:

The research done by Raj95 says that corruption is omnipresent in India in

various walks of life such as social, economic, political, and cultural milieu.

Moreover, the corruption has affected the government machinery. This research

explores the role of judiciary in curbing the corrupt practices. This research concludes

that judiciary is the only option that the public looks upon to provide justice in the

face of corruption. Judicial department is able to deal with the corruption in spite of

all the stumbling blocks. This research further concludes that the judiciary should be

strengthened to deal with the corruption sternly.

In a research done by Anil Hira96, the study deals with the role of culture in

curbing the corrupt practices. This research tells that the culture has to be reformed in

corruption reforms. The research has taken into account the case studies of various

countries like Singapore, Indian, Afghanistan, Chile, etc. This research concludes that

the current measures to fight the corruption fail because these approaches tend to

ignore the role of culture. The research calls for a development of culture in the fight

against the corruption.

2.4 Research Gap

Although there are several studies have been conducted in the past, but to our

knowledge not comprehensive study of corruption from the perspective of socio-legal

approach. For instance, the research by Ganga Reddy had focused on judicial

A. Sridhar Raj, “Cultural Roots of Corruption: Efficacy of Judiciary in Combating Corruption in
India”Indian Journal of Public Administration. 57.3 (2011): 797–805, Available:
A. Hira, “Broken Windows: Why Culture Matters in Corruption Reform”Journal of Developing
Societies. 32.1 (2016): 1–16, Available:

aspects97, similarly there are several studies have been looked at corruption from the

anthropological and functional perspective98 and not many on socio-legal perspective

of corruption.

2.5Conceptual Framework

This thesis attempted to identify the barriers of effective implementation of

Prevention of Corruption Act in India. In order to achieve the objective, the study

critically reviews the existing laws and acts along with cases in India. Moreover, it

explains why the phenomena are still persistent despite major anti-corruption efforts.

The thesis will look at the problem from the perspective of Socio-Legal approach. The

thesis I advance is that corruption spurred by absence of rule of law in practice is a

factor explaining it. This task, in turn, requires the creation of a relevant theoretical

framework.Therefore, theoretical framework is developed from Eugen Ehrlich’s

concept living law and legal pluralism perspective and Marcel Mauss’ anthropological

approach to gift-giving.

A socio-legal approach to the problem of poor implementation of corruption

law is considered in this research. The important fact is that the corruption is

encouraged by the inefficiency of the rule of law. The development is impaired by the

negative impact of corruption and this is often the topic of research.99,100,101,102 ,103

There is a lack of researches in studying the corruption from the legal point of view.

Reddy Y Gangi, “Role Of Judiciary In Preventing Corruption In India With Special Reference To
Political Corruption”Sri Krishnadevaraya University, 2015, Available:
Gupta, “Narratives of corruption.”
Smith, A Culture of Corruption: Everyday Deception and Popular Discontent in Nigeria.
Mbaku, Corruption in Africa: Causes, Consequences, and Cleanups.
Kempe Ronald Hope and Bornwell Chikulo, “Decentralization, the New Public Management, and
The Changing Role of The Public Sector In Africa”Public Management Review. 2.1 (2000): 25–42,

Some of the previous literatures stated presenting corruptions have been showing lack

of legal structure, for example Brownand Shackman104. The main intention of this

study is to identify the rule of law explanation for corruption. However, literatures on

rule of law regarding corruption are very limited. Therefore, this study attempts to

connect corruption to ‘total exercise of power’, however the study will not focus on

how power came to be so implemented (Hope in Hope & Chikulo105; Mbaku106;

Smith107). Unfortunately, literatures, that connecting corruption, underdevelopment

and lack of rule of law are not available.

In this regard, the present research work attempts to fill the gap existing in the

academic field in the context of India. This research is imperative in India because

development- impeding corruption is the sign of absence of rule of law. A study on

the rule of law would guarantee transparency, honesty and responsibility in the field

of public resources. Furthermore, this consequently leads to utilisation of human

development as public good. The present work has identified five different variables

regarding rule of law such as equality before the law; supremacy of the law;

trusteeship over public resources; restraint on executive powers and code of conduct

for public officers. The variables’ barratry would violate the policy making power of

government as upholders of public resources with unaware of power and would led to

R Theobald, Corruption Development and Underdevelopment, Trans. Macmillan., vols. (London,
Paolo Mauro, “Corruption and Growth”The Quarterly Journal of Economics. 11.3 (1995): 681–712,
Available: 1995.pdf.
Steven F. Brown and Joshua Shackman, “Corruption and Related Socioeconomic Factors: A Time
Series Study”Kyklos. 60.3 (2007): 319–347, Available:
Hope and Chikulo, “Decentralization, the New Public Management, and The Changing Role of The
Public Sector In Africa.” P. 19
Mbaku, Corruption in Africa: Causes, Consequences, and Cleanups. P. 72-74
Smith, A Culture of Corruption: Everyday Deception and Popular Discontent in Nigeria. P.189

corruption. Therefore, this study attempts to describe the rule of law principles and

also it have not been implemented in India.

2.6 Summary

This chapter provided the definitions, concepts and theories of corruption in

detail. The present chapter deeply analysed the significant reasons and causes of

corruption. Major factors of corruption analysed with the types of corruption.

Operation of Criminal Law against Corruption is explained and their ineffectiveness

is also emphasized. Furthermore, international aspects related to corruption are

analysed. International legal rules to control corruption are also discussed. Finally

previous works that are related to the present work are provided and by that review

research gap was identified.