The Author, Gagan Gandhi is Managing Partner at NitiNyaya Law Office.
ABSTRACT
The Indian Government released a notification asking stakeholders to share their views on its objective to decriminalize many minor economic offenses through an amendment in the parliament in order to push for effective and improved ease of doing mechanism in our country, protecting the interest of many enterprises that may default in payments due to the ongoing pandemic and to unclog our overburdened judiciary by reducing pendency. The government has characterized these objectives as the foundation for achieving 'Sabka Saath, Sabka Vikas, and Sabka Vishwas'. Through this article, an attempt has been made to analyze and highlight the advantages and disadvantages if this amendment becomes a reality.
INTRODUCTION
The Ministry of Finance proposed to decriminalize certain minor economic offences spread across various statutes. The objective behind this step is to promote ease of doing business in the long run to many investors who are willing to invest their money in our economy, but due to our stringent laws and obsolete court system, which takes years to dispose of any case, refrain from investing. According to the government, the element of criminal liability in these statutes results in fear in the minds of investors, which forces them to look somewhere else to invest their money where they don’t have to face similar legal problems. The proposed move will remove criminal liability from these statutes and boost business sentiment as well as restore trust amongst investors to invest freely without having to worry about the element of punishment.
Another objective behind the introduction of this amendment is to provide relief to all those small businesses which have suffered due to the on-going pandemic and might default in payments and face legal consequences. The government has further argued that the move to decriminalize these offences will help in unclogging our already overburdened judicial system and reduce pendency. The government is pushing for this amendment to achieve its objective of ‘Sabka Saath, Sabka Vikas, and Sabka Vishwas’. This step will amend 39 sections, across 19 statutes, Insurance Act 1938 (Section 12 and Section 103); SARFAESI Act 2002 (Section 29); PFRDA Act, 2013 (Section 16(7) and 32(1)); RBI Act, 1934 (Section 58B); Payment and Settlement Systems Act, 2007 (Section 26(1) and 26(4)); NABARD Act, 1981 (Section 56(1)); NHB Act, 1987 (Section 49); State Financial Corporations Act, 1951 (Section 42(1) and 42(2)); Credit Information Companies (Regulation) Act, 2005 (Section 23(1)); Factoring Regulation Act, 2011 (Section 23); Actuaries Act, 2006 (Section 37, 38(2) and 40(2)); Banking Regulation Act, 1949 (Section 36AD(2),and 46); General Insurance Business (Nationalisation) Act, 1972 (Section 30); LIC Act, 1956 (Section 40); Banning of Unregulated Deposit Schemes Act, 2019 (Section 21(1), 21(2), 21(3), 22, 23 and 24); Chit funds Act, 1982 (Section 76(1), 76(3) and 77); DICGC Act, 1961 (Section 47(1)); Negotiable Instruments Act, 1881 (Section 138 and 143(1)); and Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (Section 4 and 5). For example, under NIA, a person can be given two-year imprisonment or a penalty amounting twice the amount of the cheque, or both in cheque dishonour cases due to insufficient funds in a bank account. However, the proposed amendment will remove criminal liability from Sec 138 and make this offence civil in nature.
Now, emerges a very interesting question, whether this amendment is going to have any significant and visible impact, as stipulated by the government, on our economy and would lead to a reduction in pendency of cases in the courts? To answer this, we have carried out a detailed analysis by highlighting reasons for the introduction of this amendment, major flaws in the government’s reasoning, and various other situations that might arise due to the introduction of this amendment.
REASONS OF DECRIMINALISATION OF ECONOMIC OFFENCE
Finance Minister Nirmala Sitharaman had said that violations involving minor technical and procedural defaults would be decriminalized as an effort to further ease of doing business in the country. The ease of doing business index is meant to measure regulations directly affecting businesses and does not directly measure more general conditions such as a nation's proximity to large markets, quality of infrastructure.
Economic offences are a distinct category of crimes under criminal offences and comprise of both white-collar crime (refers to financially motivated nonviolent crime) and blue-collar crime (refers to a crime committed by an individual from a lower social class as opposed to white-collar crime). They are generally committed by persons of a certain social status during their occupation as a deviation from their occupational role or as a typical activity. Almost all economic crimes are like the various other offences and organized crimes and have a very serious impact on various segments of society, national economy, and national security.
EASE OF DOING BUSINESS
Targeting to break India into the top 50 in the global Ease of Doing Business ranking, the Department for Promotion of Industry and Internal Trade (DPIIT) has projected a sequence of restructuring including reduction in-licenses, simpler registration processes and removal of renewal requirements.
‘Ease of doing business in India should be the first facilitating move if India is to become a 5 trillion-dollar economy by 2024, as desired by the government. Simplification of Labour Regulations would be among the most important action points to move towards the mission. LEGISLATIVE VIEW
It is remarkable that for the third repeated year, India has been familiar as one of the top ten countries' improvers. India stands first amongst the South Asian economies and third amongst the BRICS nations. 4 out of the 10 indicators measured in this index.
The Arbitration and Conciliation Amendment Bill, 2019 aims to launch a self-regulating body, namely the Arbitration Council of India ('ACI') that will set guidelines, provide arranging of arbitral organizations, and manage the timely and cost-effective clearance of arbitration cases. It will be presided by a judge of the Supreme Court, or the Chief Justice of a High Court or a renowned person, having distinct knowledge and experience in the conduct of the arbitration.
WHITE COLLAR CRIMES
The general insight is that white-collar crimes are committed because of greediness or economic unpredictability. But these criminalities are also committed because of situational burden or the integral characteristic of attainment more than others. However, there are innumerable reasons for white-collar crimes.
The government of India has familiarized various controlling legislatures, the break of which will amount to white-collar lawbreaking. Some of these legislatures are Essential Commodities Act 1955, the Industrial (Development and Regulation) Act, 1951, The Import and Exports (Control) Act, 1947, the Foreign Exchange (Regulation) Act, 1974, Companies Act, 1956, Prevention of Money Laundering Act, 2002.
MEASURE OF CONTROLLING OFFENCES AFTER DECRIMINALISATION:
New Zealand ranks first in Opening a Business and Accomplishment Credit indicators. It takes the shortest time to open a business. Here, in Starting a Business, notwithstanding the implementation of reorganizations, we have witnessed complications in rising upwards in the ranking. It would be perfect to implement New Zealand's procedure and modify it for Indian settings.
The Indian Customs establishments are working proactively and unceasingly to progress the trade atmosphere in the country by responsibility measures which improve transparency, inspire collaboration between investors, and progress traders' compliance. While these improvement procedures have facilitated us to achieve several milestones, the sustained enactment of energetic restructurings, coupled with durable industry participation, will permit India to offer one of the best trading-across border environments in the world.
REMOVAL OF CRIMINAL LIABILITY: IS IT CORRECT TO DO THIS?
The Government has reiterated that the removal of criminal liability from these minor economic offences will result in ease of doing business for both foreign and domestic investors, and these investors should not suffer because of mistakes committed due to unintentional negligence or without any fraudulent intention. Through this amendment, the government is planning to introduce a framework where ‘malafide intent is punished while other less serious offences are compounded.’ This theory which has been put forth by the government signifies that minor non-compliance and procedural lapses can easily be dealt with fines and penalties rather than initiating exhausting criminal proceedings and punishing people with harsh imprisonment. The government is of the opinion that the imposition of stringent penalties and fines will act as a deterrent for offenders committing similar offences in the future and there is no need to have criminal liability attached to these sections for minor economic offences. Now the aforesaid notification released by the government stated that “Mens rea (malafide/ criminal intent) plays an important role in the imposition of criminal liability, therefore, it is critical to evaluate the nature of non-compliance, i.e. fraud as compared to negligence or inadvertent omission.” However, the criminal jurisprudence requires the intent to be proved beyond a reasonable doubt, which is not possible in every case and may lead to more cases of fraud. Now, the direct consequence of removing criminal liability from these sections would be more cases of giving false cheques, more cheques being dishonoured, and asking for deposits in unauthorized schemes, which in turn, is going to result in the creditors and people losing faith in investing their money in our economy as well as judiciary’s power to punish these offenders for their fraudulent actions. This removal would definitely help foreign and other domestic investors in doing investments without having to worry about criminal proceedings but would give excessive advantage to many people to commit fraud since they won’t have to worry about serious legal repercussions like imprisonment. Although the government has argued that people with habitual nature of non-compliance or repeated offenders would be punished with harsher sentences, removal of criminal liability is only going to have serious implications for our economy and conversely leading to a dip in the ease of doing business. So is it correct for the government to put heavy reliance upon strict penalties as a deterrent and walk away from criminal liability, which either ensures the creditor receiving his/her defaulted money back or the offender facing serious legal consequences for his/her actions. We need to take examples of Saudi Arabia and the State of Michigan in the U.S.A, where even minor offences attracted strict punishment and serious consequences for the offender. It is observed that serious punishments for offences promote deterrence and people comply with rules and regulations laid down by the statutes.
SHIFTING BURDEN FROM CRIMINAL COURTS TO CIVIL COURTS
Now, this amendment is going to make these offences civil in nature and the burden will shift from criminal courts to civil courts. The government has argued that this amendment will relieve pressure from our already overburdened judiciary by unclogging the system and reduce pendency. However, the concrete claim made by the government that our judiciary will get some breathing space is a completely flawed argument, as the cases are not going to come down but will shift from criminal courts to civil courts, which have been already grappling with problems, such as pending cases and inefficient courts, and are not equipped or have efficient mechanism to deal with this transition. At all three levels of the judiciary, courts dispose of fewer cases than are filed. The number of pending cases keeps growing, litigants face even dimmer prospects of their cases being disposed of quickly and these hopes are minimum when a litigant approaches civil courts due to its obsolete ways and long duration of time taken to dispose of cases. Though the government has made claims that they are finding ways to make our civil courts more efficient so that they take less time to dispose of cases, this is not the first time when our governments have made such promises. There have been many studies highlighting deteriorating conditions of our court system and their ongoing battle to fight pendency, but no major reforms have taken place which can assure people that these promises are ever going to materialize.
CONCLUSION
Criminalizing technical lapses and minor non-compliances surges problems on businesses and it is vital that one should re-look at provisions which are simply procedural in nature and do not affect national security or public interest at large. Decriminalizing the minor crimes may appeal to the foreign stockholders to participate in India to enhance the economy, but on the other hand the Government will have to also see the curiosity of the creditors who will be aggrieved as they will have to wait longer to get their payments.
Picture Source :