Last month, the Prime Minister used the COVID-19 situation as an opportunity to create a ‘Self-reliant India’. He asked the citizens to take steps to ensure that there are enough manufacturing units in India. This is aimed at reducing the dependency of our country on imported products. Modi also quoted Swami Vivekananda on increasing the market for Indian goods abroad.
Thus, to give some relief from the impact of the lockdown, the Prime minister announced a 20-lakh crore package. Furthermore, to add on, the Union Cabinet expanded the definition of MSME’s to give a boost to the growth of the sector. In addition to that, it also provided an Rs. 50,000 crore fund.
Hence, COVID-19 has fast-tracked the Government’s plan of increasing the ease of doing business. The Government is now planning to introduce more such reforms to enhance its program.
The basic plan outline is to fast-track clearance of goods with physical distancing.
Decriminalisation of Offences
Last month, the Finance Minister proposed the decriminalization of some offences. These include a few minor technical and procedural errors. The Department of Financial services expects this step to help in the long run. Therefore, this would help improve the ease of doing business. Moreover, it would also help ease the pressure on the prisons and courts.
Thus, this step is towards the Government’s aim of “Sabka Saath, sab ka Vikas and sabka vishwas”. Therefore, the Finance Ministry has proposed decriminalisation across 19 laws. These are those offences where the intent may not be mala fide. Thus, criminalising these often act as significant hurdles to investments. Furthermore, the time is taken for resolution in courts and the haze around the legal process hurts business sentiments. Hence, the belief is that the Government can overlook such minor non-compliances. This is because they do not impact public interest at large or national security.
The Ministry considered four things before reclassifying the offences:
1. Focusing on economic growth, national interest, and public interest.
2. Reducing the burden on businesses and attracting investors.
3. Mens rea of the doer.
4. Habitual nature of non-compliance.
They have also asked stakeholders to share their views and suggestions about this.
Proposed Offences
The Department of Economic Affairs has released a list of the above mentioned offences. The following are some of the significant offences listed:
1. Securities and Exchange Board of India Act, 1992
Section 11C (6)
Under this, failing to produce any records or information to the authorities, without reasonable cause is a crime. It also criminalizes hindering the investigation. The punishment for this offence is imprisonment for up to a year or a fine up to Rupees One Crore or both.
Section 24
This section penalizes failing to pay penalties or complying with any order. It mandates a punishment of up to ten years or fine of up to Rupees Twenty Crores.
2. The Depositories Act, 1936
Section 20
This section also penalizes failing to pay penalties or complying with any order. It imposes a fine of up to Rupees Twenty-five crore or imprisonment of up to ten years for this offence.
3. LIC Act, 1956
Section 40
This section criminalizes failing to deliver property, books, or documents to the LIC. Under this, unlawfully retaining possession of a property of an insurer is also a crime. The section prescribes imprisonment of up to 1 year or fine of Rupees Thousand or both for this offence.
4. Negotiable Instruments Act, 1881
Section 138
This section is the most commonly slapped offence. It pertains to dishonour or to bounce of cheques, due to insufficient funds in the account. The term of punishment is up to two years or a fine which may extend up to twice the amount of the cheque or both.
5. Prize Chits and Money Circulation Scheme (Banning) Act, 1978
Section 4
This section prescribes punishment for contravening the immediately previous section. Section 3 of the act bans prize chit and money circulation schemes. Therefore, even enrolling or participating in such a scheme are the ingredients of this section. The term of imprisonment may extend to three years or a fine of up to Rupees Five Thousand or both.
Section 5
This deals with penalties for the promotion of prize chits and money circulation schemes. It may include but not limited to:
– Printing tickets, coupons or other documents for use;
– Selling or distributing any ticket or coupon;
– Advertising such schemes, etc.
6. Actuaries Act, 2006
Section 37
Section 37 penalizes people who falsely claim to be a member:
– of the Actuaries Institute;
– use the designation of an Actuary;
– use the letters’ AIAI’ or ‘FIAI’ after his/her name or practices the profession of an Actuary. The punishment for the same may extend up to Rupees Two Lakhs or imprisonment for a term up to one year or both.
Potential Changes
This February, the Confederation of Indian Industry suggested a few alternatives in this regard. They aimed at promoting investor confidence in the country.
“A change like penalty provisions in business and economic laws represents the next stage of reforms in ease of doing business. Divesting criminal penalties from business laws – unless well-defined criminal actions are found – will strengthen confidence among young entrepreneurs and investors in doing business,” Mr Vikram Kirloskar President CII said.
The following are some of the suggestions by the CII:
- Provide for many summons cases for relatively minor offences to be compoundable;
- Revisit/prescribe limitation period for assuming jurisdiction;
- A transparent mechanism for no-guilt admission.
- Settlement of technical offences with penalties and not prosecution;
- Introduce dispute settlement mechanism deferred prosecution agreements – with exceptions;
- Introduce one-time settlement schemes;
- Award costs where there is frivolous litigation or dilatory tactics;
- Create a process for a without-admission of guilt settlement for tax and economic offences with exceptions. This will also reduce the pipeline of future matters and take some pending matters out;
- Increase the role of technology in Courts with e-filings;
- Plea bargaining / Settlement Mechanism.
Conclusion
The move of the Government to provide relief to the existing stakeholders. Therefore, this move will prove beneficial in attracting stakeholders. Hence, decriminalising offences that are purely technical would be beneficial to all.
Pratibha Jain, the founding partner of Nishith Desai Associates, says the following:
“lack of clarity on the jurisdiction of SFIO, ED and CBI often result in multiple regulators and proceedings for the same offence, causing significant issue for defendants”.
In addition to that, she further emphasised that Indian regulators, especially SFIO and ED, “do not have processes to allow monetary penalties instead of imprisonment, especially for offences that are technical in nature”.
However, in my opinion, promoting the ease of doing business and strengthening corporate governance must be balanced.
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