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.
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.