Decriminalisation of Laws

13 Feb 2020

With the world’s largest and youngest workforce and rising consumer incomes, India represents an attractive investment destination for driving economic growth and employment generation. In recent years, the country has made rapid strides in Ease of Doing Business, emerging as one of the fastest reformers of the business environment since 2014.

At the same time, India’s business environment has undergone substantial changes with the enactment of new legislation such as GST and Insolvency and Bankruptcy Code, weeding out of obsolete laws, and strengthening of regulatory institutions. The Government has endeavoured to limit criminal proceedings for non-compliances of minor, technical or procedural nature for the Companies Act, 2013 by setting up the Company Law Committee (CLC). The Committee submitted its interim report in November 2018 and recommended amendments in 46 penal provisions. This is indeed a welcome step towards ease of doing business and ease of living and adds to investor confidence.

While these are under consideration, CII has noted that multiple statutes in the country relating to various regulatory functions include compoundable offences which can be recategorized into penalties or be considered through adjudication. The regulation of business processes is predicated on different objectives such as consumer protection, worker interests, environmental aims and so on. The aim of such regulation is to ensure smoother business operations in line with the needs of society and the economy. Such legislation should alleviate apprehensions among corporate entities and their functionaries which would inhibit normal business activities.

CII has had a long and deep engagement in corporate governance and has proactively promoted moral and ethical business activities that keep in mind the interests of diverse stakeholders. With most businesses keen to comply with the rules of the land, it is important to balance ease of doing business with regulation.

CII has now brought out a note of ‘Decriminalisation of Business and Economic Legislations’. In this note, CII has compiled a list of statutes that would benefit from reclassification of criminal offences to civil offences, thereby attracting civil penalties rather than imprisonment. The intention is largely to highlight a system where fines and penalties rather than criminal proceedings are in place for compoundable offences. Serious non-compoundable offences and actions where malafide intent is proven would naturally continue to be liable for criminal recourse.

The list includes 37 legislations related to the Companies Act, Insolvency and Bankruptcy Code, environmental protection, consumer protection and labour interests. Some of Acts recommended for changing criminal penalties to civil penalties include the Securities and Exchange Board of India Act, 1992, the Insurance Act, 1938, the Competition At 2002,  Minimum Wages Act, 1948, Industrial Disputes Act read with Industrial Disputes (Uttar Pradesh) Rules, 1976, the Partnership Act, 1932 and so on.

In its recommendations, CII has suggested 12 points that can be actioned to replace the current provisions:

Provide for many summons cases concerning relatively minor offences to be compoundable
Revisit/prescribe limitation period for assuming jurisdiction
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
Consider making summons cases compoundable by expanding the scope of Section 320 of the Criminal Procedure Code, 1973.
Award costs where courts have observed that there is frivolous litigation or dilatory tactics.
Expeditious filling up of vacancies so as to ensure that Benches act in full strength.
Create a process for a without-admission of guilt settlement of tax and economic offences with exceptions to reduce the pipeline of future matters and take some pending matters out. 
Increase the role of technology in Courts with e-filings and the like.
Plea bargaining / Settlement Mechanism

With such measures, increasing incidents where commercial and civil disputes are being treated as criminal complaints will be avoided, thereby lifting the fear factor among entrepreneurs, foreign investors and independent directors that is currently seen.

Changing the nature of such laws will also help to de-congest the courts and reduce litigation.

CII would continue to take up issues related to ease of doing business in order to shape an environment that encourages investments, job creation and growth.