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Decriminalization of Business Laws

29 Mar 2022

The Indian Government has undertaken a comprehensive exercise to remove a number of archaic laws that are not relevant in the current environment from the statute books. It has also recognized the critical part played by business in fostering economic growth and addressed many business and economic laws that called for criminal action under laws. 

CII has been playing a major role in the exercise and approached the topic of decriminalization with a wider agenda of de-clogging the judicial system and making the function of courts more efficient, while seeking decriminalization of economic and business laws.

In certain cases, commercial and civil disputes under business and economic legislations are treated as criminal offences, thereby raising concerns amongst directors, young entrepreneurs, and domestic and foreign investors. This needs to be addressed. 

Offences which are of a technical nature or which do not affect public interest prejudicially or which are not serious offences may be considered to be decriminalised.  For such business and economic legislations which fall within the domain of arbitration or civil courts, the Government needs to consider decriminalising the laws, unless there is an intent of fraud or misdoings.

The punishment ought to be limited to penalties instead of fines/imprisonment. Periodic or habitual offenders may be punished with higher penalties as may be decided by the adjudicating authority. 

According to data from National Judicial Data Grid regarding pending court cases, the speed of accumulation of criminal cases in courts is quite high and the number has increased by around 300,000 in the lower courts and by about 80,000 cases in High Courts since November 2021. 

The rationale for decriminalization is that several statutes include criminal sanctions for violation of third-party orders, private/ intra-party disputes, offences punishable only with fines, criminal sanctions for failure to share information and others, which need not warrant criminality.

While the focus of reforms has remained on building capacity to address the issue of pendency of cases, there is also a need for reducing pendency and burden at courts to expedite the redressal process and ensure that only the guilty are punished. A significant part of economic decisions today is taken by tribunals and quasi-judicial bodies; however, the data in this regard is unavailable.

A detailed review of statutes on decriminalization of offences, scope of law on limitation, in-house adjudicatory mechanisms, settlement mechanisms, impact analysis of changes in dispute resolution forums, and infrastructure and technology upgradation, amongst others, must be conducted.

Following interactions with the Government, CII submitted detailed Recommendations on Decriminalization of Business and Economic Legislations (Part I) covering 37 legislations including the Companies Act 2013, Insolvency and Bankruptcy Code and legislations in the domain of environment protection, consumer protection and labour laws to various ministries. This was followed up with a Part II, which included the feedback received on Part I and covered legislations including the Competition Act, Consumer Protection Act, Patents Act, Trademarks Act, Legal Metrology Act etc., highlighting provisions that may be decriminalised. 

These recommendations, broadly looked at decriminalization, compounding, including in-house compounding, increasing compoundability in summons cases, and compounding without admission of guilt, limitation on filing criminal complaints and impact analysis of changes in dispute resolution forums, summons and warrant cases, etc. 

Further, suggestions were made on sharing data in formats on pending cases with tribunals and investigation agencies, etc., and a detailed note was submitted on need for limitation in criminal cases. These initiatives have achieved results and heightened Government’s understanding of how decriminalization can lead to several benefits and while unclogging the judicial system. 

It is encouraging to note that in response to CII advocacy, several offences under the Companies Act, 2013 have been decriminalised which is a welcome move by the Government. Amendments were also announced to the Limited Liability Partnership Act to decriminalise provisions therein and provide LLPs an equal playing field, compared to large companies under the Companies Act. 

CII sincerely appreciates the Government for undertaking these as part of the continuing endeavour for improving the business environment, which in turn not only has the potential of attracting investment, but also improving the quality of corporate boards and reducing concerns of criminal prosecution for non-material matters.

CII has also made out a case of the need for a broader need for Limitation to be applied for Criminal Offences, and some other important changes in CPC, CrPC and IPC. Also included in the recommendations are suggestions for decriminalization of minor offences under Insurance Act, 1938, SARFAESI Act, 2002, PFRDA Act, 2013, RBI Act, 1934, Payment and Settlement Systems Act, 2007, etc. for improving business sentiment and unclogging court processes.

CII looks forward to taking this endeavour ahead in partnership with the Government.

Read the CII Reports:

Decriminalization of Business and Economic Legislations at https://bit.ly/36QKMtk

Decriminalization of Business and Economic Legislations (Part II) at https://bit.ly/3DhUxwV

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