DE-CRIMINALISATION OF ECONOMIC OFFENCES: OF CHEQUES AND BALANCES

The economic issue of the COVID-19 lockdown, due to the culmination of almost all commercial activity, is yet to be fully ascertained. With the ‘Unlock 1.0’ have been come out earlier this month many restrictions have been imposed in some places. As where factories and offices following some protocol Restaurants and malls were allowed to open their doors. While the stimulus economic package has been previously announced, with uncertainty of market sentiments that were being low, other measures were needed to be taken to prop-up the economy.

The Union has initiated the process of decriminalization of minor offences that are currently punishable with fine and with jail term So with this regard the Ministry of finance had released its Statement of Reason (SOR) sought opinions from stakeholders like state governments, UT Administration, Civil Society/ Non-Government Organisations (NGOs), academicians, public and private sector organizations and the public on proposals to amend 19 acts that criminalize economic offences like a bounced cheque by 27th of june.

Statutes which are proposed to decriminalise:

The finance minister has proposed to decriminalise offences dealing with the economic and financial affair and the main aim is to make them compoundable offence. These include Negotiable Instruments act, 1881, the Insurance Act, 1938, NABARD Act, 1981, RBI Act, 1934, as well as some more recent legislations such as provisions of the Securities and Exchange Board of India Act, 1992, Sections 26(1) and 26(4) of the Payment and Settlement Systems Act, 2007, Section 29 of SARFAESI Act, 2002, and Section 23 of the Factoring Regulation Act, 2011.

Notable, the amendment under S. 138 of the Negotiable Instruments Act, 1881 which makes the cheque dishonor a criminal offence now being reclassified to compoundable offence as the SOR specifies that mens rea and malafide intent plays an important role in imposition of criminal liability, therefore, it is critical to assess nature of non-compliance, i.e. fraud as compared to negligence or inadvertent omission And the most important Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020. By this ordinance the initiation of fresh insolvency proceedings has been suspended for a period of six months starting from 25^th march, 2020 (extendable to one year). Finance Minister said that Criminal penalties, including imprisonment for minor offences act as a disincentive. This is perceived as one of the major reasons impacting business sentiment as well as hindering investments both from domestic and foreign investors. This becomes even more relevant in the post-Covid-19 response strategy to help revive the economic growth and improve the justice system so that ease of doing in business can be possible.

Five key principles for reclassification:

The Statement has suggested five key principles for the reclassification of criminal offences to compoundable offences. i.e.

1.      Decrease in the burden on businesses and inspire confidence among investors.

2.      Focus on economic growth, public interest.

3.      Government ensures that national should remain in paramount importance.

4.      Malafide intent is punished while other less serious offences are compounded.

5.      Habitual nature of non-compliance.

Benefits of decriminalisation :

Actions taken for decriminalization of minor offences are expected to go a long way in improving ease of doing business because the economic investors always have fear of offence in mind and it helps the pendency of the cases and prisons to unclog the court system therefore the economic offences will be treated or considered as civil offence so that investigation or mediation can be taken place. There is one scheme “Sabka Sath, Sabka Vikas and Sabka Vishwas” provide the trust to economic investors as well as economic players and with this investment will also be increased.

Is this mean the Government effectively providing Jail-free-card to the defaulters?

No, it does not the Government are providing them special privileges as in the world of commerce , the interest of Debtors also the Creditors is taken kept in mind and have to be balanced. If protection is extended only to Debtor so it is unjust for the creditors who also needs funds to commence or start his business and will hamper the commercial validity of creditors.

It is concluded that it is necessary to boost the economy and it no doubted needed and businesses take all the precaution to get back their feet, a balance should be maintained between competing interest and practicality. To protect only the debtors will swing pendulum too much on one side and will lead to rush in cases, which asides from being contrary to the objective of the proposed SOR, will also have their own set of economic and legal challenges.