Decriminalisation Of 'Minor Offences': Factors To Be Considered And Its Probable Implication

In the wake of COVID-19 pandemic and the consequent lock-down, the Finance Minister of India on June 08, 2020 has proposed to decriminalise minor offences for improving business sentiment and unclogging court processes. The Central Government has also sought suggestions and objections from public on the same.

Decriminalisation of minor offences was under Government's consideration since 2019, but the decision on the same was in pipeline. However, given the present economic crisis, decriminalisation of minor offences at this stage will be a significant step towards improving the economy.

The proposed decriminalisation of minor offences includes cheque bounce cases under section 138 of the Negotiable Instruments Act, 1881 ("NI Act") and few other statutes, inter alia, pertaining to the financial sector. Introducing decriminalisation of minor offences will re-categorise these offences of criminal nature into civil (and compoundable) offences, which means there would no longer be a punishment in form of imprisonment for such offences. The proposal aims to substitute criminal liability with (stiff) compoundable monetary penalties of a civil nature that can act as deterrents and help encourage investor sentiment.

As per Finance Ministry's proposal dated June 08, 2020, certain provisions of the following nineteen (19) Acts are proposed to be decriminalised:

1. Insurance Act, 1938,
2. The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 ("SARFAESI Act"),
3. The Pension Fund Regulatory and Development Authority Act, 2013 ("PFRDA Act"),
4. Reserve Bank of India Act, 1934 ("RBI Act"),
5. Payment and Settlement Systems Act, 2007,
6. The National Bank for Agriculture and Rural Development Act, 1981 ("NABARD Act"),
7. The National Housing Bank Act, 1987 ("NHB Act"),
8. State Financial Corporations Act, 1951,
9. Credit Information Companies (Regulation) Act, 2005,
10. Factoring Regulation Act, 2011,
11. Actuaries Act, 2006,
12. Banking Regulation Act, 1949,
13. General Insurance Business (Nationalisation) Act, 1972,
14. Life Insurance Corporation Act, 1956 ("LIC Act"),
15. Banning of Unregulated Deposit Schemes Act, 2019,
16. Chit funds Act, 1982,
17. The Deposit Insurance and Credit Guarantee Corporation Act, 1961 ("DICGC Act"),
18. Negotiable Instruments Act, 1881, and

Prize Chits and Money Circulation Schemes (Banning) Act, 1978.

The Finance Minister on June 12, 2020 has further proposed to decriminalise certain sections under the Securities and Exchange Board of India Act, 1992, the Securities Contract Regulation, Act, 1956 and the Depositories Act, 1996. Public comments and suggestions are called for on the same.

In addition to the above proposal, the Ministry of Corporate Affairs ("MCA"), on June 19, 2020, released a statement of reason proposing decriminalisation of compoundable offences under the Limited Liability Partnership ("LLP") Act, 2008 ("LLP Act"), for greater ease of doing business for law abiding LLPs and declogging of criminal justice system. MCA has further called upon the stakeholders to provide their comments and suggestions on such proposition. The exercise to identify and decriminalize the provisions of LLP Act is aimed at incentivizing compliance, de-clogging of criminal justice system and promoting congenial business climate.

The LLP Act as it stands today, inter alia criminalises minor violations which impinges upon the business sentiments. Therefore, with a view to provide business ease, MCA plans to review the penal provisions of LLP Act, to decriminalize compoundable offences involving minor, procedural or technical violations of the LLP Act, or offences which may not involve any harm to public interest.

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Originally published 27 June, 2020

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