Effects Of Decriminalisation Of Minor Offences


Post COVID19 there has been a economic slowdown in the country which has resulted into huge unemployment and business losses. The Central Government to boost the business and trade and to encourage investments both from domestic and foreign investors has strategically proposed to decriminalize various minor sections of various laws including section 138 of Negotiable Instruments Act, 1881 ( NIA ), Companies Act 2013, sections 4 & 5 of Prize Chits and Money Circulation Schemes (Banning) Act, 1978, Section 12 of the Insurance Act 1938, Section 29 of the Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 (SARFAESI), Sections 16(7) and 32(1) of the Pension Fund Regulatory & Development Authority  Act, 2013 ( PFRDA), Sections 26 (1) & 26 (4) of Payment and Settlement Systems Act, 2007 (PSSA)), Section 56(1) of National Bank for Agriculture and Rural Development, Act 1981 (NABARD), Banking Regulation Act, Reserve Bank Of India Act etc.etc.

The Hon’ble FM in her Budget Speech for financial year 2020-2021 had said: “There has been a debate about building into statutes, criminal liability for acts that are civil in nature. Hence, for Companies Act, certain amendments are proposed to be made that will correct this. Similarly, other laws would also be examined, where such provisions exist and attempts would be made to correct them”.

Thereafter the Government of India Ministry of Finance Department of Financial Services in its statement dated 8 the June, 2020 has proposed “Decriminalisation of minor offences for improving business sentiment and unclogging court processes. Decriminalisation of minor offences is one of the thrust areas of the Government. The risk of imprisonment for actions or omissions that aren’t necessarily fraudulent or the outcome of malafide intent is a big hurdle in attracting investments. The ensuing uncertainty in legal processes and the time taken for resolution in the courts hurts ease of doing business. Criminal penalties including imprisonment for minor offences act as deterrents, and this is perceived as one of the major reasons impacting business sentiment and hindering investments both from domestic and foreign investors. This becomes even more pertinent in the post COVID19 response strategy to help revive the economic growth and improve the justice system…” The Ministry thereafter has invited comments from all stakeholders on its proposal to do away with minor financial offences as they do not impact national security or public interest and unclogging the court’s system and prisons.   

The Bar Council of Delhi, an autonomous statutory body constituted under Advocates Act, 1961, representing lawyers has opposed the Central Government’s proposal to decriminalize 39 provisions contained in 19 different Acts relating to payments and security specifically offenses relating to cheque bouncing i.e Section 138 of the Negotiable Instrument Act along with other similar offenses. The Co-Chairman of the Council, Mr.Sanjay Rathi, in his representation addressed to the Hon’ble Union Minister for Finance has highlighted the effect of the same on the lawyers community as the lives of the lawyers have been destabilized by this horrific pandemic, every advocate is also facing an economic and financial crisis.  

Section 138 of the Negotiable Instruments Act, 1881mandates that “Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both.”

The Bar Council of Maharashtra and Goa have also opposes the proposal to decriminalize Section 138 of NI Act and has written to the Finance Ministry. In it’s letter the Council has objected to the offence of cheque bounce being termed as a “minor offence”or“procedural lapse”by the government in its bid to decriminalize the same, saying that the same goes against the judicial pronouncements and legislative intent to set a deterring effect. Further the move would have a “cascading effect”on the ease of doing business and an entire well-established system of negotiable instruments will be rendered futile, it is said in the letter.

The Central Government while decriminalize the sections of various laws has to look into the issue related to the interest of lawyer’s, welfare of the public at large and the business community. Today mostly post-dated cheques (PDCs) are taken from the borrowers as a security by the banks and financial institutions. Also in business transaction whether it is qua the sale of goods, property, paying of fees or daily business activity etc. payment are made through cheques/ PDCs. Since the Negotiable Instruments Act, 1881 provides for an early mode for redressal where a cheque, for discharge of debt or liability, is dishonoured due to paucity of funds or where it exceeds arrangement it act as a deterrent for the borrower/ drawer of the instrument form not  making timely payments of the cheques issued by them. By proposal to decriminalize Section 138 of the Negotiable Instrument Act, 1881 along with other similar offenses will dilute the said Acts.

On one hand decriminalizing the minor offences may attract the foreign investors to invest in India to boost the economy, but on the other hand the Government will have to also see the interest of the creditors who will suffer as they will have to wait longer to recover their dues. The apprehension of Criminal legal action & punishment with imprisonment and fine as provided under Section 138 of the Negotiable Instrument Act, 1881 are the factor for making timely payments of the cheques. While decriminalizing the minor offences the Government will have to make/ ensure through enactment of provisions that the interest of the creditors are secured and timely payment in terms of honouring the Cheques is done to maintain the sanctity of contracts.

In the present scenario when there is a economic slowdown globally,  if India wants to emerge as a key player in the post-Covid era, a few thing needs to be considered by the Government including the ease of doing business and its implementation by the state, which remains a challenge as on date. Apart from decriminalizing the minor offences the Government will also have to consider changing the rules governing e-commerce guidelines and data localization. For attracting foreign Investors India has a great competitive advantage in terms of its relationship with the other Countries, demographic advantages, increase in the purchasing power, skilled and young labour and digitization. The Government will need to open up its policies not just with regards to the legal reforms but also qua the land and labour policies and ensure transparency in policy-making. Last but not the least any policy change, decriminalizing of the minor offences or enactments by the Government has to be made keeping in mind the long-term effect of the same and its repercussions.

The Authors are practicing Advocates in the Supreme Court of India.

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