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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:
- Insurance Act, 1938,
- The Securitisation and Reconstruction
of Financial Assets and Enforcement of Securities Interest Act,
2002 (“SARFAESI Act“), - The Pension Fund Regulatory and
Development Authority Act, 2013 (“PFRDA
Act“), - Reserve Bank of India Act, 1934
(“RBI Act“), - Payment and Settlement Systems Act,
2007, - The National Bank for Agriculture and
Rural Development Act, 1981 (“NABARD
Act“), - The National Housing Bank Act, 1987
(“NHB Act“), - State Financial Corporations Act,
1951, - Credit Information Companies
(Regulation) Act, 2005, - Factoring Regulation Act, 2011,
- Actuaries Act, 2006,
- Banking Regulation Act, 1949,
- General Insurance Business
(Nationalisation) Act, 1972, - Life Insurance Corporation Act, 1956
(“LIC Act“), - Banning of Unregulated Deposit
Schemes Act, 2019, - Chit funds Act, 1982,
- The Deposit Insurance and Credit
Guarantee Corporation Act, 1961 (“DICGC
Act“), - 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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guide to the subject matter. Specialist advice should be sought
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