FINANCE MINISTRY ANNOUNCES DECRIMINALISATION OF 19 LEGISLATIONS- BOON OR BANE?

This week the #MinistryofFinance has proposed to #decriminalize “minor” #offences prescribed in 19 different #legislations for economic offences, purportedly, for improving “business sentiment” and “unclogging” of court process.

The Ministry of Finance has invited comments or suggestions regarding decriminalization of 19 Legislations within 15 days, i.e. on or before 23-06-2020. . The Legislation proposed to b decriminalized are  Insurance Act 1938, SARFAESI Act, 2002, PFRDA Act 2013, RBI Act, 1934, Payment and Settlement Systems Act, 2007, NABARD Act 1981, NHB Act, 1987, 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 (Nationalization) Act, 1972, LIC Act, 1956, Banning Unregulated Deposit Schemes Act, 2019, Chit Funds Act, 1982, DICGC Act, 1961, Negotiable Instruments Act, 1881 and  Prize Chits and Money Circulation Schemes (Banning) Act, 1978.

Firstly, the offences which the Ministry has termed “minor offences” are not at all minor. They are serious in nature. Essentially the proposed changes would remove whatever little fear that exists in the minds of Indian corporate honchos about the prospect of serving a jail term for corporate frauds.

The key managerial personnel of the corporations such as – the Chief Executive Officer, the Company Secretary, the whole-time director, the Chief Financial Officer etc., are sought to be let off the hook by the proposed decriminalization of the above legislations.

Previously, these officials could be sent to jail for a term of one year or a fine of Rupees one lakh, if they resort to corporate frauds. The auditors too faced the prospect of being sent to jail for one year or fine of Rupees One Lakh.

Normally our #courts dealing with economic offenders have been averse to sending the offenders to #jail  and it has been my experience that corporate bigwigs get away by paying a small fine. Very rarely key managerial personnel are actually imprisoned. In this context it is not understood as to how “business sentiments” would be improved by removing the almost fictional jail term prescribed in the above referred legislations.

In U.S.A and U.K, jail terms are an integral part of their corporate laws. Jail term of three to five years are embedded in the corporate laws of those countries and business leaders do not find anything unusual about the jail term contained in the legislation. Thus the argument of “business sentiment” being affected does not hold any water. Many errant top executives have served jail sentence in U.S.A. Indian-American businessman Rajat Gupta too served jail sentence of two years for insider trading.

The mere presence of a jail term has not prevented big corporations flourishing in those countries. It is not understood as to why a mild jail term in India should be viewed as being not market/investor friendly.

It should not be forgotten that two of the biggest scams in recent times are Satyam Computers and IL & FS. Both involved the manipulation of accounts. Stringent punishments are necessary in our country, where such scams take place with unerring regularity. I do not remember any Indian businessman being jailed for insider trading till date. Generally our court process are very slow and often the accused usually dies before being actually convicted, Harshad Mehta, is an example of this.

Not satisfied with the above proposed amendments, Finance Ministry wants to amend Section 138 of Negotiable Instrument Act, 1881. Section 138 of the Negotiable Instrument Act deals with payment of debt by the issuance of a cheque. About 35 lakh Negotiable Instrument Act cases were pending as per the 213 Law Commission Report published in 2008. What happens to these cases which are already in the courts?  Will all these cases get abated?  If they still continue, how will the “unclogging of the court” processes take place ?.   If cheque bounce cases are to be treated as civil cases, instead of criminal, then equal number of civil cases will be filed in the civil courts and we will be back to square one.

 The solution lies in increasing the funds for the judiciary. Currently the amount allocated for judiciary is less than one percent of the total budget allocation. In the 2020-21 the budget allocation for judiciary is just Rs.2,200 crores. This is totally insignificant compared to the funds allocated to the other ministries. The funds allocated for top 10 ministries are given below:

  1. Defence Ministry                                             –   Rs. 4,71,378 crores
  2. Home Ministry                                                 –   Rs. 1,67,250 crores
  3. Agriculture and farmer welfare                        – Rs.1,42,762 crores
  4. Ministry of Consumer affairs and Public distribution – Rs.1,24,535 crores
  5. Ministry of Rural Development                         – Rs.1,22,398 crore
  6. Ministry of Human Resource Development         – Rs. 99,312 crore
  7. Ministry of Road Transport and Highways           – Rs.91,823 crore
  8. Ministry of Railways                                          – Rs.72,216 crore
  9. Ministry of Health and Family welfare                – Rs.67,216 crore
  10. Ministry of Housing and Urban Affairs              – Rs.50050 crore

        Thus, it can be seen that Government does not seem to attach much importance to the justice delivery system and has allotted Rs.3150 crores for Ministry of Culture and Rs.2500 crores for Ministry of Tourism. Judiciary is ranked even below the Ministry of Culture and Ministry of Tourism.

It is not understood as to how our understaffed and under budgeted Judiciary is expected to dispose off 3.2 crore cases which are currently pending in the country. Mere removal of jail term from various legislations does not reduce the pendency of the cases. The solution lies in appointing more judges and establishing more courts.

The most surprising part of this proposed exercise is that the #LawMinistry does not seem to be have been consulted. The jail term in the above legislations was incorporated after due deliberations and this is ought to be removed by the experts from the Finance Ministry, purportedly to improve the “business sentiments”.

Will the Law Minister please stand up and prevent the cannibalization of the Law Ministry by the Finance Ministry?

Prabhakar Sripada

Advocate, Telangana High Court

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