Mint Explainer | India's new criminal codes: What they mean for businesses

India has replaced the ndian Penal Code of 1860, the Indian Evidence Act of 1872, and the Code of Criminal Procedure of 1973 with the Bharatiya Nyaya Sanhita, Bharatiya Sakshya Adhiniyam, and Bharatiya Nagarik Suraksha Sanhita, respectively. (Image: Pixabay)
India has replaced the ndian Penal Code of 1860, the Indian Evidence Act of 1872, and the Code of Criminal Procedure of 1973 with the Bharatiya Nyaya Sanhita, Bharatiya Sakshya Adhiniyam, and Bharatiya Nagarik Suraksha Sanhita, respectively. (Image: Pixabay)

Summary

  • India's new criminal codes can reshape the business world, offering modernized laws with a catch: stricter regulations and the power to try top executives in their absence. Discover how these changes could redefine accountability and compliance for companies operating in India.

On 1 July, India replaced its colonial-era criminal laws with three new codes, marking a significant shift in its legal landscape. While these reforms promise modernization, they introduce stricter regulations that could challenge businesses striving to reduce regulatory burdens.

Mint delves into the impact of these new criminal laws on businesses, with a particular focus on provisions addressing economic offenses.

The new criminal code laws

The new laws replace the Indian Penal Code (IPC) of 1860, the Indian Evidence Act of 1872, and the Code of Criminal Procedure of 1973 (the first version of the Code of Criminal Procedure was enacted in 1861) with the Bharatiya Nyaya Sanhita, Bharatiya Sakshya Adhiniyam, and Bharatiya Nagarik Suraksha Sanhita, respectively. Cleared by Parliament in December and effective from 1 July, these changes aim to streamline and update India's criminal justice system.

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Key changes introduced

One of the most notable changes is the introduction of the Zero FIR, allowing complaints to be filed at any police station, eliminating delays in initiating legal action. Technological advancements, including online police complaints and electronic summons, aim to reduce bureaucratic hurdles. Judicial reforms mandate strict timelines for trial judgments and charge framing, ensuring swift justice. Special provisions now protect vulnerable groups with stringent penalties for offenses like mob lynching and crimes against women and children.

The new laws also focus on enhancing evidence collection, requiring mandatory audio-video recordings of victim statements and forensic evidence, which strengthens the prosecution's case.

Victim-centric reforms ensure that victims are kept informed about case progress and prevent case withdrawal without their consent. 

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The offense of sedition has been eliminated, replaced by provisions aimed at safeguarding national integrity and unity. Additionally, the definition and penalties for terrorism have been strengthened.

Economic crimes under the new laws

The scope of economic offenses has been broadened to include a wider array of activities aimed at financial gain, such as breach of trust, forgery, counterfeiting, mass marketing fraud, and digital scams. Significant revisions include increasing the maximum imprisonment term for cheating from one to three years and expanding the definition of forgery to cover government-issued identity documents like voter ID cards and Aadhaar cards.

The punishment for criminal breach of trust has been heightened from three years to five years, and a mandatory minimum imprisonment of six months plus a fine has been introduced for dishonest misappropriation of property. Fines for producing or using documents resembling currency notes or banknotes have been increased, and the government has made the offense of producing government-issued coins or stamps for revenue purposes punishable.

Key provision: Conviction-in-Absentia

A pivotal aspect of the Bharatiya Nagrik Suraksha Sanhita (BNSS) is the provision for Conviction-in-Absentia, allowing for the trial, conviction, and sentencing of accused individuals even in their absence. This applies to crimes carrying a jail term of 10 years or more, including economic offenses, and extends to serious offenses governed by company law, the rules laid out by the Securities and Exchange Board of India, and sector-specific laws such as those regulating drugs, cosmetics, and food adulteration.

In the past, courts have had to summon top executives from major corporations, such as the chairman of Samsung Electronics Co. from South Korea and Citigroup’s US-based CEO, and have initiated criminal prosecutions against companies like Motorola Inc. The new provision now enables courts to initiate criminal proceedings against senior executives without requiring their personal appearance in court. This grants courts significant authority with potentially far-reaching consequences for both local and foreign businesses operating in India.

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Mumtaz Bhalla, Partner at Economic Laws Practice, explained that if the magistrate deems the accused's presence unnecessary for justice or if the accused disrupts court proceedings, a trial in absentia may proceed. "Section 356 of the BNSS also permits trials in absentia for proclaimed offenders without immediate arrest prospects…the provision under BNSS for conviction and sentencing in absentia could deter multinationals, as their executives may face trial without being present—an approach distinct from the Fugitive Economic Offenders Act of 2018, which targets absconders."

Impact on business operations

Legal experts view these new criminal laws as a mixed bag for businesses. While they enhance transparency, accountability, and ethical standards, they also bring stricter regulations that might hinder the ease of doing business. 

Mohit Garg, managing partner at Lex Panacea, notes that these laws introduce stricter regulations increasing the accountability of directors, executives, and managers, thereby helping to prevent fraud and unethical practices. “Additionally, the inclusion of new sections allowing for admissible electronic records, mentioned in Section 61 of the Bharatiya Sakshya Adhiniyam, 2023, is expected to facilitate easier compliance for both large corporations and small companies alike," he said.

Vidhi Khanijow, a white-collar crimes specialist at Panag & Babu, emphasized that the new laws impact how corporations conduct business, affecting them directly and indirectly, including their key managerial personnel, directors, and employees. “Companies will be under considerable pressure to conduct swift internal investigations to effectively respond to and defend themselves against multi-pronged investigations and proceedings," Khanijow added.

Looking ahead

Experts suggest that now is a crucial time for companies to improve their compliance and governance practices. With the new laws focusing on economic crimes and allowing trials in absentia, enhancing these frameworks will help businesses navigate regulatory changes smoothly and ensure long-term success in a more transparent environment.

However, some critics argue that these laws need to undergo rigorous judicial scrutiny before their true impact is realized. 

Abhimanyu Kampani, partner at IndusLaw, pointed out that while the changes may appear minor, they could carry significant implications. These provisions will face legal scrutiny to assess their validity and practical challenges, such as potential delays in FIR registration due to new procedures like preliminary inquiries. He also highlighted the requirement for accused individuals to be heard before the court takes cognizance of an offense, which could introduce delays and complexities in court proceedings.

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As India's legal landscape evolves, businesses must adapt to these reforms, balancing the promise of transparency and accountability with the realities of stricter compliance requirements.

 

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