Small financial offences may be decriminalized to improve business sentiment1 min read . Updated: 10 Jun 2020, 11:34 PM IST
The finance ministry has proposed decriminalization in as many as 36 sections, across 19 laws, including Negotiable Instruments Act, SARFAESI Act, LIC Act, PFRDA Act, RBI Act, Banking Regulation Act, and Chit Funds Act
A cheque dishonoured due to insufficient money in the bank may no longer attract a jail term, with the government planning to decriminalize several minor financial offences to boost business sentiment.
“Actions taken for decriminalisation of minor offences are expected to go a long way in improving ease of doing business and helping unclog the court system and prisons. It would also be a significant step in the government of India’s objective of achieving ‘SabkaSaath, Sabka Vikas and Sabka Vishwas’," the department of financial services said. The finance ministry has invited comments from stakeholders by 23 June.
The ministry has proposed decriminalization in as many as 36 sections, across 19 laws, including Negotiable Instruments Act, SARFAESI Act, LIC Act, PFRDA Act, RBI Act, Banking Regulation Act, and Chit Funds Act.
For instance, under the Negotiable Instruments Act, a cheque dishonoured due to insufficient funds in bank account could result in a two-year imprisonment and a penalty amounting to twice the amount of the cheque, or both. Similarly, any deposit taker, who promotes, issues advertisement to participate in an Unregulated Deposit Scheme or accept deposits for the same under Banning of Unregulated Deposits Act results in an imprisonment term of up to five years, with a fine up to ₹10 lakh. The government has now proposed to make these civil offences, and work on a framework that will still act as a deterrent.
While the proposal to decriminalize minor offences is likely to provide relief to foreign investors for whom criminal liability for economic offences is a big concern, it will have a negative impact on creditors who will have to wait longer to recover their legitimate dues, said Sumit Batra, partner at India Law Alliance.
“The intent of these laws is to create fear of being booked for failing to pay their contractual obligation, if these offences are decriminalised, it will give a free hand to such persons to defer making payments at their own whims and fancies," Batra said.
The move is, however, in line with steps announced over the last one year to boost business sentiment.