The Centre’s move to separate good-faith errors or omissions from mala fide ones will bolster ease of doing business
Assurance as a part of justice for all is a critical component, and it led to an incremental addition on the foundation of the government of India’s goals in 2019. From ‘Sabka Saath, Sabka Vikaas’, the government began optimising towards ‘Sabka Vishwaas’. A significant aspect of building assurance, belief and trust is by supporting and scaling entrepreneurship in India. There has been relentless focus on facilitating entrepreneurial endeavours towards bringing prosperity for citizens and to create well-being in society.
Several interventions to this effect have been curated in recent times with labour laws consolidation, opening up the space paradigm for the private sector, Production Linked Incentives, proactively augmenting Ease of Doing Business by reducing compliance norms, among several others.
Decriminalisation is far-thinking and far-reaching in its capacity as both a standalone reform, and as part of the overall maximum governance impact. It is no secret that the Indian statute book is riddled with laws that are redundant and sometimes contextually adverse. This creates an inclined plane on which disputes arise downstream amidst a plethora of litigation.
The National Judicial Data Grid accessed on January 19 reveals that amongst the 3,70,21,980 pending cases at district and taluk court level, 2,69,84,603 cases (72.8 per cent) are criminal cases and 79.3 per cent of them have been pending for more than a year.
While bolstering court infrastructure and judicial capacity is one strategy, which has been advocated to tackle pendency, the government has strategically started deploying other strategies to get at the root of the problem. The government notified the Ramanujam Committee in November of 2014 to dispense with redundant laws. Proactively following up the recommendations has meant that the government has been able to revoke over 1,500 archaic laws.
For reviewing laws to make them contextually relevant, a significant exercise has been the cross ministerial effort towards ‘Decriminalisation of Minor Offences.’
The prism of decriminalisation
Decriminalisation of minor offences emanates from the belief that penalties induced by legislation should be a deterrent for ill-intended activity but shouldn’t hurt good-faith work on innovation, Ease of Doing Business and Ease of Living. Prescribing criminal proceedings for offences which are technical mistakes is sub-optimal, and may be better dealt with as a civil offence prescribing stiff penalty.
There have been four broad pillars holding up the prism through which Ministries are reviewing acts under their administrative supervision. First is to decrease the compliance burden on businesses and inspire confidence amongst the investors. Second, has been to facilitate economic growth while being mindful of public interest and upholding national security. Third is to find a balance between punishing mens rea (mala fide/criminal intent) and taking a less extreme stance on negligence or inadvertent omission.
Finally, a reason and also a significant consequence of this exercise is to help unclog the court system from unwarranted litigation, and subsequently, prisons.
Statutes in dissonance with the endeavour to support entrepreneurship may have created inconveniences for MSME entrepreneurs, and the administration of justice itself. A seminal paper by Sanford H Kadish in 1967, ‘The Crisis of Overcriminalisation’, argued that it is essential to “determine whether the total public and private costs of criminalisation outweigh the benefits.”
The costs include public and private burdens, both tangible and intangible. Public costs include police, court, and correctional expenditures attributable to the enforcement of a specific criminal law. Private costs include compliance burdens harming ease of doing business, curbing innovation of entrepreneurs and trying to optimise operations under the fear of rent seeking from those with vested interest in the status quo.
It is also relevant to note Tom Tyler’s work in ‘Procedural Justice, Legitimacy and Effective Rule of Law’ where he argues that ‘perceptions of unfairness undercut the legitimacy of legal prohibitions, making citizens less likely to respect Rule of Law.’ It is the legitimacy of law, not just law itself, which induces citizens to truly respect the rule of the land.
The iteration of unintentional non-compliance being corrected by fines as the norm so as to provide maximal freedom to operate via business and economic laws could be transformative for our ease of doing business movement. Divesting criminal penalties from laws unless criminal actions with ‘mens rea’ are found — will strengthen confidence among young entrepreneurs and investors in doing business.
Globally, countries have been following a similar trend to mitigate litigations and provide confidence to industry. For example, in the US environmental offences can be compounded by being fined, and in the UK the concept of “plea bargaining” has been accelerated for compounding.
After holding comprehensive discussions with stakeholders on impactful aspects of decriminalisation to augment investor comfort, a concept note was prepared by NITI Aayog in February 2020. This had an illustrative list of 120 provisions from 28 statutes which were identified for decriminalisation with suggested amendments.
This was conducted in parallel to the decriminalisation of 16 offences of the Companies Act, 2013 vide the Companies (Amendment) Act, 2019 and also decriminalisation of 49 offences vide the Companies (Amendment) Act 2020. Following NITI’s illustrative exercise, the Ministries have taken a keen interest and shown proactive engagement.
As of November 2020, 32 Ministries/Departments had initiated this review process and several have commenced or are in the process of commencing public feedback on identified provisions for decriminalisation.
The Department of Financial Services has undertaken public consultation on criminal provisions under as many as 19 Acts.
In January 2021, a high-level government committee recommended the decriminalisation of 12 compoundable offences and omission of a penal provision from the Limited Liability Partnership (LLP) Act potentially benefiting 145,000 registered LLPs.
The government has taken a pioneering role in bifurcating good faith mistakes or omissions during the course of business, from mala-fide intent-driven activity. By doing this, innovation and justifiable risk-taking will be allowed, with a stiff compoundable penalty continuing to deter, but not leading to misuse or misinterpretation of statutes.
The downstream impact will yield several positive benefits. Re-designing laws and regulations towards a more conducive statutory ecosystem with decriminalisation of minor offences exercise will bolster both ease of doing business and ease of living for citizens.
This is a major reform which could set a precedent for all other jurisdictions to potentially emulate. It will essentially bring in assurance and comfort for bona-fide activities and actors.
Kant, Sekhri and Mishra are CEO, OSD and Head-Access to Justice and Young Professional at NITI Aayog respectively. Views are personal