Central Government Proposes to Decriminalise various Minor Financial Offences

The Ministry of Finance has announced to propose the decriminalization of offences like dishonor of cheque under section 138 of the Negotiable Instruments Act and other minor financial offences. The Ministry has decided to make such a move in order to improve the business sentiment and unclog the court processes, in the wake of the economic crisis being faced during the pandemic caused by covid-19.

The criminalization of procedural lapses and minor non-compliances cause a burden on associated businesses and the ministry realizes that it is necessary to re-look at the provisions which are merely procedural in nature and do not impact society at large. However, principles like decreasing the burden on businesses, focusing on economic growth, critically evaluating non-compliance and its habitual nature is essential. Further, actions taken for such decriminalization of minor offences is expected to cause an ease of doing business and reduce the burden of court and prison.

The various important offences proposed to be decriminalized include:

  1. Section 138 and 143(1) of the Negotiable Instruments Act, 1881: Section 138 states with regard to dishonor of cheque for insufficiency of funds in account and also states the required penalty in such a case. In addition, Section 143(1) states the power of the court to try cases with regard to all offences as contained in Code of Criminal Procedure, 1973.
  2. Section 12 and 103 of Insurance Act, 1938: The penalties are stated under the section if balance sheet, P & L Account, and Revenue Account, if not audited annually by the auditor. Further, if a person carries a business of insurance without obtaining a certificate of registration, he shall be liable to penalties.
  3. Section 29 of SARFAESI Act, 2002: If any person intervenes, contravenes or abets the provision of the Act, he/she shall be liable for punishment which includes imprisonment for a term not exceeding 1 year.
  4. Section 16(7) and 32 (1) of Pension Fund Regulatory and Development Authority Act, 2013: A person shall be liable for punishment if he fails without reasonable cause or refuses to produce an investing authority, denies to furnish any relevant information for his duty and to appear before the investing authority. He shall also be punishable if he contravenes, intervenes and abets the provision of the Act.
  5. Section 58 B (1), (4A), (5) and 5(A) of Reserve Bank of India Act, 1934: Section 58 B briefly elucidates various penalties under the Act. It includes if a person in any application, declaration, statement, information or return furnishes a false information, he shall be punishable with an imprisonment for a term which may extend to 3 years. Moreover, it states penalties with regard to requirement of registration as per Section 45 I-A of the Act, persons who fail to comply with the Act and contravenes with any provision of Section 45 S (Deposits not to be accepted in certain cases) shall be liable.
  6. Section 26(1) and 26(4) of Payment and Settlement Systems Act, 2007: The Section states with regard to imprisonment of a person failing to comply with the Act.
  7. Section 56 (1) of the NABARD Act, 1981: A person who willfully makes a false statement in any return, balance sheet or other document shall be liable for fine and imprisonment.
  8. Section 49 of the National House Banking Act, 1987: This section states penalty with regard to a person furnishing false statement in documents, balance sheet or returns, failing to produce any book or other document, fails to comply with directions as stated by the auditor or authorized officer and contravenes with the policies of the Act.
  9. Section 42 (1) and 42(2) of the State Financial Corporations Act, 1951: Whoever furnishes a false statement in any bill of lading, warehouse receipt or other document of the financial corporation shall be punishable with imprisonment and fine. In addition to this, if anyone uses the name of a financial corporation without a written consent of the such institution, it shall be liable for the same.
  10. Section 23(1) of the Credit Information Companies (Regulation) Act, 2005: A person shall be liable he/she furnishes a false information in any return or document.
  11. Section 23 of the Factoring Regulation Act, 2011: A person shall be liable if he/she intervenes or fails to comply with the provisions of the Act.
  12. Section 37, 38(2) and 40(2) of the Actuaries Act, 2006: Any person who is not a member of the institute represents himself as a member, uses the designation of actuary or practices the profession or being a member does not have a certificate of practice and represents that he is in practice shall be liable for penalties. Further, if a person contravenes with the policy of the Act shall be liable.
  13. Section 36 AD (2) and 46 of Banking Regulation Act, 1949: A person shall be liable if he/she contravenes with the provisions and furnishes a false statement for any return, balance-sheet or other document.
  14. Section 30 of the General Insurance Business (Nationalization) Act, 1972: If any person willfully withholds or fails to deliver required information to Indian Insurance Company with regard to any property, book or document which he is in possession of, he/she shall be held liable for punishment under the Act.
  15. Section 40 of LIC Act, 1956: If any person willfully withholds or fails to deliver required information to Corporation with regard to any property, book or document which he is in possession of, he/she shall be held liable for punishment under the Act.
  16. Section 21(1), 21(2), 21(3), 22, 23 and 24 of the Banning of Unregulated Deposit Schemes Act, 2019: Chapter VI of the Act states with regard to various offences and punishments with regard to contravention of section 3, 4 and 5. Section 24 states the punishment for repeat offenders.
  17. Section 76 (1), 76(3) and 77 of the Chit Funds Act, 1982: The sections states that a person shall be liable if he/she contravenes or abets the provisions of the act or furnishes false statement. Section 77 states provision for repeat offenders.
  18. Section 47(1) of Deposit Insurance and Credit Guarantee Corporation Act, 1961: The section states that whoever in any return, document or balance sheer furnishes any false information shall be liable for a punishment under the Act.
  19. Section 4, 5 and 12 (5) of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978: The section 4 suggests that whoever intervenes with the provision of section 3 of the Act shall be liable for penalties. Section 5 provides penalty for offences in connection with prize chits or money circulation schemes and section 12(5) states with regard to failing to comply with the provisions of the Act shall be liable.

The government has further stated that the stakeholders may propose and submit the comments or suggestion regarding decriminalization of a particular act or section of an act along with a rationale. The suggestions should be submitted to the department’s e-mail address (bo2@nic.in) by June 23, 2020. The comment/feedback shall include necessary details like name of the institution or organization or member of the public, correspondence address and category (State/UT/Civil Society/Private Sector/Public Sector/Multilateral Institution/Member of the public/Academic/NGO).

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