Decriminalisation of minor offences to improve ease of doing biz, say experts

Decriminalisation of minor offences in 19 economic legislations, as proposed by the finance ministry, will provide relief to the MSMEs reeling under the impact of COVID-19, improve ease of doing business and reduce burden on NCLT, according to experts.

However, some experts believe that the move will dilute legal remedies available to lenders to recover their legitimate dues from borrowers.

The finance ministry on Wednesday proposed to decriminalise minor offences, including those relating to cheque bounce and repayment of loans, in as many as 19 legislations.

The legislations identified for amendments include Negotiable Instruments Act, SARFAESI Act, LIC Act, PFRDA Act, RBI Act, NHB Act, Banking Regulation Act, Chit Funds Act, Insurance Act, Payment and Settlements Systems Act, NABARD Act, among others.

The decriminalisation measures need to be viewed from three different perspectives- ease of doing business; relief to beleaguered MSMEs and companies affected by lockdown and COVID-19; and easing the stress on the National Company Law Tribunal (NCLT), said Atul Pandey, Partner, Khaitan & Co.

The initiative, Pandey said, would help in improving India's ranking in the ease of doing business index.

However, on the other hand, the move would reduce the avenues available to lenders for recovery of debt, he said. The government, it may be mentioned, has already diluted the provisions of the Insolvency and Bankruptcy Code (IBC).

According to Sumit Batra, Partner, India Law Alliance, the proposal, once implemented, will provide relief to foreign investors for whom criminal liability for economic offences is a big concern.

At the same time, Batra cautioned, the move will have negative impact on creditors who will have to wait longer to recover their legitimate dues. The underlying principle will be defeated in Negotiable Instruments Act and SARFAESI Act, if blanket decriminalisation of offences is introduced.

Commenting on the proposal, HostBooks Ltd chairman and founder Kapil Rana said the proactive move of the finance ministry will decrease legal disputes and help in accelerating economic revival in the post-COVID period.

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Pratibha Jain, founding partner Nishith Desai Associates, too opined that the proposal would provide relief to foreign investors for whom criminal liability for economic offences is a big concern.

The finance ministry will take a final view on the proposal after receiving feedback from the stakeholders who can send their comments by June 23.