Fear of imprisonment for minor offences and the associated harassment or social taboo can hamper individual confidence and the growth of business ecosystem. Broadly, this is the rationale stated in the Statement of Objects and Reasons of the Jan Vishwas (Amendment of Provisions) Bill, 2022, (the Bill) which attempts to decriminalise minor offences across 42 legislations in India.[i]
Decriminalisation of a criminal act is a complex subject. In the context of economic offences, popularly known as, white-collar crimes, some of the factors that may be considered are comparison of cost of imposing criminal liability on violations like, procedural lapses or minor non-compliances against the benefits, presence of criminal intention (mens rea), probability of repeated non-compliance (recidivism) and load on the criminal justice system.[ii]
Decriminalisation of minor economic offences is an ongoing exercise. In the past, the incumbent Government has taken measures to decriminalise minor offences to reduce disproportionate burden and increase ease of doing business. For instance, in 2018, 16 minor offences were decriminalised under the Companies Act, 2013. Similar exercise was undertaken in 2021, when 16 minor offences under the Limited Liability Partnership Act, 2008 were decriminalised.[iii] Consistent with this past approach, the Government has introduced the Bill.
While the Government proposes to amend as many as 42 central legislations, from the perspective of businesses in Information Technology (IT) – Business Process Management (BPM), eCommerce and tech start-ups in general, some of the more relevant legislations are:
- Information Technology Act, 2000 (IT Act)
- Patents Act, 1970
- Copyright Act, 1957
- Trademarks Act, 1999
- Payment & Settlement Act, 2007 (P&S Act)
- Drugs & Cosmetics Act, 1940
- Cable Televisions Networks (Regulation) Act, 1995
- The Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016
This blog discusses the types of amendment proposed in the Bill to decriminalise minor offences.[iv] In the same context, the blog briefly explains the concept of offence, fine & penalty, which are often used interchangeably.
- No more punishment
In this situation, the entire provision has been proposed to be deleted. This means a given act will be no longer considered as violation which means no consequences under that statute. For example, section 66A of the IT Act provides for imprisonment with fine for sending offensive messages through communication service. This section has been proposed to be deleted, although this comes after a gap of 7 years, when the Supreme Court in 2015 had declared section 66A of the IT Act as unconstitutional in the Shreya Singal case.[v]
Similarly, section 68 of the Copyright Act, provides for imprisonment or fine or both for making false statements for the purpose of deceiving or influencing any authority. Section 68 has been proposed to be dropped from the statute.
- Punishment by only monetary penalty
Under this scenario, the provision has been amended (not deleted) to the effect that violation will no longer attract imprisonment or fine but only monetary penalty. For example, section 67C of the IT Act provides for imprisonment and fine when intermediaries fail to preserve and retain information. Imprisonment has been replaced with increased monetary penalty which can go up to INR 25 lakhs.
Similarly, under section 72A of the IT Act, punishment for disclosure of information in breach of lawful contract is imprisonment or fine up to INR 5 lakh or both. The Bill substitutes the current punishment with enhanced monetary penalty which can go up to INR 25 lakh.
Further, there are provisions which currently provides for only fine and no imprisonment. As a subset of scenario 2, in such provisions, the expression fine has been proposed to be replaced with penalty. In 2018, a similar exercise was undertaken to decriminalise several offences under the Companies Act, 2013, where the term offence was replaced with penalty.
For instance, under the Patents Act 1970, a person selling a falsely represented article as patented in India commits an offence (although there is no imprisonment) is subject to a fine of up to INR 1 lakh. The Jan Vishwas Bill proposes to replace the offence and fine with penalty.[vi]
Similarly, under section 26(3) of the P&S Act, the expression offence and fine have been replaced with penalty.[vii] In 2018, a similar exercise was undertaken to decriminalise several offences under the Companies Act, 2013, where the term offence was replaced with penalty.
Substitution of offence and fine with penalty
The question that can arise that what happens/changes if the terms offence and fine are replaced with penalty. How does this lead to decriminalisation? To answer this, difference between offence & civil violation; and their respective outcome needs to be understood.
Simply understood, offence is a criminal act for which fine could be imposed as monetary punishment. The adjudication is done by a court. Whereas penalty is monetary punishment imposed for a civil violation. The adjudication is done by a non-court body or an officer appointed by the government.
From time to time the Supreme Court and High Courts have discussed these differences in judicial pronouncements.[viii] These differences are summarised below:
- Offence is defined in the Indian Penal Code (IPC) which denotes a thing made punishable under the IPC or any other special law with punishment upto 6 months with or without fine.[ix] The test to determine whether a violation, act, omission, non-compliance, contravention, failure, breach, or default under a law, is criminal or civil - hinge on the fact whether it is classified as offence. For example, chapter 11 of the Indian Telecommunication Bill, 2022 deals with offences and prescribes fine for commission of such offence.[x] However, the Digital Personal Data Protection Bill, 2022 uses the term financial penalty instead of offence and fine.[xi]
- Fine is the punishment for committing an offence, whereas penalty is for civil violations. To elaborate, even when there is no imprisonment and only fine is to be paid for an offence, the act is not absolved of its criminal nature. This understanding comes from the IPC, which lays down 5 different kinds of punishments, and fine is one of them.[xii]
For instance, when a person pulls chain of a moving train without reasonable cause, one can either pay fine or go to jail.[xiii] Although when the person pays fine and does not go to jail, the nature of violation remains an offence.
- In offence, mens rea is a pre-requisite. This is one of the cardinal principles of criminal jurisprudence which presupposes that a guilty mind is must for an act or omission to be classified as crime.[xiv] In other words, for an offence committed, mens rea must be established before imposing fine or imprisonment.
However, minor offences, like bonafide omission or technical errors may not qualify the threshold of mens rea and therefore, they are more suitable for civil liabilities.[xv] In other words, for imposing penalty in a civil violation, malafide intention is not a pre-requisite. This means the burden of proof is lower compared to offences.
- Offences are adjudicated by courts and thereafter, fine is imposed. Whereas, in case of a civil violation, the government appoints an adjudicating authority for imposition of penalty.
For instance, the Jan Vishwas Bill proposes to vest the Controller of Patents as the adjudicating authority for determination of penalties for certain kind of violations under the Patents Act.[xvi] Similarly, under the P&S Act, RBI will adjudicate penalty for violation under section 26(3) of the said Act.
In the case of Telecommunication Bill, offences would be tried in the magistrate court before imposition of fine,[xvii] whereas under the Digital Data Protection Bill, the proposed Data Protection Board is the adjudicating authority for determination of penalties.[xviii]
- Settlement through compounding
Compounding is a form of decriminalisation. It is a settlement mechanism for some offences (minor/less serious in nature) in which the parties concerned might reach a settlement. For example, under the Companies Act 2013, an offence for which only punishment is imprisonment or fine with imprisonment, cannot be compounded. Under compounding, offender pays a prescribed amount of money to the competent authority in lieu of getting prosecuted in a court. Once compounding is done, the accused is acquitted of accusations.
For instance, certain kind of offences (when committed for the first time) under the Drugs and Cosmetics Act (section 32B) are now proposed to be compoundable. This is not allowed at present.[xix] Similarly, the Bill proposes to make offences under section 200 of the Motor Vehicles Act as compoundable. Such compounding is available only on the first occasion and not in case of repeated violation.[xx]
Questions for examination
Often criminal laws are used as populist measures for electoral gains. The Jan Vishwas Bill is a right step to protect bona-fide businesses against criminal punishment or excesses for trivial violations.
While the Government has undertaken a commendable task, the Bill (legislations relevant for the technology industry) needs to be examined carefully to understand some of the issues, like:
- Whether the Bill comprehensively covers all offences which merits decriminalisation but are not part of the Bill? For instance, in the IT Act, the Bill proposes to substantially raise the fine for violating the Indian Computer Emergency Response Team (CERT-IN) directions or failing to provide information to CERT-IN from upto INR 1 lakh to upto INR 1 crore. However, the said act has not been decriminalised.[xxi] Similarly, the proposed amendment to section 2(1)(e) of the IT attempts to clarify how the specific Department or Ministry of the Central Government will be identified as the “appropriate Government”.[xxii]
Non-trivial changes like these warrant a wide public consultation as they can lead to unintended consequences, especially when the Bill aims to boost confidence of the business community.
We appreciate that the Bill has been referred to the Joint Parliamentary Committee (JPC) although the terms of reference of this committee are not available in the public domain.[xxiii]
- What could be the possible impact (like, compliance burden) of the proposed amendments to the relevant legislations on the technology sector? For instance, in several provisions’ imprisonment or fine for certain violations have been replaced with high penalty.
High penalty becomes an important consideration for the purpose of enforcement actions. Safeguards/rigours (like, prosecution, trial, burden of proof) in case of criminal liability are not applicable in civil violations where penalty would be adjudicated by designated authorities – mostly, government’s administrative officers. This might lead us to the following questions:
- Whether increased penalty can lead to increased enforcement actions?
- Whether there are sufficient guardrails in the relevant legislations against arbitrary enforcement action?
- Whether there is an independent and efficient appellate mechanism?
- Whether proposals to decriminalise offences could give rise to an incentive for bad actors to treat monetary penalties as acceptable cost and not as a credible deterrent? However, this is the first instance, where there is a legislative proposal for periodic enhancement of fine and penalty. For this, the Bill proposes to increase the minimum amount of fine and penalty levied (to be increased by 10%), after the expiry of every 3 years once the Bill becomes a law. Perhaps this change has been proposed keeping in view factors, like inflation and efficacy of the financial deterrence.
Please see attachment for our detailed submission to the Parliamentary Joint Committee on the Jan Vishwas (Amendment of Provisions) Bill, 2022 on specific proposed amendments relevant to the technology industry in India.
For any queries, please write to sudipto@nasscom.in or varun@nasscom.in or policy@nasscom.in.
End notes
[i] The Bill was introduced in the Lok Sabha on December 22, 2022 and on the same day, the Bill was referred to a 31-member Joint Parliamentary Committee for scrutiny.
[iv] The Bill proposes to bring changes to the IT Act beyond the mandate of decriminalisation of minor offences. However, those changes are not discussed in this blog.
[viii] In 1996, the Supreme Court in a seminal judgement involving violation of Foreign Exchange Regulation Act, 1947 had clarified that “when penalty is imposed by an adjudicating authority, it is done so in adjudicatory proceedings and not by way of fine because of prosecution of an accused for commission of an offence in a criminal court.”
See, Supreme Court, Director of enforcement v MCTM. Corporation Pvt. Ltd and Ors (AIR 1996 SC 1100,1104)
More recently, the Madras High Court in 2022, with respect to a dispute under the Companies Act, 2013 observed that since fine has been substituted with penalty, this has resulted in decriminalisation of the violation. Further, the Court clarified that the contravention is now liable for penalty to be adjudicated by an officer appointed by the Central Government. If the contravention is liable for fine, it is triable by a Magistrate.
See, Madras High Court, B Kannan V The Deputy Registrar of Companies, Tamil Nadu (Crl. M.P. Nos. 1933 and 1934 of 2017)
[ix] See, section 40 of the Indian Penal Code, 1860.
[xxiii] See, PRS, The Jan Vishwas (Amendment of Provisions) Bill, 2022 was referred to the Joint Parliamentary Committee on December 22, 2022.
