Ministry of Finance
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Should cheque bouncing be an offence? Finance Min invites suggestions on decriminalisation of minor offences to boost economic growth

Aditya AK

In a bid to improve ease of doing business and consequently improve economic growth in the country, the Union Finance Ministry has invited suggestions on the decriminalisation of certain minor offences under various Acts.

A press release issued on Monday highlights the rationale behind this exercise:

“The risk of imprisonment for actions or omissions that aren’t necessarily fraudulent or the outcome of malafide intent is a big hurdle in attracting investments. The ensuing uncertainty in legal processes and the time taken for resolution in the courts hurts ease of doing business. Criminal penalties including imprisonment for minor offences act as deterrents, and this is perceived as one of the major reasons impacting business sentiment and hindering investments both from domestic and foreign investors…”

Quite significantly, one of the provisions that the Finance Ministry is considering for decriminalisation is Section 138 of the Negotiable Instruments Act, 1881, under which cheque bouncing is an offence.

As per information placed before the Supreme Court earlier this year, there are over 35 lakh cheque bouncing cases pending in courts across the country. Highlighting the docket burden these cases cause, the Apex Court had registered a suo motu case for evolving a mechanism to dispose of these cases expeditiously.

Should the government ultimately consider decriminalising the offence of cheque bouncing, it will curb the filing of new cases and consequently ease the burden on the courts.

Other provisions on which suggestions have been invited include Section 12 of the Insurance Act, 1938, which criminalises failure to annually audit balance sheet and other documents of insurers; criminal sanction for contravention of provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; and criminal penalty for making false statement as provided in Section 58B (1) of the Reserve Bank of India Act, 1934.

The Finance Ministry has provided the following points to consider while determining reclassification of criminal offences:

  • Decrease the burden on businesses and inspire confidence amongst investors;

  • Focus on economic growth, public interest and national security should remain paramount

  • Mens rea (malafide/ criminal intent) plays an important role in imposition of criminal liability, therefore, it is critical to evaluate nature of non-compliance, i.e. fraud as compared to negligence or inadvertent omission; and

  • The habitual nature of non-compliance.

Thus, the Ministry has called upon state governments, academicians, public and private sector organisations, NGOs, and the public at large to give suggestions regarding the decriminalisation of offences under 19 different economic legislations.

Comments and suggestions may be submitted to the Department of Financial Services at the email address bo2@nic.in within 15 days, by June 23.

[Read the press release]

Decriminalization - Public Comments.pdf
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