On 8th June 2020, the Ministry of Finance through the Department of Financial Services issued a notification under the Statement of Reason titled “Decriminalisation of good criminal lawyers in bangalore minor offences for improving Business Sentiment and Unclogging Court Processes” and asking suggestions from various stakeholders qua the possibility of decriminalizing the offence of cheque bounce law that is enshrined under section 138 of the Negotiable Instruments Act, 1881 (hereinafter the “NI Act”) among various other legislations. The fundamental reason behind the idea to decriminalise the cheque bounce law is to bring more investment in the economy, ease the mechanism of doing business, unclogging the process of courts, and lighten the burden of the courts too all in the light of the brutal impact of Covid19 on the economy.
As stated earlier that the Government, via the aforesaid notification, proposed to decriminalise various provisions of law which are strikingly different among each other. Thus, for the sake of brevity, this piece of writing revolves around the idea, rationale, viability and the plausible impact of decriminalization of cheque bounce cases only.
Logic behind the impugned notification
Covid19 has tricked not only just the Indian economy, but the entire world. In these unprecedented times, various measures were taken from time to time in order to curb its impact. The Covid19 brought the gruesome lockdowns which ultimately thrashed the economy and followed by massive lay-offs, unwarranted salary cuts, disruption of small business, worries for real estate and the high chances of delayed payments and cheque bounce cases in the near future.
On these lines, the Government of India had already increased the threshold limit of default from Rs 1 lac to Rs 1 crore stipulated under section 4 of the Insolvency Bankruptcy Code, 2016[i] followed by the decision of suspending sections 7, 9 and 10 of the Code for 6 (six) months [ii].
Thereafter the aforesaid notification dated 8th June 2020 showing the intention of the Government to decriminalise the cheque bounce law as the possibility of defaults and cheque bounce cases can’t be ignored.
But the mere perusal of the notification apprises us that the intention is to not to come up with an idea to combat the possible defaults but to bring more confidence in the market by easing of doing business. The impact of decriminalizing the offence of cheque bounce on the economy is itself a matter of scientific and rational debate, but the Government believes that the
decriminalization will bring the following positive changes among others:
The chances of imprisonment in the offences that aren’t always fraudulent bring hurdles in attracting investments. Therefore, the act of decriminalising the cheque bounce law will make the investors feel confident.
The jail term hurts business sentiment; therefore the removal of the same will create positive business culture.
In the light of Covid 19, the aforesaid step is a necessary measure to deal with a sluggish
The proposed step will reduce the burden from the shoulders of the judiciary and also bring some relief to the prisons.
It will also boost India’s objective of achieving ‘Sabka Saath, Sabka Vikas and Sabka Vishwas’.
Every non compliance in business doesn’t attract mens rea, therefore the cheque bounce law could be decriminalized.
The reasons seem interesting and quite relevant in the light of Covid19 period. But whether the decimalizing section 138 of the NI Act can actually bring more investment, boost the confidence among business and reduce the burden of courts? Therefore in order to assess the viability of the impugned decision, it is imperative to consider the statutory mandate, rationale behind criminalizing the offence at first place, and the stand of the judiciary and other related factors.
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