OCTOBER 03, 2023

By S Rahul Jain, Partner & Thvija, Associate, M2K Chartered Accountants

IN the Union Budget 2023-24, Finance Minister Smt. Nirmala Sitharaman announced the introduction of the Jan Vishwas Bill, aimed at amending42 Central Acts to promote trust-based governance.

The term Jan Vishwas translates to "Public Trust", or "belief upon the individuals". The Jan Vishwas (Amendment of Provisions) Act, 2023 received the assent of the President on 11th August 2023 .While some provisions such as Cinematograph Act, 1952 are effective from 1 st September 2023, some other Acts such as amendments to the Legal Metrology Act are effective from 1 st October 2023. Some other Acts such as the Forest Act, 1927 and the Drugs and Cosmetics Act, 1940 are yet to be notified.

The enactment of this legislation represents a significant stride towards alleviating concerns related to criminal penalties for minor, technical, and procedural lapses in business compliance. The primary aim of the Act, as explicitly articulated in its stated objectives, is to foster 'the ease of doing business in India' by adhering to the principle of 'minimum government, maximum governance.'

The apprehension of incarceration for minor transgressions has significantly impeded the development of the business ecosystem and eroded individual confidence. According to the findings of the report titled 'Jailed for Doing Business,' conducted by the Observer Research Foundation, among the 69,233 distinct regulatory requirements governing business operations in India, a staggering 26,134 stipulate imprisonment as a consequence for non-compliance 1. In essence, nearly 40% of these regulatory provisions carry the potential to lead entrepreneurs to incarceration.

What the Act seeks to achieve

Under the Act, a total of 183 provisions have been proposed to be decriminalized in 42 Central Acts administered by 19 Ministries/Departments. The Act converts several fines to penalties, eliminating the need for court prosecution to impose punishments. Further, Adjudicating Officers have been appointed across several legislations as primary dispute resolution authorities. As stated supra, t he amendments relating to various enactments will come into effect on different dates as notified in the Official Gazette.

Major Enactments amended

The important enactments to be amended and which would directly impact the ease of doing business include the following:

1) The Legal Metrology Act, 2009

2) Information Technology Act, 2000

3) The Indian Forest Act, 1927

4) The Drugs and Cosmetics Act, 1940

5) The Pharmacy Act, 1948

6) Food Safety and Standards Act, 2006

In total, around 42 Acts have been proposed to be amended under the Act.

Under the Act, several offences with an imprisonment term have been decriminalized by imposing only a monetary penalty.  For instance, Section 72A of the Information Technology Act prescribes imprisonment for a period of up to three years and/or a fine of up to Rs. 5,00,000 for disclosing personal information acquired through a contract, without the consent of the concerned person. The amendment substitutes such punishment with just monetary penalty up to Rs. 25,00,000.

In the Indian Forest Act, 1927 the amendment removes imprisonment for trespassing, permitting cattle to trespass, cutting timber etc., in reserved forest. A fine up to Rs 500 and compensation for damage as determined by the Forest Officer is payable instead.

Under the Drugs and Cosmetics Act, 1940, Section 30(2) prescribes for imprisonment of upto two years and/or a fine of upto Rs. 10,000 for repeated offence of using a government analysis or test report for advertising a drug. The amendment now proposes to levy only a fine, but not less than Rs.5,00,000.

Similarly, under the Legal Metrology Act, 2009, imprisonment of up to six months along with fine was prescribed under Section 25 for repeated offence of using non-compliant weights, measures or numeration. The amendment removes imprisonment and provides for Rs. 2,00,000 for the second, and Rs. 5,00,000 for subsequent offences.

Way forward

The objective of the Act carries substantial national importance of leading it towards the goal of making India more competitive in ease of doing businesses. Nonetheless, it is crucial to acknowledge that the legislation may not comprehensively resolve all concerns. While it is theoretically conceivable that streamlining and reducing criminal sanctions could enhance business efficiency and offer various advantages, a more exhaustive scrutiny is imperative to ascertain whether the precise offenses marked for streamlining and decriminalization are sufficient or more provisions must be decriminalized.

Action points

Notably, the amendments to the Cinematograph Act, 1952, Press and Registration of Books Act, 1867, have already been enforced with effect from 1 st September 2023, and Boilers Act, 1923 with effect from 22 nd September 2023. The amendments made to the Legal Metrology Act, 2009, will come into effect on 1 st October 2023. One has to keep a track of the appointment dates of these amendments to ensure compliance with the updated regulations and to adapt any relevant practices accordingly.

A point which comes for interpretation here is whether offences which have been committed prior to the implementation of the Act will also be eligible for the benefits which are flowing under the Act? In other words, are the provisions of the Act retrospectively applicable to existing proceedings is an open query requiring a more detailed scrutiny.

Conclusion

Though at first blush, it may appear that the Government has decriminalized offences under various Statutes, it is also important to note that only some provisions of these statutes have been decriminalized. For example, under the Legal Metrology Act, there are multiple penal provisions which are still providing for prosecution (like Section 36 which is invoked in maximum cases) and have not been included under the Act. Hence, the Assessee must not get coloured by the headlines but read between the provisions to also take into account whether the relaxations provided by the Act will apply to their case.

[The views expressed are strictly personal.]

1 Gautam Chikermane and Rishi Agrawal, Jailed for Doing Business: The 26,134 Imprisonment Clauses in India's Business Laws, February 2022, Observer Research Foundation