Running a business should be no crime: Govt sits up and takes note
July 28, 2023
Synopsis
The government has set up a working group to decriminalise laws to further promote ease of doing business. The group will look at areas where more decriminalisation of provisions is required.
Running a business in India is a risky proposition because it is governed by so many criminal laws that you can land in jail even for a small infraction. Breaking a law should surely attract consequences but India has a large number of criminal provisions to regulate businesses where civil provisions would be enough, or criminal provisions are too harsh for the offences.
Now the government has set up a working group to decriminalise laws to further promote ease of doing business. The group will look at areas where more decriminalisation of provisions is required.
The Jan Vishwas (Amendment of Provisions) Bill, 2023, was passed in the Lok Sabha yesterday which seeks to amend 183 provisions across 42 Acts administered by 19 ministries to reduce the compliance burden on individuals and businesses.
Criminal laws in the retail sector
The retail sector, which is the commonest form of business, has to comply with a large number of criminal provisions.
A recent report by Teamlease Regtech on the retail sector showed there is a high chance of getting imprisoned as a large number of compliance laws have criminal clauses. A retail chain with multiple retail establishments having operations across six cities and two states and a corporate office in a single state deals with 3,182 compliances in a year, the Teamlease Regtech report said. Among them, 1,192 (or 37%) compliances contain imprisonment clauses. Approximately 43% of these clauses are contained in state laws while the rest are within Union laws. Labour laws account for as high as 54% of all the clauses.
Revealing these numbers, the report said while the compliance framework has been put in place to safeguard the customers, it has also raised the regulatory complexity faced by employers.
This division of law-making authority across various levels of government has created three levels of compliance - union, state and municipal. On average, a retail store faces a total of 490 compliances, of which 53% are at the union level, 44% are at the state level and the rest 3% are at the municipal level.
The Teamlease Regtech report mentioned a monograph which uncovered the nature and extent of the risks of imprisonment faced by entrepreneurs in the country. The monograph highlights that a sizable portion of compliance clauses criminalises procedural violations and technical lapses rather than serious offences involving willful harm. It illustrates that in many cases, there is an equivalence between punishment for minor errors by entrepreneurs and for death due to negligence under the Indian Penal Code, 1860.
What the retail companies think of compliances
In a recent survey conducted by TeamLease Regtech among compliance officers of major retail companies, the key findings were as follows:
83% agreed to have missed at least one critical compliance during the 12 month period
91% agreed to pay fines and penalties in the 12- month period
85% agreed that their compliance needs a serious rethink
73% of compliance officers believe that third-party consultants have better liaisoning experience than they have internally
67% agreed to have poor control over their compliance documents
92% believed that they do not have the required visibility and control in their organisation's compliance program
32% The average cost of compliance consultants stood at approximately INR 100,000 per month, of which labour contributed approximately 32% of the cost
51% believed that keeping track of regulatory updates is challenging
How the new bill will bring in change
For effective implementation, the the Jan Vishwas (Amendment of Provisions) Bill, 2023, which covers all types of Indian businesses and not just retail, proposes measures such as pragmatic revision of fines and penalties commensurate to the offence committed; establishment of adjudicating officers; establishment of appellate authorities; and periodic increase in the quantum of fines and penalties.
Some of the acts that will be amended through the bill include The Press and Registration of Books Act, The Boilers Act, The Indian Forest Act, The Drugs and Cosmetics Act, The Deposit Insurance and Credit Guarantee Corporation Act, The Warehousing Corporations Act, The Food Corporations Act, The Patents Act, The Prevention of Money-laundering Act and The Food Safety and Standards Act.
"The government has already decriminalised 3,600 laws and reduced the burden of 40,000 compliances under different laws in the last nine years to promote ease of doing business and ease of living," said Commerce and Industry Minister Piyush Goyal on Thursday in the Lok Sabha while moving the bill.
[The Economic Times]
