Confidence Building Measures For Business Through Jan Vishwas Law
Invocation of ‘animal spirits’ in businessmen and entrepreneurs has been the cherished quest of all governments. It is imperative to promote investments and fire up demand – both essential for promoting economic growth. What has hitherto held this back is the perception of acute vulnerability by businesses – that even the smallest infraction, no matter how involuntary, can land them in jail. The Jan Vishwas law is meant to assuage such apprehensions. The provision of criminal liability embedded in many laws was an offshoot of a colonial mindset, that persisted even post-independence – viewing private enterprise with suspicion. We are now undoing the shackles of the past and making a brand-new beginning in the right direction.
A total of 183 provisions will be decriminalised in as many as 42 Central Acts administered by 19 ministries and departments. Decriminalisation is proposed to be achieved either through removal of the imprisonment penalty completely or by converting it into a monetary-fine based compounding provision. An attempt is being also made to ensure that the degree of punishment is commensurate with the severity of the offence.
Removal of penal provisions with the imprisonment clause will also be positive news for companies that are presently confronted by the scourge of notices that carry threats of arrests of their key management personnel for the slightest default. Notices to directors ultimately affect the public global image of the company, especially with stringent SEBI listing obligations and disclosure guidelines.
Not just private enterprise, but the logjam of more than 50 million cases in judicial pendency will be the biggest beneficiary of this new dispensation. Currently, criminal consequences prescribed for technical/procedural lapses and minor defaults compel the justice delivery system to be clogged as companies bring in the most high-profile lawyers to defend them. That crowds out adjudication of more serious offences that require detailed scrutiny and examination by the courts, putting them on the back burner.
This is indeed a logical development, that has not come too soon. For instance, it has long been maintained that it does not make sense for laws meant to facilitate development and promotion of food and agricultural products to carry imprisonment provisions. Therefore, it is just as well that the Marine Products Export Development Authority Act, the Farm Produce (Grading and Marking) Act, the Rubber Act, the Tea Act, the Spices Board Act etc. are being amended to soften the impact of any breach in the stipulated provisions. One may recall that it was the criminal provisions in the Factories Act and the Boilers Act that have always scared industry and have helped spawn the disparaging moniker, Inspector Raj. The Legal Metrology Act, even though of a vintage as recent as 2009, too, has innumerable imprisonment clauses even though infringement does not have any significant implications that cannot be remedied. Likewise, deleting the criminal provision in the Forest Act that allowed for arrest of grazers whose cattle entered forest land will make the provision consonant with the objectives of the Forest Rights Act that bestows land rights to tribals living close to forests. Some of the criminal provisions were of course, completely ludicrous in the first place, such as those about the illicit use of the names of the Warehousing Corporation and the Food Corporation.
However, there are some laws, the removal of criminal penal provisions from which is being questioned by activists and analysts. One key area is that of pharmaceuticals. The Bill will amend two sections of the Drugs and Cosmetics Act, 1940. The first amendment seeks to change the punishment for a repeated offence of using a government analysis or test report for advertising a drug. The previous punishment was imprisonment of up to two years or a fine of more than Rs10,000, which has now been proposed to only be a steep fine of more than Rs 5 lakh.
The second amendment allows for “compounding” of the punishment to one to two years’ imprisonment and a fine of more than Rs 20,000 for drugs that are not of standard quality (NSQ), as defined under Section 27 (d) of the 1940 Act. The Health Ministry has clarified that the compounding will be allowed only for drugs that have not failed parameters considered injurious to health, that do not contain toxic substances, that do not contain substance which reduce quality or strength of a drug, that haven’t been manufactured in unsanitary conditions, that haven’t been manufactured without a licence, and that do not have any misleading labels. Thus, the amendment in law is a key enabling provision only. There is work to be done in those cases where the law is being radically eased – the rules too will have to be suitably amended to conform to the objectives of the law and to help maintain a balance between the punitive provisions that safeguard public interests and the private interests of industry.
It is commendable that the government’s Industry and Commerce Ministry has steeled its resolve to get this mammoth task going. It should be noted that it is easy to tighten the laws, but difficult to loosen them. If in due course, it is found that some people are misusing this benediction, the law can always be tightened. But we must give a liberal working environment a chance and applaud this move. The abrogation of redundant provisions and the decriminalisation initiative is bound to ensure people’s faith in the government – a prerequisite for attracting investments and most importantly, for arresting the flight of capital out of the country. The name of the amendment is appropriate.
As a nation inching towards becoming a third largest economy, it is high time that laws are continually re-examined, abrogated, or amended. Certainly, the government should not relax its guard against breaches that threaten human life. But it is crucial to respect tax payers and to treat them as partners in progress. In the next round, the government should go into the deeper end – to decriminalise the inappropriate provisions in many of our more onerous financial and corporate laws – whose abuse by enforcement agencies we keep reading about so often. That would provide the transparency and confidence building so badly required to truly fire up the economy and prevent flight of capital.
The author is a former Secretary Government of India
