TeamLease RegTech

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Mar 07, 2022
7 min read

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The Indian regulatory universe has been a topic of discussion for a while with government bodies being at the forefront. There has been a lot of talk about easing regulations and making doing business easier.

The key point is that there is still a lot of work to be done, and we believe that it is essential for the future of our country to act now. We recently released Jailed for Doing Business - a research report exploring the regulatory universe in India. The report was co-authored by Rishi Agrawal, CEO & Co-Founder at TeamLease RegTech, and Gautam Chikermane - Vice President at Observer Research Foundation.

This report distills the risks of imprisonment faced by Indian entrepreneurs. Using newly isolated data on 26,134 imprisonment clauses embedded in laws enacted by the Union and state governments, it provides the risks faced by entrepreneurs and corporations in doing business in the country.

The report can be found here Report

The report on Jailed for Doing Business: The 26,134 Imprisonment Clauses in India’s Business Laws provides ten policy recommendations and 31 sub-recommendations for legislative and judicial reform. If changes are made according to these recommendations, it will help minimize India’s regulatory cholesterol. Compliance should be less hostile. The intention behind the report is to reduce the duration of imprisonment and to help the legislature to redefine harsh laws.

The recommendations are as follows:

1. Reform the way policies are designed
  • The process of determining regulations by unelected officials should be changed as they do not draft micro regulations with much responsibility

  • There is a need for a policy documentation process; this will include the problems addressed by-laws, rules, and regulations

  • The criminal sanction should be issued only after invoking all the ways for solving such a problem. Acts like Foreign Exchange Management Act have given rise to criminal sanctions.

  • Addressing Democratic deficit: The problem can be solved by drafting such a rule or regulation which imposes punitive action with less cost. The legal instrument should be put in a public domain so that analysis can be done by economic agents and public feedback should be taken on the same. India should understand and factor in best practices while considering reforms and should exclude those, which do not apply to the country.

2. Use of Criminal penalties in business laws with extreme restraint

In ancient India criminality was never a penalty against businesses, only financial liabilities were there. The idea behind punishing the organizations should be to exert deterrence and not to impose retribution.

  • The punishment given to the companies for any willful misconduct should be in the form of damages and not criminal punishments.

  • The Issue of weak enforcement would not be strengthened by enacting more Criminal laws related to business but by penalizing officials who are misusing their offices.

  • Entrepreneurship is a debatable issue and India should debate on the same as this generates jobs, delivers growth. It is high time for policy retribution. Despite having 26,134 criminal clauses, there is no positive change. It means India needs to reduce or remove such criminal clauses for economic growth.

3.  Constitution of regulatory impact assessment committee within the law commission of India
  • In 2011, the Planning commission report observed that the Indian regulatory system lacks “Regulatory Impact Analysis”. This report aims to propose a structure that includes evaluating the way laws are enacted and when the state can intervene. The intention is to reduce the burden on all stakeholders, business community, executives, and judiciary by adopting some global best practices into the Indian regulatory environment. The various state intervention can be minimized if there is a body performing a regulatory impact analysis to simplify regulations.

  • The Union and state governments should have a clear picture of situations where crime has to be addressed.

4. Independent economic regulators in compliance reforms should be involved

The economic regulators should be the part of compliance reform exercise. There are various provisions only on the regulator. Audit of the Criminality clause should be done by independent regulators. The provisions should be repealed if there is no cause.

5. End the criminalization of all compliance procedures

The criminality should be determined as per the principles of criminal law and other principles of law. The intention is that the regulatory impact assessment body should become an effective tool in reducing the burden of 26,134 compliances, which provides for imprisonments. Non- Compliance should be classified into two categories like procedural or technical lapses and serious offenses. A procedural lapse arises from lack of awareness and for such kind of non-compliance no imprisonments should be given. In Serious offenses, the imprisonments should be there and for that men's rea should be decisive criteria.

6. Creation of alternative mechanism and framework

There should be a framework where the habitual offenders should be imprisoned. The less serious offenses should be made compoundable and in place of imprisonment, one should be liable to pay monetary compensation as the punishment won't recover the loss only money can. There should be a reduction in compliances related to labour laws. The compounding should be done without any intervention from the court.

7. Define standards for legal drafting

The principles of necessity, proportionality, and coherence should be followed by parliament while proposing the legislation and amendments. This should also be followed by regulators.

8. Introduce Sunset Clauses

There is a need to introduce sunset clauses as a tool that terminates a certain law, rule, or regulation at a predetermined time, into India’s lawmaking space.  This can terminate the law, rules, or regulations at a predetermined time. The burden of proof of the need for legal instruments will be upon the members of parliament. The provisions related to the imprisonment clause should go through legislative scrutiny at least once in five years. As the law must be reviewed as innovation is increasing day by day.

9. Reform with one legislation

There should be one legislation for the laws related to compliance so that there should not be confusion related to the validity of the various provisions. If there is more than one legislation related to compliance laws, it will create more lacunas and confusion. As per the recommendation of the Law Commission, the union government should start reform at once by one legislation that will override all other laws. The same should be followed by the state government. There should be an establishment of the Compliance Reforms Commission within three years of the sunset clause. This commission should be headed by the executive or judiciary.

10. Respect entrepreneurs, businessmen, and wealth creators

The change needs to be created at a political level to expand into a transformative socioeconomic mindset. Time and again our prime minister has praised entrepreneurs. He regarded entrepreneurs as the value-creating entities in India. He further said that the entrepreneurs deserve a substantial amount of respect as they contribute to the economy of the country.

They were the 10 recommendations that were penned down in the report.

TeamLease RegTech works extensively with corporates to track and manage their compliance burden, so we'd be happy to hear from you. Fill out the form below if you want to know more about us or want our help to track and manage your compliance better.


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