Curbing financial crimes: Does Indian Penal Code need a revamp?

Experts share their views on the need for an overhaul of the Code, framed in 1860, in view of the recent spate of high-profile financial crimes

Bring harmony among diverse laws

The Indian Penal Code, 1860, is the primary statute governing criminal offences in India. It is a century-and-half-year-old statute that was instituted by the British to control the colonial population. It needs to be revamped because there have been many changes in the nature of criminal activities that have not been captured in the description of offences and punishment as entailed in the IPC.

Economic and technological changes have created a new class of financial crimes, which can refer to any non-violent crime that generally results in a financial loss, including fraud. This class also includes a range of illegal activities such as money laundering, bribery and corruption, corporate fraud, tax evasion and cybercrime.

The IPC had been subjected to a limited number of amendments and these were not substantial. The legislature in independent India preferred to create separate enactments as to deal with various kinds of offences under financial crimes not included in the IPC. Statutes such as the Prevention of Corruption Act, 1988, and the Prevention of Money Laundering Act, 2002, contain provisions dealing with corporate and business fraud. The Companies Act, 2013, also contains provisions that aim at preventing fraudulent activities by and in companies.

Creation of separate statutes has meant that there are specific offences under various statutes that can be used to prosecute financial crimes such as corporate or business fraud. Such offences have varying punishments that make enforcement difficult.

Any regulation is effective only when there is harmony in the application of diverse legislations by effectively addressing and overcoming regulatory gaps or conflicts of jurisdiction in the statutory framework. The increasing rate of financial crimes demands stiff penalties and exemplary punishments in high-profile cases to serve as deterrents. Therefore, there is an urgent need to revamp the IPC and to harmonise various statutes so that they can be enforced efficiently. The IPC must not only include chapters on financial crimes and cyber laws to be more comprehensive, it should also delete offences that are obsolete and outdated and update the illustrations with recent case examples. Alternatively, jurists may consider using the Fraud Act, 2006, of the UK as a framework to create a separate new consolidated statute for financial crimes.

Views expressed are personal
Widen definition of financial crimes

Vinayak Burman, Managing partner, Vertices Partners

The country has witnessed a number of financial crimes in the past years, including various instances of innovative financial crimes being recently unearthed. There is a compelling need for the government to bring long-awaited reforms to the existing laws in order to tackle the rise in the financial crimes.

Currently, there are a number of acts and legislations to counter the financial crimes, but these existing frameworks are not entirely passable to address the severity of the hitches faced by the society at the large. There is need to plug in the gaps in the existing architecture, in relation to the provisions of the IPC and the Code of Criminal Procedure (CrPC), 1973, so that there is a faster mechanism to arrest the relevant persons before they leave the country.

Though there are some basic principles provided under the IPC in relation to financial crimes, such as cheating, fraud and forgery, it does not explicitly cover the entire range of financial crimes.

The current mechanism enacted under the law takes excess time as such, given that all the criminal actions are required to be proved under the court of law. In such cases, offender takes the advantage of some archaic processes. Therefore, financial crimes should be defined not only to deter the economic offender but also provide for the faster resolution of such cases.

The definition of financial crime could have a wider ambit and the same should include the wrongful acts done with the motive of financial gains, which negatively impacts the financial market and interest of the public at large. 

Punishment for this should be preventive in nature and act as a deterrent with constructs like life imprisonment and a heavy pecuniary liability, depending upon the degree of the offence. An amendment to the IPC could be considered to provide for a faster mechanism for the disposal of the case with a fixed timeline. The specific legislations and policies dealing with financial crimes and the provisions of the IPC relating to the financial crimes should be harmoniously interpreted so that there is no interpretational conflict between the same.

Vishal Mehta also contributed to the article