The Bharatiya Nyaya Sanhita, 2023 (BNS), marks a significant overhaul in India's criminal law framework, replacing the long-standing Indian Penal Code, 1860. Effective from July 1, 2024, the BNS introduces several new provisions to address contemporary criminal activities, including organized crime. This blog delves into the concept of "Organized Crime" as defined under Section 111 of the BNS, its implications, and the potential challenges it poses.
A Prologue to the Bharatiya Nyaya Sanhita, 2023
The BNS, introduced in December 2023, retains much of the Indian Penal Code's structure but condenses it into 358 sections from the original 511. It incorporates new provisions to address modern criminal activities such as environmental pollution, human trafficking, terrorism, cyber-crime, financial fraud, and notably, organized crime.
Defining Organized Crime Under Section 111
Section 111 (1) of the BNS defines "Organized Crime" as:
"Any continuing unlawful activity including kidnapping, robbery, vehicle theft, extortion, land grabbing, contract killing, economic offence, cyber-crimes, trafficking of persons, drugs, weapons or illicit goods or services, human trafficking for prostitution or ransom, by any person or a group of persons acting in concert, singly or jointly, either as a member of an organized crime syndicate or on behalf of such syndicate, by use of violence, threat of violence, intimidation, coercion, or by any other unlawful means to obtain direct or indirect material benefit including a financial benefit, shall constitute organized crime."
For an activity to be classified as organized crime, the following elements must be present:
The offences enlisted in the section must have been committed.
The said activity must be performed directly or indirectly by an “Organised Crime Syndicate”
The activity must be a “Continuing Unlawful Activity”, as explained in Explanation (ii) of Section 111 (1) of the BNS.
It may be done by use of violence, threat of violence, intimidation, coercion or any other lawful means.
There must be direct or indirect material benefit, including financial benefits derived from the commission of the said activity.
Upon the fulfillment of the above elements, it can be discerned that the offence under Section 111 is said to have been committed.
Although the said section attempts to deal with “Organised Crimes” with utmost clarity, it still rakes up the question of fairness, equity, good conscience and thereby constitutionality within the elements present in “Explanation (ii)” of Section 111 (1)".
Analyzing Section 111: The Precarious Nature
Section 111's retrospective nature raises concerns about its implications for the legal principle of double jeopardy. The section allows authorities a ten-year window to file charge-sheets for continuing unlawful activities, potentially leading to misuse by authorities due to prejudices or other reasons.
Constitutional Challenges and Financial Cases
Section 111's broad scope could lead to multiple prosecutions under different statutes for the same conduct, conflicting with Article 20(2) of the Indian Constitution, which protects against double jeopardy. Financial offences prosecuted under statutes like the SEBI Act or the Prevention of Money Laundering Act (PMLA) might also be prosecuted under the BNS, leading to redundant legal proceedings and increased criminal liability for the accused.
Impact on Corporate Governance
The article examines Section 111 of the BNS, focusing on its retrospective application and its potential impact on the legal principle of double jeopardy.
The said section along with the explanation explicitly mentions that the activity must be a “continuing unlawful activity” meaning:
The activity must be one which is prohibited by law.
It must be a cognizable offence punishable with three years or more.
More than one charge-sheets must be filed before a competent Court within the preceding period of ten years and that Court has taken cognizance of such offence.
The presence of all of the above elements when understood correctly, enables the provision to act in retrospective essence.
Thus, by virtue of Section 111 (1) alongwith the explanations thereunder, an almost absolute power or authority seems to be vested in the hands of the officers wherein a considerably long period of 10 years is afforded to the authorities to have chargesheets prepared and filed before a competent Court and bring anyone arbitrarily to justice. Therefore, the said provision, devoid of any proviso to the Explanation (ii) of Section 111 may be open to misuse by authority due to any prejudice(s) or otherwise.
Constitutionality of Section 111 of the BNS R/W Special Statutes w.r.t Financial Cases
Section 111 of the BNS opens up floodgates for various financial related cases to be brought under its purview. The retrospective element of Section 111 will enable the courts to further penalize the accused under the said section thereby operating against the legal principles of “Nemo Debet Bis Vexari”, i.e., “no man should be present in court of law twice for the same offence” or “no one should be twice vexed”, which is the rule of double jeopardy enshrined in Article 20 (2) of the Constitution of India. This provision, along with the already existing special statutes addressing disputes in the nature of financial or economic offences, will lead to multiplicity of investigation and proceedings.
Simply put, Section 111 of the BNS introduces a retrospective element that could lead to multiple prosecutions under different statutes for the same underlying conduct. For instance, financial offences already prosecuted under the Securities Exchange Board of India (SEBI) Act or the Prevention of Money Laundering Act (PMLA) might again be subject to prosecution under the BNS if deemed part of an "Organized Crime." This could result in what is effectively double jeopardy, where an individual is punished more than once for the same act, contrary to the protections afforded by Article 20(2) of the Indian Constitution.
In cases of prosecution initiated by the Securities Exchange Board of India (SEBI) under the SEBI Act, 1992, the accused despite already being penalized under the Act with upto ten years of imprisonment or fine or both [either under section 24 or under Chapter VI-A (Sections 15A to 15HB)], will now again be subjected to further punishment (imprisonment and/or fine) under the BNS.
In cases under the Companies Act, 2013, the Serious Fraud Investigation Office (SFIO), after carrying out investigation under Section 212 of the Companies Act, 2013, proceeds with the framing of charges. Based on the charges framed, if it is evinced that the charges indeed contain elements that are criminal in nature, it might incite the authorities to initiate/call for investigation and file report under the aegis of Section 111 of the BNS thereby attracting criminal action under the said section.
Cases under the Prevention of Money Laundering Act, 2002 (PMLA), wherein the authorities investigating financial offences charge the accused under section 3 of the Act, the burden of proof lies on the accused to prove his innocence as per section 24 of PMLA. The Act, under its scheduled offences, alludes to the fraudulent practices enshrined in section 12A read with section 24 of the SEBI Act, 1992, which further prescribes punishment thereby creating a situation of double jeopardy for the accused under the PMLA as well as the SEBI Act.
In yet another instance, in 1999, the state of Maharashtra enacted a piece of legislation called “Maharashtra Control of Organised Crime Act, 1999” (MCOCA) to combat issues relating to organized crime and terrorism within the state. The said act defines organised crime and covers the jurisprudential aspect around it in great detail. The applicability of the Act was subsequently extended to the National Capital Territory of Delhi by the Home Ministry of the Indian Government by a notification dated 2nd January 2002. The Act also has an overriding effect over all other Indian laws, and will prevail over any law that is in conflict with the provisions of the MCOCA.
Therefore, in territories where the MCOCA or any other [State] Control of Organised Crime Act(s) (SCOCA), finds applicability, someone who is accused of an “Organised Crime” under Section 111 of the BNS can now be brought under the purview of these SCOCAs wherein the conditions for bail to be granted are much more stringent than if only BNS was solely applicable. Therefore, in case of any prior prejudices possessed by the authorities or otherwise, such a situation can lead to authorities misusing or rather abusing their power by filing frivolous applications.
Thus, now, after the operation of BNS, 2023, the situation of the accused seems much more dire in cases of financial or economic offences. On one hand, the authorities under the special statutes such as SEBI, SFIO, Enforcement Directorate (ED), Central Bureau of Investigation (CBI), etc. will be urged to investigate and prepare and file charge-sheet(s) on their part, and on the other, the police authorities will be given an additional responsibility to investigate financial offences on their end and file charge-sheet(s). This will not only critically affect the accused in terms of an increased criminal liability (under the special acts as well as the BNS), but also put an additional burden on the legal/justice system by increasing the demand for an additional investigation by the authorities and filing of charge-sheet(s).
Counterarguments and Legal Defenses
Proponents of Section 111 might argue that its retrospective application is necessary to address ongoing and complex criminal activities that cannot be fully tackled under existing statutes. They may assert that financial crimes, especially those tied to organized crime syndicates, often evolve over time, requiring a legal framework that can address past actions as part of a continuing unlawful activity.
Nevertheless, this argument is not devoid of its challenges. The retrospective application of criminal law is generally disfavored because it can undermine the rule of law by punishing individuals for actions that were not clearly illegal at the time they were committed. This principle was upheld in the landmark case of Kedar Nath Singh v. State of Bihar 1962 AIR 955 , where the Supreme Court of India emphasized the importance of clear legal standards to avoid arbitrary enforcement.
In response to potential misuse, legal practitioners could challenge the constitutionality of Section 111 by arguing that it violates the principle of "nullum crimen, nulla poena sine lege" (i.e., no crime, no punishment without law), which prohibits retroactive criminalization. They might also argue that Section 111’s broad scope could lead to arbitrary and discriminatory enforcement, particularly against individuals like Non-Executive Directors (NEDs) or Independent Directors (IDs) who may have limited involvement in the day-to-day management of companies [and whose statuses are not as clear or authoritative as that of the Managing Director, Whole-Time Directors or other Key Managerial Personnel (KMP) of the Company].
The Impact on Corporate Governance
Section 111’s broad definition of "Organized Crime" could inadvertently impact corporate governance by exposing NEDs and IDs to criminal liability for actions taken by the company, even when these directors were not directly involved in the decision-making process. The law’s potential to categorize companies as ”gangs” or "organized crime syndicates" and directors as members of such syndicates poses a serious risk of criminalizing legitimate business activities.
This could lead to a chilling effect where qualified individuals are deterred from accepting NED or ID roles due to the fear of unwarranted prosecution. In S. M. S. Pharmaceuticals Ltd. v. Neeta Bhalla & Anr. (2005) 8 SCC 89, the Supreme Court clarified that only those directors who are actively involved in the management of the company can be held liable for the company’s criminal acts. However, Section 111 of the BNS may blur these distinctions, making it harder for directors to defend themselves against allegations of organized crime.
To mitigate these risks, it is crucial for the judiciary to interpret Section 111 narrowly, ensuring that only those with clear, demonstrable involvement in criminal activities are prosecuted.
Additionally, the legislature could consider amending the BNS to include safeguards that protect NEDs and IDs from undue criminal liability, aligning with the principles laid down in S. M. S. Pharmaceuticals Ltd. and other relevant case law.
Recommendations for Policymakers
Given the potential constitutional challenges and the risk of overreach, policymakers should consider the following recommendations:
Narrowing the Definition of Organized Crime: Clarify the scope of what constitutes "Organized Crime" under Section 111 to exclude actions that are purely administrative or indirect in nature, especially in the context of corporate governance.
Introducing Safeguards Against Double Jeopardy: Amend Section 111 to explicitly prohibit multiple prosecutions for the same conduct under different statutes, in line with Article 20(2) of the Constitution.
Providing Clear Guidelines for Enforcement: Develop detailed guidelines to ensure that the retrospective application of Section 111 is only used in cases where it is absolutely necessary and where there is clear evidence of ongoing criminal activity.
Judicial Supervision: Ensure that the application of Section 111 is subject to strict judicial supervision, with courts required to carefully consider the potential for abuse and the need to protect individual rights.
By addressing these concerns, the BNS 2023 can be more effectively aligned with constitutional principles, ensuring that it serves as a tool for justice rather than a source of potential injustice. As the law comes into force, continuous review and adjustment will be essential to balance the need for robust crime-fighting mechanisms with the fundamental rights of individuals.
CONCLUSION
Understanding the legal intricacies surrounding financial crimes is crucial for both regulatory authorities and individuals implicated in such cases. Clarity regarding liability and evidence is essential to ensure fair and just legal proceedings.
The Bharatiya Nyaya Sanhita (BNS) 2023, with its introduction of Section 111 on "Organized Crime," represents a significant shift in India's legal landscape, particularly concerning the treatment of financial and economic offences. While the government's intent to curb organized crime and illicit financial activities is commendable, the broad scope and retrospective application of Section 111 raise serious concerns.
One of the most pressing issues is the potential conflict with the constitutional principle of double jeopardy, as enshrined in Article 20(2) of the Indian Constitution. By allowing authorities to initiate multiple prosecutions under different statutes for the same offence, the BNS could lead to a situation where accused individuals are unfairly penalized multiple times for the same actions. This not only undermines the fundamental rights of the accused but also threatens to overload the judicial system with redundant investigations and proceedings.
Furthermore, the inclusion of financial and economic offences under the ambit of "Organized Crime" may have unintended consequences for corporate governance. Non-Executive Directors (NEDs) and Independent Directors (IDs), who are often not involved in the day-to-day management of companies, could find themselves facing criminal charges under the BNS, despite their limited roles. This could lead to a chilling effect on corporate oversight, as individuals may become hesitant to serve as NEDs or IDs due to the increased legal risks.
In light of these concerns, it is crucial for policymakers and legal practitioners to carefully consider the implications of the BNS 2023. While the need to address organized crime is undeniable, the mechanisms for doing so must be balanced against the need for fairness, justice, and the protection of constitutional rights. One possible approach could involve introducing safeguards within the BNS that limit its retrospective application and provide clearer guidelines for its interaction with existing financial and economic statutes.
Ultimately, the effectiveness of the BNS in combating organized crime will depend not only on the strength of its provisions but also on the fairness and consistency of its implementation. Ensuring that the law is applied equitably, without infringing on the rights of individuals or creating unnecessary legal burdens, will be key to its success. As the BNS 2023 comes into force, ongoing scrutiny and potential amendments may be necessary to align its provisions with the broader goals of justice and constitutional integrity in India.
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