Alliance of Digital India Foundation (ADIF), a think-tank for the Indian start-up ecosystem, has recommended decriminalising frivolous complaints against companies' Key Managerial Personnel (KMPs) after a study found an unintended increase in the number of cases and submitted the recommendations to the Law Ministry.
The study has revealed that in most cases, there is no direct relationship between the offence and the executive’s duties, leading to unnecessary harassment and interference in their business operations.
As per a study done by the think tank, most of these cases against Key Managerial Personnel (KMPs) of the companies are generally related to fraud and cheating and content-related offenses, which are covered under sections 65-67 of the IT Act (information technology act) and sections 292, 294, 411, 419, 420, 425 under the IPC (Indian penal code).
Also, it is worth noting that despite the safe harbor provided under Section 79 of the IT Act for intermediaries and various court cases upholding the safe harbor protection, criminal complaints are increasingly being filed against technology companies and their KMPs in cases, there these executives have no active role to play, ADIF observed.
The study further explained that most frivolous cases against their KMPs under the IT Act were instituted in tier II, III and IV towns as compared to metropolitan cities. The plausible explanation may be that the officers posted in metropolitan areas understand the nature of the companies and the concept of intermediary liabilities. However, this definitely points to the need for comprehensive training of police officers posted in smaller cities in intermediary companies and cybercrimes investigation.
ADIF advocates improving the ‘Ease of Doing Business’ in India, by revisiting certain provisions of the IPC and IT Act, so as to minimise the abuse of the criminal justice system, through frivolous complaints.
The government and judiciary have been cognizant of these issues and have made efforts to address it. For instance, courts have held in various rulings that the element of mens rea to be considered while maintaining the criminal liability against the senior executives and criminal proceedings should be discouraged in cases where a complaint is malafide or abusing the court process.
Similarly, various offences under the Companies Act, 2013 have been decriminalised recently in order to improve the ease of doing business in India. Despite these efforts, KMPs are routinely charged and even arrested on account of frivolous FIRs (first information reports).
ADIF suggests that the relevant provisions of IPC and IT Act dealing with the offences of cheating, fraud, criminal conspiracy, etc. may be revisited from a digital markets perspective.
ADIF spokesperson shared that, the enforceability of penal provisions also needs reconsideration from the investigation perspective. Involvement of KMPs in the investigation process for matters concerning day-to-day operations may be avoided through the designation of specific nodal officers with appropriate visibility and control over the subject matter.
Similarly, preliminary enquiry powers before registration of FIR may be expanded to allow determination of who may be responsible for an alleged offence, specifically in relation to cases filed against companies and there must be provision training and upgradation of law enforcement officials, especially at the ground level. Also, the data collection on cybercrimes and particularly those against KMPs must be strengthened through the National Crime Record Bureau.
