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Comparative Study of Penal Laws in Australia, U.K. and Canada

By: Ankita Pachouri

Enactment of a particular legal system is designed to deal with from the stage of commencement of crime through its trial and right to its meaningful end, thus criminal laws or penal laws were framed. Penal Laws are the set of laws determining the action as legal or illegal and any behavior that is harmful to any person or society, aims to threaten to cause bodily or mental harm and thus sentencing with appropriate penance.

In Australia, like the British law, a mere intention in criminal attempt is not prescribed. In Australia as with India, when a criminal prosecution is commenced, the burden of proof lies with the prosecutor. The general rule is that the accused person is ‘innocent until proven guilty’. The standard of proof is ‘beyond reasonable doubt’ which is the highest standard in law. The criminal law gathers its roots from English common law, with one state even drawing its laws from 19th century criminal code operating in India. Additionally, the principles of ‘Double Jeopardy’[1] and ‘Right to remain Silent’ are also held as essential.

The States have more control over criminal law as compared to the Federal Government. Criminal Laws govern not only the nature of crimes and the penalties thereof but also the procedures of trial and nature of evidence. There are several legislations that make up the criminal law in each Australian state.  Australia has nine criminal jurisdictions—

  • six state governments,
  • two territory governments
  • the federal government.

Each state has a collection of Acts and regulations establishing criminal offences and regulating the operation of the criminal justice system. The Criminal Code Act, 1995 of the Federal Government is an exhaustive piece of legislation containing 261 divisions.

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Criminal law is primarily divided along ‘Indictable offences’[2] and ‘Summary Offences. The term ‘indictable offences’ represents grave offences, with some states choosing to bifurcate them further into ‘minor indictable’ and ‘major indictable’ while ‘summary offences’ refer to comparatively lighter offences. If the Offender pleads guilty, the court can order a fine or a sentence or suspended sentence or imposing a bond or a home detention or community service or orders of restraining, compensation, forfeiture and so on. The trial starts if the accused pleads not guilty. An indictment is a formal document that the prosecution files with a court to commence a ‘trial on indictment’. This document presents a brief description of the charges faced by an accused. All offences, except summary offences are able to be tried ‘on indictment’. The prosecutor acts on behalf of the Crown and the cases are mentioned as against ‘the Queen’, which is similar to the Indian way where criminal offences are said to be against the entire society and hence mentioned as against ‘The State’.

The Jury which consists of 12 citizens who are chosen from the electoral rolls play an important role in Criminal trials. The judge explains the relevant laws to the jury and it is the job of the jury to derive facts from the evidence presented to them. Crimes committed by people under the age of 18 years are dealt with either by a caution or by the Youth court. Serious crimes by minors are referred to the Supreme Court. Another important facet of the Australian criminal law pertains to Coroner’s Court. The Coroner[3] has the power to enquire into unnatural deaths, accidents, missing persons cases amongst others.

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The historical development of the penal law trace back to the English Reformation and the acts that gave supremacy to the crown which led to the development of the penal laws in United Kingdom. After the British reformation, the penal laws of the United Kingdom passed against the Roman Catholic of England and Ireland penalising their practice and hence imposed civil Penalties on them. During 16th and 17 the century, numerous acts were passed determining the imprisonment, fines in case of participation and also death penalty in case of practice by the Catholic priests in the territories of United Kingdom. Many rights were barred to them, like, right to vote, right to own land, right to teach their ideas, etc. But later all these discriminatory penal laws were removed especially during 1778-93 and other further corrections were made in the penal laws of the United Kingdom. Civil penalties were imposed on the people who developed the sacrament towards the Rome and not towards the king headship. The English Parliament passed the two most important acts, i.e., Clarendon Code[4], the Test Act[5] and the Toleration Act[6].

There is no penal code in the United Kingdom, rather there are three different criminal justice system:

  • Scotland
  • New England
  • Wales

The sources and explanation of the criminal laws are to be found in individual Acts such as:

  • Parliamentary and statutory laws
  • Decisions by judicial bodies, particularly, the Court of Appeal

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The definitions of various offences are found in the respective rule books, like, theft, burglary are defined in the Theft Act,1968. The introduction of new laws has to be done to both the House of Commons and also the House of Lords. Then on being successfully passed it becomes the Acts of the Parliament. Common law is also a major source of criminal law which is framed from the customs and laws people generally follow. The acts like Homicide Act 1957, Murder (abolition of Death Penalty) Act 1965 and the Criminal Justice Act 1991 are the statutes which set out the punishments and defences to them. The adversarial principle provides the logic in determining the nature of the crime and also its operations. After providing the evidence, the court forms a jury, stipendiary, magistrate or a panel of magistrates depending upon the seriousness of the crime. As said above about the adversarial system, it does not expect a person to be innocent or culprit but only whether guilty or not. Mostly crime is proven by the culprits on their own admission of the guilt. The abolition of the Criminal Act of 1967 demolished the difference major and minor crimes and further added the concept of:

  • arrestable crime: crime in which the punishment is fixed by law
  • non arrestable crimes: Crime in which finds no mention under the rule of law.

 

The laws of U.K., like Australian law, classifies offences into three categories for procedural purposes;

  • indictable only: offence requiring a formal document which sets out charges about a person and tried only in the crown court. E.g. kidnaping, robbery, rape, etc.
  • triable-either-way: offence which can be dealt infront of either magistrate’s court or crown court. E.g. theft, assault, etc.
  • Summary: offence whose proceedings are held in the magistrate’s court. E.g. drink and drive, less serious assault, etc.

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The criminal law of Canada finds its genesis in its founding document called as the Constitution Act 1867 which gave sole authority to Canadian parliament to make criminal laws. Section 91 of the Canadian Constitution describes criminal law in federal Parliament as the sole jurisdiction. In the year 1892 the government of Canada passed a law called as the criminal code as it amalgamated crimes and criminal law procedure into a single statue which has witnessed plethora of amendments in the past. The Canadian criminal law has certain fundamentals similar to that of India viz- ‘’presumed innocent until proven guilty’’. The Criminal Code, a wide-ranging Code which contains 28 ‘parts’ which contain offences under various heads including Terrorism, currency and Public Morals is the behemoth governing Canadian criminal justice. There are different statues to govern specifically on a subject matter. The Supreme Court, established under constitutional reform act 2005, is the highest and final court of appeal in the criminal cases from England, Wales and Ireland.

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There are two levels of crime in the system namely,

  • federal level crimes
  • regulatory or provincial offences

The former crimes are more serious in nature and deal with murder, arson, fraud etc. and the latter offences are comparatively of non-serious nature. All the levels however unanimously provide assistance in prosecution and investigation of the federal crimes. Offences which are relatively minor are referred to as ‘Regulatory Offences’. The Australian and British principle of ‘innocent until proven guilty’ is seen here along with the requisite standard of proof being to prove the guilt ‘beyond reasonable doubt’. Canadian criminal law looks at crime from two aspects- intent and action. It is essential to prove both in most of the cases.

The criminal code is comprehensive and elaborate however there are certain subjects which are not covered under the code for which there are separate federal statutes. E.g.-Controlled Drugs and Substances Act are enacted.

Canada displays ‘Supremacy of the Constitution’ and all laws which are inconsistent to the Constitution, be them of civil or criminal nature, are to the extent of the inconsistency, of no effect. The Rule of Retrospective application of criminal laws does not exist. Additionally, the Courts follow precedents laid down in previous rulings to ensure that the rule of law is applied justly across cases. There exists a two-tier federal polity structure with the powers divided between the Federal government and the provincial government. The Parliament was granted powers to legislate Criminal laws including the procedural aspect of it. Similarly, the provinces have authority to legislate their own laws. In case of a dispute between the two, the laws passed by the Parliament shall prevail over those of the State. The appointment of Judiciary at both the Supreme Court and for the Provincial Courts is done at the Federal level.

The federal government of Canada, unlike Australia, has exclusive jurisdiction to enact criminal law and the provinces have the authority to administer it. The provinces have their own regulations, authority and procedure for quasi-criminal offences (regulatory offences)[7]. During administration of criminal law each province has specific powers with regards to appointment of judges for provincial court, hiring prosecutors etc.

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As mentioned above the criminal code not only incorporates conduct which constitutes offences but also procedures to be complied during the process. The preliminary portion of the code consists of offences dealing against property, against person, offences relating to sexual nature etc. Post that the code describes the procedures dealing with the aforesaid offences and the sentencing options. A special Act for offenders who are aged 18 or younger- The Young Offenders Act exists which stated that a child younger than 12 years cannot commit a crime. The Canadian criminal code has in the recent past focused intensively in looking after the needs of the victims and also at alternatives to truly reform the criminal.

 

In the recent past, due to significant shift in the functioning of the society there has been a paradigm shift in the social, economical and technological arenas which consequently resulted in advent of new offences dealing with information technology, banking system, credit card system etc.  requisite amendments have been made routinely to be abreast with the changes.

As with the British and Australian laws, the Canadian criminal jurisprudence considers a crime as an act that is committed against the entire society. The concept of Mens Rea or guilty mind which is a mainstay of the Common law is seen here though not with as much power. The term itself is not defined in the Criminal Code, yet a substantial number of judgments have required that the proof of guilt with the perpetrator be proved.

The countries like Canada, Australia consists of a specific punishment for specific crime whereas in England there is no such specific code. Punishments are decided by the statutes and Parliament from time to time while others are supervised under common law.

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No precise line for distinguishing between non-punishable preparation and punishable attempt has been made in any criminal or penal law system of any country. They say that any behaviour that generates any suspicion or apprehension in the mind of an observer is likely to be punishable in the eyes of law too.

[1] Means an accused cannot be charged for the same offence twice (also “non bis in idem”)

[2] Offences where defendant has a right to trial by jury

[3] Is a public official

[4] Series of Parliamentary Acts aiming at establishing supremacy of Anglican Churches

[5] Religious test for public offices, imposing penalties on Roman Catholics

[6] Freedom of worship to all non-conformists

[7] E.g.: driving with undue care and attention, illegal dumping of waste, etc.

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Impact Of Covid-19 on Insolvency and Bankruptcy Laws of India and the World at Large

By: Anjan Bhandari 

INTRODUCTION:

In the past few months, India has witnessed unprecedent changes being made in almost every sphere; whether it be something as simple as a lifestyle change or something as complex as amending various legislations to safeguard and protect the interests of both the parties. To give you a better perspective, the Central Government on 24th March declared a nationwide lockdown as a preventive step to limit the spread of the infectious coronavirus. In doing so, everyone was required to restrict themselves to their homes thereby bringing our economic structure to a standstill. Nobody knew for how long the lockdown would ensue when it began, but now we do have adequate data that informs us about the manner in which the lockdown was imposed and in how many phases –

  • PHASE 1 : 25th March – 14th April [Nationwide lockdown]
  • PHASE 2 : 15th April – 3rd May [Further extended]
  • PHASE 3 : 4th May – 17th May [Further extended]
  • PHASE 4 : 18th May – 31st May [Further extended]
  • PHASE 5 : 1st June – 30th June [Considerable relaxations from 8th June]

According to the above-mentioned data, it is clear that COVID-19 is the primary reason for all business uncertainties and the economic stabilities at large since the lockdown was continued for so long. All industrial activities came to a standstill because of which the Companies suffered huge losses which either resulted in salary reduction or laying off a major chunk of their employees in order to manage their sustainability. And not just the industrial sector, the outbreak of COVID-19 has caused massive difficulties for all sectors globally, such as the Micro Small Medium Enterprises (MSME’s), healthcare, tourism, automobile, etc. Courts all across the country has prohibited physical hearing to maintain social distancing except a few important cases and has instead resorted to virtual court proceedings. The only thing that can be said with absolute surety is that the brunt of this economic meltdown will be faced by all the financial institutions since its difficult to comment on the overall impact of the lockdown.

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IMPACT OF COVID-19 ON IBC LAWS IN INDIA:

The All India Association of Industries estimated a loss of 2lakh crore by 31st March due to the nationwide lockdown. The Central government has been trying to minimise such drastic blows by bringing in numerous reforms. The virus has indisputably disrupted the performance of contracts and payments consequently creating problems for the financial and operational creditors. It will have a devastating impact on economy if the creditors wish to initiate insolvency proceeding against the corporate debtors at a mass scale amidst this pandemic.

What’s important to notice is that the value of the stocks is declining at a startling rate since the demand has decreased at a global level. It wouldn’t be too far-fetched to suspect that at this point, the financial and operational creditors would move to the National Company Law Tribunal (NCLT) to avail remedies available to them under the Insolvency and Bankruptcy Code, 2016. After approaching the NCLT, initiation of the insolvency proceeding will have a negative impact because then the management of the company would shift from the hands of the corporate debtor to the insolvency resolution professional and as a result, the value adding mechanism by the corporate to the economy gets highly stunted.

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It is imperative to safeguard the interests of the MSME’s because if insolvency proceedings are initiated against them, it would further lead to rise in unemployment in the country. Pre-empting such an impact, our Finance Minister Nirmala Sitaraman had announced that if the current state of affairs continued beyond 30th April, the Central government may suspend a few relevant sections of the IBC for 6 months in order to protect companies from being forced into insolvency proceedings in such force majeure causes of default. Due to these reasons, the Government of India decided that they need to adopt a pragmatic approach in dealing with this problem and came up with the following amendments to the IBC, 2016 –

  • Application under Sections 7, 9 and 10 can only be filed when the default is of Rs. 1 crore or more.[1] Earlier U/S 4(1) of IBC, the minimum amount of default was Rs. 1 lakh which has now been officially increased by the Ministry of Corporate Affairs (MCA).
  • Section 7 : Initiation of insolvency proceedings by financial creditor

Section 9 : Initiation of insolvency proceedings by operational creditor

Section 10 : Initiation of insolvency proceedings by corporate applicant

According to the MCA Notification No. S.O. 1205(E) dated 24th March 2020 the Finance Minister as a relief to the affected industry announced that no petitions would be entertained unless the minimum amount of default is Rs. 1 crore or more.

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  • The Supreme Court on 23.03.2020 opined that the lockdown period should be excludedfor the purpose of counting the timeline. Even the NCLAT ordered the same on 30.03.2020. The order states that “the period of lockdown imposed by the central government in the wake of Covid-19 outbreak shall not be counted for the purposes of the timeline for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process.”[2]
  • The government may even consider scrapping Section 7, 9 and 10 of the IBC, 2016 so that no insolvency proceedings be initiated by the promoter, operational or financial creditor if the situation continues beyond 30th April, 2020 and if it does, it would be scrapped for a period of 6 months.

The first amendment that came in on 24th March which increased the minimum default vale from Rs. 1 lakh to Rs. 1 crore not only reduced the workload on the insolvency resolution professionals but also turned out to be beneficial for the MSME’s and corporate debtor. However, the fruit to such benefits is only enjoyed by one as opposed to safeguarding equal interest of the parties. Increasing the default value to such a higher threshold causes immense dissatisfaction to the operational and financial creditors. The operational creditor in particular would face hindrances as they won’t be able to utilise this remedy to regain the operational and corporate debt from the corporate debtor. Moreover, their operational debt isn’t generally this high to be able to initiate insolvency proceedings which further puts them on the backfoot. Under Section 9 of the IBC, 2016 the operational creditor cannot even jointly file for an application unlike as mentioned under Section 7 of the Insolvency Code, 2016. Kumar Saurabh Singh, Partner at Khaitan & Co. said that the Central Government shall also cover matters of liquidation in other courts and tribunals besides the IBC process. He said that “A similar approach would also be required to be followed by other courts/tribunals in the country to not allow enforcement and sale of assets of companies which are suffering from the impact of the pandemic situation so that the benefit of suspension of insolvency law is effectively given to the borrowers.”

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After diving deep into the details of the impact of COVID-19 on the IBC laws in India, the question still remains whether the applicants who filed for the insolvency resolution before the pandemic should be affected or not. In my view if it does, then the applicants would rather prefer indulging themselves in outside settlements rather than utilising the provisions under the Insolvency and Bankruptcy Code thereby defying the very purpose of the said statute.

IMPACT OF COVID-19 ON IBC LAWS ACROSS THE WORLD:

  • UNITED STATES – On 19th February, the Small Business Reorganisation Act became effective which seeks to provide an economical and quicker option for reorganisation of businesses with total debts falling within the quantum of $2,725,625. On 28th March, Donald Trump gave a nod to the Coronavirus Aid, Relief, Economic Security (CARES) Act. Apparently, it is the largest emergency aid package ever provided in US history. It includes revised retirement account rules, student loan changes, and the unemployment coverage. There has also been an increment in the debt limit under the CARES Act to $7.5 million for a year in order to allow small business debtors to realign their affairs for a new start.

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  • SINGAPORE – The Ministry of Law in Singapore had announced that they would introduce a bill in the Parliament aimed at finding a way for an organised moratorium so that the obligations that ensue are either suspended or deferred. A distinctive feature of the Bill is that the parties would not be allowed to be represented by lawyers in case of a dispute. Instead, an assessor would be appointed by the Ministry of Law who will decide on an equitable and just outcome without any legal fees. 
  • AUSTRALIA – On 23rd March, the Commonwealth government introduced the Coronavirus Economic Response Package Omnibus Bill 2020[3] which was passed by both Houses of Parliament and received the Royal Assent on 24th Certain temporary amendments were made to the Corporation Act, 2001 which are as follows:
  • Amendment relating to individual in financial distress
  • Amendment relating to businesses in financial distress
  • Temporary relief for directors from the duty to prevent insolvent trading

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  • UNITED KINGDOM – Alok Sharma, Business Secretary announced a package of insolvency measures to be adopted in the future. The UK government has shown keen interest in bringing forward such legislation, but the timing still remains uncertain. It is evident that the government is building up on potential reforms announced in August 2018. The new structuring tools include –
  • To bring in measures safeguarding the suppliers and creditors, thereby ensuring timely payments until a more viable solution is reached.
  • Coming up with a new restructuring plan, and binding creditors to that plan.
  • To introduce a moratorium for companies allowing them a breather from creditors enforcing their debts for a while until they seek a restructure or rescue.
  • To protect their supplies thereby enabling them to continue with their trading activities during the moratorium period.

 Thus, on comparing the impact of COVID-19 on IBC laws in India with the rest of the world, we can deduce that almost similar precautionary steps were adopted by other countries. Some of them increased their minimum default limit required to file for insolvency proceedings, some have thought of implementing a moratorium period, while the others decided to put a bar on initiation of insolvency proceedings after a set particular date.

[1] https://www.ibbi.gov.in/uploads/legalframwork/48bf32150f5d6b30477b74f652964edc.pdf

[2] http://www.mca.gov.in/Ministry/pdf/Notification_30032020.pdf

[3] https://pinpoint.cch.com.au/document/legauUio3230299sl1133168580/regulation-5-4-01aa-temporary-increase-to-the-statutory-minimum-and-statutory-period

 

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