Sessions Judge Or Additional Sessions Judge Not Empowered To Try Offences Under IBC: Bombay High Court

The Additional Sessions Judge passed an order- "issue process" u/s 73(a) and 235A of the IBC, 2016, which was filed by the IBBI. The Petitioner, in a writ petition u/a 227 of the Constitution of India r/w Section 482, CrPC challenged this order on the ground that the Additional Sessions Judge does not have the jurisdiction to entertain the complaint filed by the Respondents under the IBC.

The Counsel appearing on behalf of the Petitioner submitted that in terms of Section 236 of the IBC, the Special Court, established under the Companies Act, 2013 is empowered to try the offences under the IBC. Section 236 of the IBC also states that Special Court shall be 'deemed' to be a Court of Session and a person conducting prosecution shall be 'deemed' to be a Public Prosecutor.

Analysis By Court

Amendments Made To Section 435 Of The Companies Act, 2013

Position In 2013

Originally, Section 435 of the Companies Act empowered the Central Government to establish Special Courts for speedy trial of offences, only under the Companies Act and Sessions Judge or Additional Sessions Judge were qualified to be appointed as judges of the Special Court.

Section 435 After The 2015 Amendment

After the amendment was made in 2015 to Section 435, Special Court/s, established by the

Central Government consisting of the Judge holding office of Sessions Judge was empowered to try offences only under the Companies Act, which were punishable with imprisonment of two years or more.

Other offences under the Companies Act, punishable with imprisonment less than two years, were triable by Court of Metropolitan Magistrate or Judicial Magistrate First Class.

Post 2018 Amendment

The 2018 Amendment made it more compatible with the object of "speedy trial of offences". This Amendment empowered the Central Government to create two classes of Courts as Special Courts:

• one, Special Court consist of Judge holding office as a Sessions Judge or Additional Sessions Judge and
• second, Special Court consist of Metropolitan Magistrate or Judicial MagistrateFirst Class.

The primary contention of the Petitioner was that a Sessions Judge or Additional Sessions Judge was only vested with the power to try offences under the Companies Act, punishable with imprisonment of two years or more. Whereas, Special Court consisting of Metropolitan Magistrate or Judicial Magistrate First Class u/s 435(2)(b) is vested with the jurisdiction to try offences other than under the Companies Act, i.e., the IBC.

Accepting the contention of the Petitioner, the High Court of Bombay held that Special Court in terms of Section 435(2)(b) of the Companies Act, which consists of Metropolitan Magistrate or Judicial Magistrate First Class is empowered to try offences of two kinds:

• Those offences under the Companies Act which are punishable with imprisonment of less than two years, and Offences under the Insolvency and Bankruptcy Code.

Section 236 And 237 Of The IBC

Section 236 of the I.B. Code empowers the Central Government or Board to file a complaint against a person/s, having contravened, one of the penal provisions of the IBC with the "Special Court" constituted or established under the provisions of the Companies Act, 2013.

The Court, after analysing Section 236, concluded that it consists of the following aspects:

(i) the offences under the I.B. Code are to be tried by the 'Special Court', established under the Companies Act.

(ii) the provision of the Code of Criminal Procedure, 1973 (Cr.P.C), shall govern and regulate the proceedings before the Special Court.

(iii) the Special Court shall be 'deemed to be a Court of Sessions', AND the person conducting prosecution before the Special Court shall be deemed to be a public prosecutor.

Section 237 of the Code provides that the Special Court trying the offences under the IBC shall, 'deem to be a Session Court' and proceedings and orders of the Special Court shall be amenable to Appellate and Revisional jurisdiction of the High Court.

The Question That Arose For Consideration Was-

which of these two classes of Special Courts, created by Companies Act (amendment) 2017, is empowered to try the offences under the I.B. Code.

The Court held-

"The object to create another class of Special Court was to speed up the trial of offences under the I.B. Code. If that was not a object as contended by the Respondent, the question is, why for Central Government has been empowered to designate Court of Metropolitan Magistrate or Judicial Magistrate First Class as Special Court under Section 435 of the Companies Act? Answer is simple. It is after Section 236 of I.B. Code, came into force Section 435 of the Companies Act was amended (17th amendment Act) on 7th May, 2018 and another class of Court (Metropolitan Magistrate and Judicial Magistrate First Class) have been created as Special Courts for speedy trial in offences under the I.B. Code. Therefore, keeping in mind, the said object, legislature thought it fit, not to burden a Special Court comprising of Sessions Judge or Additional Sessions Judge with the trials, also under I.B. Code. If trials in offences under I.B. Code were also to be tried by the Special Court comprising of Sessions Judge or Additional Sessions Judge, it would frustrate to object of the speedy trial for which, the Special Courts have been established. This underlined object is visible from clause (a) and (b) of subsection (2) of Section 435 of Companies Act as amended."

"…it is clear that "Special Court" comprising of a Metropolitan Magistrate or Judicial Magistrate First Class is to try "other offences", under Section. The phrase "other offences", contained in section 435 (2) (b), in contradistinction to section 435 (2) (a) of CA 2013, would include (1) offences under the I.B. Code, and (2) offences under the CA 2013 but carrying punishment of imprisonment of less than two years."

The Tribunal accepted the contention raised by the Petitioner- that provisions of law which curtail the general jurisdiction of criminal courts must be interpreted strictly, for which he relied on Sachida Nand Singh Vs. State of Bihar.

The Court also held-

"It may also be noted that Section 236 (3) of the I.B. Code creates a deeming fiction that the Special Court trying offences under I.B. Code shall be deemed to be Court of Sessions . If , the intention of the legislature was that offences under I.B. Code are to be tried by the Sessions

Court, then this subsection would have been unnecessary."

It set aside the order passed by the Additional Sessions Judge on the ground that he was not competent to pass the same, as to try an offence under the IBC, the appropriate court would be that of the Metropolitan Magistrate or Judicial Magistrate First Class.

Case Title: Satyanarayan Bankatlal Malu v. Insolvency and Bankruptcy Board of India

Citation: 2022 LiveLaw (Bom) 39

Counsel for the Petitioner: Mr. Amir Arsiwala a/w. Mr. Piyush Deshpande a/w. Mr.Farzeen Pardiwala, Advocate

Counsel for the Respondents: Mr. Pankaj Vijayan a/w. Mr. Mohammed Varawala, Advocate for Respondent no.1. Mr. Y.M. Nakhawa, APP for State-Respondent no.2.

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