Special courts with sessions judges can try offences under IBC: Supreme Court

The Supreme Court on Friday ruled that special courts with sessions judges can try offences under the Insolvency and Bankruptcy Code (IBC) [Insolvency and Bankruptcy Board of India & Anr v Satyanarayan Bankatlal Malu & Ors]..A Division Bench of Justices BR Gavai and Sandeep Mehta held so on an appeal against a Bombay High Court order which said that only special courts consisting of metropolitan or judicial magistrates are empowered to hear complaints under the IBC. "We have held that the Sessions judge has the jurisdiction. Since the matter has not been decided on merits, we remand the matter to the (Bombay) High Court for a fresh decision," the top court held..The Bombay High Court order in question was passed on February 14, 2022.Justice SK Shinde of the High Court had observed that the objective of the legislature was to not burden a special court comprising a sessions judge with trials under the IBC.The High Court ruling came on a plea filed by two individuals assailing a sessions court order issuing summons to them following a complaint filed by the Insolvency and Bankruptcy Board of India (IBBI), a statutory body under the IBC. The petition before the High Court had stated that the sessions judge did not have the jurisdiction to entertain the complaint filed by the IBBI..That plea noted that as per Section 236 of the IBC, special courts under the Companies Act were empowered to try offences under the IBC as a court of sessions. The petitioners had argued that the objective behind Section 236 was a speedy trial of offences and to achieve the same, there were two classes of special courts introduced:one consisting of a judge holding office as sessions or additional sessions judge; andanother consisting of metropolitan or judicial magistrate. first class.They had contended that by amending Section 435 of the Companies Act, after Section 236 of the IBC, the legislature intended that for speedy trial of offences under IBC, courts with metropolitan magistrates or judicial magistrates are courts deemed to be special courts. Only these courts could try cases under the IBC, the petitioners argued. The High Court had accepted this contention.It had noted that courts consisting of sessions judges were to try offences under the Companies Act, whereas courts consisting of magistrates were to try offences under Acts other than the Companies Act (including IBC).With these observations, the High Court had concluded that the proceedings initiated by the IBBI in the sessions court were not sustainable.The order issuing process against the petitioners had been held as being without jurisdiction, unsustainable, and hence quashed..The Supreme Court today disagreed with this finding by the High Court.The present case, it reasoned, is one of ‘legislation by incorporation’ and not a case of ‘legislation by reference’. "The provision of Section 435 of the Companies Act, 2013 with regard to Special Court would become a part of Section 236(1) of the Code as on the date of its enactment. If that be so, any amendment to Section 435 of the Companies Act, 2013, after the date on which the Code came into effect would not have any effect on the provisions of Section 236(1) of the Code. The Special Court at that point of time only consists of a person who was qualified to be a Sessions Judge or an Additional Sessions Judge," the apex court said. The High Court grossly erred in quashing the complaint only on the ground that it was filed before a Special Court presided by a Sessions Judge, the bench ruled. "At the most, the learned single judge of the High Court could have directed the complaint to be withdrawn and presented before the appropriate court having jurisdiction," the top court observed while remanding the matter for a decision on merits..Before the Supreme Court, the IBBI was represented by Additional Solicitor General SV Raju, advocates Rashi Rampal and Apoorv Khatore, and Advocate-on-Record (AoR) Vikas Mehta.The respondents-accused, Satyanarayan Bankatlal Malu and Ramesh Satyanarayan Malu, were represented by AoR Amir Arsiwala and advocate Dhaval Deshpande.The State of Maharashtra was represented by AoR Aaditya Aniruddha Pande and advocates Anand Dilip Landge, Siddharth Dharmadhikari, Bharat Bagla, Sourav Singh, Aditya Krishna, Preet S Phanse and Adarsh Dubey..[Read Judgment]