Court of Additional Sessions Judge can’t Try Offences under IBC: Bombay High Court [Read Order]

The Bombay High Court has held that the Court of Additional Sessions Judge cannot try offences under Insolvency and Bankruptcy Code.

Mr. Amir Arsiwala, Counsel for the Petitioner, Satyanarayan Bankatlal Malu submitted that in terms of Section 236 of I.B. Code, the Special Court, established under the Companies Act, 2013 is empowered to try the offences under the I.B. Code. He submitted, Section 435 of the Companies Act empowers, the Central Government to establish Special Courts for speedy trial of the offences under the Companies Act. Mr. Arsiwala submitted that under Section 236 of I.B. Code, the Special Court shall be deemed to be a Court of Session and person conducting the prosecution shall be, ‘deemed’ to be a Public Prosecutor. Mr. Arsiwala submitted Section 236 of the I.B. Code came into effect on 1st December, 2016, whereafter Section 435 of Companies Act was amended by way of Companies Amendment Act 2017 with effect from 7th May, 2018, and in that sense amendment of 2017 was consequential. Mr. Arsiwala submitted Section 435 of the Companies Act, 2013 was amended twice; firstly in 2015 and thereafter in 2017.

He submitted that originally enacted Section 435 empowered the Central Government to establish Special Courts, for the speedy trial of offences, only under the Companies Act and the Judge holding office of the Sessions Judge or Additional Sessions Judge was qualified to be appointed as a Judge of Special Court. Mr. Arsiwala argued that in 2015, Section 435 of Companies Act was amended with effect from 29th May, 2015. By this amendment 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 AND 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. Mr. Arsiwala further submitted in 2018 i.e. after I.B. Code came into force, Section 435 of the Companies Act was again amended on 7th May, 2018 to make it compatible with the object of Section 236 of I.B. Code i.e. “Issue Process”, under Section speedy trial of offences”, under Section.

Mr. Arsiwala submitted that by 2018 amendment, for the first time, Central Government is empowered to establish/ designate two classes of Courts as Special Courts; (i) one, Special Court consist of Judge holding office as a Sessions Judge or Additional Sessions Judge and (ii) second Special Court consist of Metropolitan Magistrate or Judicial Magistrate First Class. He submitted a Judge holding the office as a Sessions Judge or Assistant Sessions Judge under clause (a) of subsection (2) of Section 435 of the Companies Act is

The single bench of Justice Sandeep M.Shinde has held that Section 236 (3) of the I.B. Code creates a deeming fiction that the Special Court is trying offences under I.B. Code shall be “Issue Process”, under Section “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. According to the Petitioners, this is an indication as to the true and proper interpretation of Section 435 of the Companies Act, 2013 and Section 436 of I.B. Code. Thus for all the above reasons, the impugned proceedings instituted by the Respondents (Complainant) in the Court of Additional Sessions Judge, were not sustainable for want of jurisdiction. As a consequence order, ‘issue process’ passed by the learned Additional Sessions Judge against the Petitioners, in a complaint by the Respondents/Board was without jurisdiction and therefore not sustainable equally. It is therefore to be held that Special Court “Issue Process”, under Section Which is to try offences under the I.B. Code is the Special Court established under Section 435 (2) (b) of the Companies Act, 2013 which consists of Metropolitan Magistrate or Judicial Magistrate First Class.

Satyanarayan Bankatlal Malu VS Insolvency and Bankruptcy Board of India

CITATION: 2022 TAXSCAN (HC) 158

To Read the full text of the Order CLICK HERE

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