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2022 (2) TMI 600 - HC - Insolvency and BankruptcyJurisdiction to entertain the complaint filed by the respondents - which class of Special Courts created by Companies Act (amendment) 2017 is empowered to try the offences under the I.B. Code? - challenge to issue process - Section 73(a) and Section 235A of the Insolvency and Bankruptcy Code 2016 - HELD THAT - It can be noticed that under Section 435 of the Companies Act Special Court comprising of Sessions Judge or Additional Sessions Judge was in place since 2013 and it retained its jurisdiction to try the offences under the Companies Act. Amendment of 2017 for the first time brought into existence and empowered Central Government to establish Court comprising of Metropolitan Magistrate or Judicial Magistrate First Class as Special Court after I.B. Issue Process under Section under Section Court came into force. Why for this another class of Court was created? 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. 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 frustate to object of the speedy trial for which the Special Courts have been established. The plain reading of clause (a) of subsection (2) of Section 435 of the Companies Act in no uncertain terms implies or suggests that the Special Court consists of Judge holding office as a Sessions Judge is empowered to try the offences Issue Process under Section under this Act under Section. (emphasized). The phrase under this Act only means the offences committed under the Companies Act. Therefore the offences other than the Companies Act cannot be tried by the Special Court established under clause (a) of subsection 2 of Section 435. While on the contrary Special Court consists of Metropolitan Magistrate or Judicial Magistrate First Class proposed in clause (b) is invested with jurisdiction to try the Issue Process under Section case of other offences under Section - it is clear that Special Court comprising of a Metropolitan Magistrate Issue Process under Section under Section or Judicial Magistrate First Class is to try Issue Process under Section other offences under Section. The phrase other offences contained in section 435 (2) (b) Issue Process under Section under Section 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. Special Court which is to try Issue Process under Section 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. The Petition is allowed.
Issues Involved:
1. Jurisdiction of the Additional Sessions Judge to entertain the complaint under the Insolvency and Bankruptcy Code (I.B. Code). 2. Interpretation and applicability of Section 236 and 237 of the I.B. Code. 3. Interpretation and applicability of Section 435 of the Companies Act, 2013, as amended. Issue-wise Detailed Analysis: 1. Jurisdiction of the Additional Sessions Judge to entertain the complaint under the Insolvency and Bankruptcy Code (I.B. Code): The petition challenged the jurisdiction of the Additional Sessions Judge, 58th Court, Mumbai, to entertain a complaint filed by the Insolvency and Bankruptcy Board of India. The petitioners argued that the learned Additional Sessions Judge does not have jurisdiction to entertain the complaint under the I.B. Code. They contended that the offences under the I.B. Code should be tried by a Special Court consisting of a Metropolitan Magistrate or Judicial Magistrate First Class, not by a Sessions Judge or Additional Sessions Judge. This argument was based on the interpretation of Section 236 and 237 of the I.B. Code and the amendments to Section 435 of the Companies Act, 2013. 2. Interpretation and applicability of Section 236 and 237 of the I.B. Code: Section 236 of the I.B. Code, which came into force on December 1, 2016, empowers the Central Government or Board to file complaints against persons contravening penal provisions of the I.B. Code with the Special Court established under the Companies Act, 2013. The provision states that the Special Court shall be deemed to be a Court of Sessions, and the person conducting the prosecution shall be deemed to be a Public Prosecutor. Section 237 of the I.B. Code states that the High Court may exercise all powers conferred by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973, on a High Court, as if a Special Court were a Court of Session trying cases within its local limits. The petitioners argued that the deeming fiction created by Section 236(3) indicates that offences under the I.B. Code should be tried by a Special Court consisting of Metropolitan Magistrates or Judicial Magistrates First Class, not by Sessions Courts. 3. Interpretation and applicability of Section 435 of the Companies Act, 2013, as amended: Section 435 of the Companies Act, 2013, was amended in 2015 and 2017. The 2017 amendment, which came into effect on May 7, 2018, established two classes of Special Courts: (a) a single judge holding office as a Sessions Judge or Additional Sessions Judge for offences punishable under the Companies Act with imprisonment of two years or more, and (b) a Metropolitan Magistrate or Judicial Magistrate First Class for other offences. The petitioners argued that the phrase "under this Act" in Section 435(2)(a) implies that only offences under the Companies Act can be tried by a Special Court consisting of a Sessions Judge or Additional Sessions Judge. In contrast, offences under the I.B. Code should be tried by a Special Court consisting of Metropolitan Magistrates or Judicial Magistrates First Class, as per Section 435(2)(b). The judgment concluded that the complaint filed by the Insolvency and Bankruptcy Board of India against the petitioners for offences under the I.B. Code could not have been entertained by the learned Sessions Judge for want of jurisdiction. The order issuing process against the petitioners was without jurisdiction. The court held that the Special Court 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 Magistrates or Judicial Magistrates First Class. Consequently, the proceedings in Special Case No. 853/2020 in the Court of Additional Sessions Judge, 58th Court, Mumbai, were quashed and set aside. Separate Judgments: There were no separate judgments delivered by different judges in this case. The judgment was delivered by a single judge and does not mention the name of the judge.
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