2024 (4) TMI 914 - SC - Insolvency and Bankruptcy

Offences triable by Special Court - Offenses under the IBC - offences other than the Companies Act cannot be tried by the Special Court consisting of Sessions Judge or Additional Sessions Judge or not - Whether the Special Court under the Code would be as provided under Section 435 of the Companies Act as it existed at the time when the Code came into effect, or it would be as provided under Section 435 of the Companies Act after the 2018 Amendment? HELD THAT - This Court has held that once a finding is recorded that an Act is a self-contained code, then the application of either of the doctrines i.e. legislation by reference or legislation by incorporation would lose their significance particularly when the two Acts can coexist and operate without conflict. This Court further held that, in case of general reference in the Act in question to an earlier Act but there being no specific mention of the provisions of the former Act, then it would clearly be considered as legislation by reference . In such a case, the amending laws of the former Act would become applicable to the later Act. However, when the provisions of an Act are specifically referred and incorporated in the later statute, then those provisions alone are applicable and the amending provisions of the former Act would not become part of the later Act. This Court in the case of Girnar Traders 2011 (1) TMI 1343 - SUPREME COURT held that, if the legislature intended to apply the provisions of the Land Acquisition Act generally and wanted to make a general reference, it could have said that the provisions of the Land Acquisition Act would be applicable to the MRTP Act, 1966. This Court observed that such expression was conspicuous by its very absence. This Court held that both these Acts i.e. Land Acquisition Act and the MRTP Act, 1966 are self-contained codes within themselves. This Court observed that the State Legislature while enacting the MRTP Act, 1966 has referred to the specific sections of the Land Acquisition Act in the provisions of the State Act. This Court further observed that none of the sections require application of the provisions of the Land Acquisition Act generally or mutatis mutandis. The provisions of Section 236(1) of the Code. Under Section 236(1) of the Code, reference is offences under this Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act, 2013 - It can thus be seen that the reference is not general but specific. The reference is only to the fact that the offences under the Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act. 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 impugned judgment and order dated 14th February 2022, passed by the learned Single Judge of the High Court of Judicature at Bombay in Writ Petition No.2592 of 2021 is quashed and set aside - Appeal allowed.

Summary

Issues Involved:
1. Jurisdiction of Special Courts to try offences under the Insolvency and Bankruptcy Code, 2016 ("the Code").
2. Whether the reference to Special Courts under Section 236(1) of the Code is a "legislation by incorporation" or "legislation by reference".
3. Validity of the High Court's quashing of the complaint on jurisdictional grounds.

Summary:

I. Jurisdiction of Special Courts to Try Offences Under the Code:
The Supreme Court addressed whether the Special Court presided by a Sessions Judge or an Additional Sessions Judge has jurisdiction to try offences under the Code. The High Court had quashed the complaint on the grounds that the Special Court did not have jurisdiction following the Companies (Amendment) Act, 2017, which stipulated that only offences under the Companies Act could be tried by such Special Courts.

II. Legislation by Incorporation vs. Legislation by Reference:
The Supreme Court analyzed whether Section 236(1) of the Code, which states that "offences under this Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act, 2013," constitutes "legislation by incorporation" or "legislation by reference."

Key Points:
- Legislation by Incorporation: The Court held that Section 236(1) of the Code is "legislation by incorporation." This means the provisions regarding Special Courts from Section 435 of the Companies Act, 2013, as they existed when the Code came into effect, were bodily lifted and incorporated into the Code.
- Effect of Amendments: Since it is legislation by incorporation, subsequent amendments to Section 435 of the Companies Act, 2013, do not affect the provisions of Section 236(1) of the Code. Therefore, the Special Courts as defined in the Companies Act at the time the Code was enacted continue to apply.

III. Validity of High Court's Quashing of the Complaint:
The Supreme Court found that the High Court erred in quashing the complaint solely on jurisdictional grounds. Even if the reference was considered "legislation by reference," the offences under the Code punishable with imprisonment of two years or more would still fall under the jurisdiction of Special Courts presided by a Sessions Judge or an Additional Sessions Judge.

Conclusion:
- The Supreme Court quashed and set aside the High Court's judgment and order dated 14th February 2022.
- It was held that the Special Court presided by a Sessions Judge or an Additional Sessions Judge has jurisdiction to try the complaint under the Code.
- The matter was remitted to the High Court for fresh consideration on merits.

The judgment underscores the importance of understanding legislative intent and the distinction between legislation by incorporation and legislation by reference in determining the applicability of statutory provisions.