Whether an Additional Session Judge can try offences under Insolvency and Bankruptcy Code2016?

  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 “Issue Process”, under Section deemed to be Court of

Sessions . If ”, under Section 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 have been instituted by the Respondents (Complainant) in the Court of Addtional 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. The Petition is therefore allowed in terms of

prayer clause (a). {Para 14}

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CRIMINAL APPELLATE JURISDICTION

WRIT PETITION NO. 2592 OF 2021

 Satyanarayan Bankatlal Malu Vs  Insolvency and Bankruptcy Board of India,

CORAM : SANDEEP K. SHINDE

PRONOUNCED ON : 14th FEBRUARY, 2022.

1. Rule.

2. Rule made returnable forthwith. Heard. finally

with the consent of the parties.

3. This petition under Article 227 of the Constitution

of India read with Section 482 of the Criminal Procedure

Code, 1973 assails the order, “Issue Process”, under SectionIssue Process”, under Section, under Section

73(a) and Section 235A of the Insolvency and Bankruptcy

Code, 2016 (hereinafter referred to as “Issue Process”, under Sectionthe I.B. Code”, under Section) passed

by the Additional Sessions Judge, 58th Court, Mumbai in

Special Case No. 853/2020, on a Complaint filed by the

Insolvency and Bankruptcy Board of India, a statutory body

established under the I.B. Code.

4. Presently, only ground, on which impugned order

has been challenged is that, the learned Additional Sessions

Judge does not have jurisdiction to entertain the complaint

filed by the respondents. As such other grounds of challenge

are expressly kept open.

5. Mr. Amir Arsiwala, learned Counsel for the Petitioner

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. speedy trial “Issue Process”, under Section 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

empowered and invested with the jurisdiction to try offences

under the Companies Act, punishable with imprisonment of

two years or more. Whereas, Special Court consist of

Metropolitan Magistrate or Judicial Magistrate First Class in

terms of clause (b) of subsection (2) of Section 435 of the

Companies Act is invested with the powers and jurisdiction

to try offences, other than the offences under the Companies

Act. To put it differently, Mr. Arsiwala would submit that

the expression, in case of “Issue Process”, under Section other offences”, under Section used in clause (b)

of Section 435 (2), in contradiction to expression, “Issue Process”, under Sectionunder this

Act”, under Section in clause (a) of subsection (2) of Section 435 would

mean, that the Special Courts consist of metropolitan

Magistrate or Judicial Magistrate First Class are invested

with the jurisdiction to try offences under the other Acts and

the offences under the Companies Act, punishable with

imprisonment not more than two years. Submission is that

before I.B. Code came into effect, Special Courts comprising

of Sessions or Additional Sessions Judge were established to

try offences under the Companies Act, which were

punishable with imprisonment with two years or more. As

such only one class of Special Court was established i.e.

Court comprising of Judge holding office of Sessions or

Additional Sessions Judge. However, after I.B. Code came

into effect, legislature in its wisdom, to avoid burden of

cases on Special Court consisting of Sessions Judge or

Additional Sessions Judge but for the speedy trial of offences

under the I.B. Code, created another class of Courts i.e.

Court consist of Metropolitan Magistrate or Judicial

Magistrate First Class as a “Issue Process”, under SectionSpecial Court”, under Section, which by fiction

of law shall be ‘deem to be’ Court of Session. Mr. Arsiwala

would therefore submit that the offences under the I.B. Code

are triable by the Special Court consist of Metropolitan

Magistrate or Judicial Magistrate First Class and not by a

Court consist of Judge holding office as a Sessions Judge or

Additional Sessions Judge. Mr. Arsiwala submitted, that the

complaint instituted by the Insolvency and Bankruptcy

Board of India against the Petitioners, for the offences under

the I.B. Code, could not have been entertained by the learned

Sessions Judge for want of jurisdiction and therefore the

order, issue process “Issue Process”, under Section ”, under Section, passed against the Petitioners was

without jurisdiction. Mr. Arsiwala submitted, yet there is

another reason as to why Special Courts consist of

Metropolitan Magistrate or Judicial Magistrate First Class

shall have jurisdiction to try offences under the I.B. Code.

He submitted at a time, Section 236 and 237 of the I.B. Code

came into effect i.e. on 1st December, 2016. He submitted that

in terms of Section 237 of I.B. Code proceedings, orders and

judgments of Special Courts, trying offences under the I.B.

Code shall be deemed to be proceedings of Court of Session,

amenable to Appellate and Revisional jurisdiction of the

High Court. Submission is that Courts consist of

Metropolitan Magistrate or Judicial Magistrate First Class

trying offences under the I.B. Code have been upgraded to

Court of Sessions by deeming fiction. Mr. Arsiwala

submitted by enacting Section 236 and 237 of I.B. Code at a

time, followed by the amendment to Section 435 of the

Companies Act, the legislature clearly intended, that for the

speedy trial of the offences under the I.B. Code, the Court

consists of Metropolitan Magistrate or Judicial Magistrate

First Class would be Special Court and it shall be deemed to

be a Court of Session. Mr. Amir Arsiwala, learned Counsel

for the Petitioners, would lay emphasis on expression “Issue Process”, under Sectionunder

this Act”, under Section, to contend that clause (a) of sub-section (2) of

Section 435 and clause (b) thereof, creates distinct Special

Courts and their jurisdiction being well defined, it neither

over-laps each other, nor it can be determined qua quantum

of punishment for the offences to be tried. On these grounds,

Mr. Arsiwala would contend that the complaint instituted by

the Insolvency and Bankruptcy Board of India for the

offences punishable under the I.B. Code could not have been

entertained by the Sessions Judge 58th Court and therefore the

order ‘issuing process’ under Section 73(a) and Section 235A

of the I.B. Code was without jurisdiction.

6. Mr. Pankaj Vijayan, learned Counsel appearing

for the Respondents, would contend that plain reading of

Section 435 of the Companies Act, as amended by Act of 2017,

does not admit the interpretation, as sought to be placed by

the Petitioners. Mr. Pankaj Vijayan submitted that

harmonious construction of provision of Section 236 of the

I.B. Code and amended Section 435 of Companies Act, leads

to conclude that the Additional Sessions Judge, alone has a

jurisdiction to entertain the complaint, since offence referred

therein, is punishable with imprisonment for more than three

years.

7. So as to appreciate the contentions of respective

Counsels, it would be appropriate to read and understand,

purport of Section 236 and 237 of I.B. Code and amended

provision of Section 435 of the Companies Act, 2013.

8. Section 236 of the I.B. Code empowers the Central

Government or Board to file complaint against a person/s,

having contravened, one of the penal provisions of the I.B.

Code with, the “Issue Process”, under SectionSpecial Court”, under Section, constituted or established

under the provisions of the Companies Act, 2013. Section 236

of the I.B. Code came into force on 1 s t December, 2016 and it

reads as under : (emphasis supplied)

“236. Trial of offences by Special Court.

(1)Notwithstanding anything in the Code of Criminal

Procedure, 1973 offences under this Code shall be tried by

the Special Court established under Chapter XXVIII of the

Companies Act, 2013.

(2) No Court shall take cognizance of any offence

punishable under this Act, save on a complaint made by the

Board or the Central Government or any person authorised

by the Central Government in this behalf.

(3) The provisions of the Code of Criminal Procedure, 1973

shall apply to the proceedings before a Special Court and

for the purposes of the said provisions, the Special Court

shall be deemed to be a Court of Sessions and the person

conducting a prosecution before a Special Court shall be

deemed to be a Public Prosecutor.

(4) Notwithstanding anything contained in the Code of

Criminal Procedure, 1973, in case of a complaint under subsection

(2), the presence of the person authorized by the

Central Government or the Board before the Court trying

the offences shall not be necessary unless the Court

requires his personal attendance at the trial.

. Thus, notable aspects of this provision are;

(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.

. At a time, on 1 s t December, 2016, Section 237 of I.B.

Code came into force. It reads as follows; (emphasis

supplied)

“237. Appeal and revision

The High Court may exercise, so far as may be applicable,

all the powers conferred by Chapters XXIX and XXX of

the Code of Criminal Procedure, 1973 (2 of 1974) on a High

Court, as if a Special Court within the local limits of the

jurisdiction of the High Court were a Court of Session

trying cases within the local limits of the jurisdiction of the

High Court.

. It is significant to note that in view of Section 237 of

I.B. Code, Special Court trying the offences under the I.B.

Code 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.

Therefore, Court other than Court of Session (i.e. a Court of

Judicial Magistrate, First Class and Court of Metropolitan

Magistrate) if established as a Special Court for trying the

offences under the I.B. Code, it shall be deem Session Court

and judgments and orders of such Special Court would be

amenable to jurisdiction of the High Court under Chapter-

XXIX and XXX of the Cr.P.C.

9. It is petitioner’s case that, the learned Additional

Sessions Judge, 58th Court in which respondents filed a

complaint, was not a Special “Issue Process”, under Section Court”, under Section, for trying the offences

under the I.B. Code, in terms of Section 236 thereof. To

butress the arguments petitioners would rely on provisions of

Section 435 of the Companies Act, 2013; (i) originally enacted;

(ii) amended in 2015; (iii) amended in 2017 :

(I) originally enacted

435(1) The Central Government may, “ for the purpose of

providing speedy trial of offences under this Act, by

notification, establish or designate as many Special Courts

as may be necessary.

(2) A Special Court shall consist of a single judge who shall

be appointed by the Central Government with the

concurrence of the Chief Justice of the High Court within

whose jurisdiction the judge to be appointed is working.

(3) A person shall not be qualified for appointment as a

judge of a Special Court unless he is, immediately before

such appointment, holding office of a Sessions Judge or an

Additional Sessions Judge.

(II). Through Companies (Amendment) Act, 2015, which

came into effect from 29.05.2015, this Section was amended to

reads as below :

“435(1)The Central Government may, for the purpose of

providing speedy trial of offences punishable under this

Act with imprisonment of two years or more, by

notification, establish or designate as many Special Courts

as may be necessary.

Provided that all other offences shall be tried, as the case

may be, by a Metropolitan Magistrate or a Judicial

Magistrate of the First Class having jurisdiction to try any

offence under this Act or under any previous company

law.

(2) A Special Court shall consist of a single judge who

shall be appointed by the Central Government with the

concurrence of the Chief Justice of the High Court within

whose jurisdiction the judge to be appointed is working.

(3) A person shall not be qualified for appointment as a

judge of a Special Court unless he is, immediately before

such appointment, holding office of a Sessions Judge or

an Additional Sessions Judge.

(III) Section 435 was amended, by way of Companies

(Amendment) Act, 2017 w.e.f. 7.05.2018. It reads as follows :

435. Establishment “ of Special Courts

(1) The Central Government may, for the purpose of

providing speedy trial of offences under this Act, except

under section 452, by notification establish or designate as

many Special Courts as may be necessary.

(2) A Special Court shall consist of-

(a) a single judge holding office as Session

Judge or Additional Session Judge, in case of

offences punishable under this Act with

imprisonment of two years or more; and

(b) a Metropolitan Magistrate or a Judicial

Magistrate of the First Class, in the case of other

offences.

who shall be appointed by the Central Government with the

concurrence of the Chief Justice of the High Court within

whose jurisdiction the Judge to be appointed is working.”

10. Thus, it is noticeable, that the Companies Act (17th

amendment) which came into effect from 7th May, 2018, for

the first time, seeks to establish two different classes of a

Special Court; (a) a Single Judge holding office as Session

Judge or Additional Sessions Judge and (b) Metropolitan

Magistrate or Judicial Magistrate First Class; who shall be

appointed by the Central Government with concurrence of

the Chief Justice of the High Court within whose

jurisdiction, the Judge to be appointed is working. Original

Section 435 of Companies Act, empowered Central

Government to establish and designate Special Court for

speedy trial of offences exclusively under the Companies

Act and the Special Court would consist of Single Judge

holding office of Sessions Judge or an Additional Sessions

Judge. Section 435 amended by Companies (amendment)

Act, 2015 came into effect on 29th May, 2015. This amendment

empowered Central Government to establish and designate

Special Court for speedy trial of offences only under the

Companies Act prescribing punishment of imprisonment of

two years or more, comprising of Sessions Judge or

Additional Sessions Judge. That being so, offences under

the Companies Act punishable with imprisonment for less

than two years, Courts of Metropolitan Magistrate or Judicial

Magistrate First Class were empowered, to try such offences,

but this class of Courts were not Special Courts. After I.B.

Code came into effect, on 1st December, 2016, once again

Companies Act was amended with effect from 7th May, 2018.

By this amendment, for the first time legislature designate

the Court of Metropolitan Magistrate and Judicial Magistrate

First Class as Special Courts to try the offences, “Issue Process”, under Sectionin the case

of other offences”, under Section.

11. The question is, 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.

12. 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 “Issue Process”, under SectionSpecial Court”, under Section, after I.B.

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. 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 frustate 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, for quick reference let me

reproduce the relevant provisions of Section 435.

435. Establishment of Special Courts

(1) The Central Government may, for the purpose of providing speedy

trial of 1[offences under this Act, except under section 452 by

notification], establish or designate as many Special Courts as may be

necessary.

(2) A Special Court shall consist of -

(a) a single judge holding office as Session Judge or

Additional Session Judge, in case of offences punishable under

the Act with imprisonment of two years or more; and

(b) a Metropolitan Magistrate or a Judicial Magistrate of the

First Class, in the case of other offences,

who shall be appointed by the Central Government with the

concurrence of the Chief Justice of the High Court within whose

jurisdiction the judge to be appointed is working.]

. 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 Sectionunder 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 Sectioncase of other offences ”, under Section. (emphasized). The phrase “Issue Process”, under Sectionother

offences”, under Section, means offences under other Acts, than Companies

Act and the offences under the Companies Act punishable

with imprisonment less than two years.

13. Therefore, the omission of the phrase “Issue Process”, under Sectionunder this

Act”, under Section in section 435 (2) (b) and its inclusion in section 435 (2)

(a) of CA 2013 must be treated to be a deliberate one. It

would follow that the clear mandate of the legislature is that

the “Issue Process”, under SectionSpecial Court”, under Section comprising of a Sessions Judge or

Additional Sessions Judge [i.e. 435 (2) (a)] is only to try

offences under the CA 2013 itself which carry a punishment

of imprisonment of two years or more. However, it is clear

that “Issue Process”, under SectionSpecial Court”, under Section comprising of a Metropolitan Magistrate

or Judicial Magistrate First Class is to try “Issue Process”, under Sectionother offences”, under Section.

The phrase “Issue Process”, under Sectionother offences”, under Section 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. Mr. Arsiwala has correctly argued

that provisions of law which curtail the general jurisdiction

of criminal courts must be interpreted strictly. He relied on

the judgment in the case of Sachida Nand Singh Vs. State of

Bihar (1998) 2 SCC 493 it was held as below :

“Issue Process”, under SectionEven if the clause is capable of two interpretations we are inclined to

choose the narrower interpretation for obvious reasons. Section 190 of

the Code empowers any magistrate of the “ first class” to take

cognizance of “any offence” upon receiving a complaint, or police

report or information or upon his own knowledge. Section 195 restricts

such general powers of the magistrate, and the general right of a person

to move the court with a complaint is to that extent curtailed. It is a

well-recognised canon of interpretation that provision curbing the

general jurisdiction of the Court must normally receive strict

interpretation unless the statute or the context requires otherwise

(Abdul Waheed Khan Vs. Bhawani [AIR 1966 SC 1718 : (1966) 3 SCR

617].”, under Section

14. 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 “Issue Process”, under Sectiondeemed to be Court of

Sessions . If ”, under Section 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 have been

instituted by the Respondents (Complainant) in the Court of

Addtional 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 Sectionwhich 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. The Petition is therefore allowed in terms of

prayer clause (a).

15. As a result proceedings being Special Case No.

853/2020 instituted in the Court of Additional Sessions Judge,

58th Court, Mumbai are quashed and set aside. Rule is made

absolute in the aforesaid terms.

16. At the request of the Counsel for the Respondent

No.1, operation of this order is stayed for a period of four

weeks from today.

(SANDEEP K. SHINDE)