In a significant legal ruling, the Supreme Court has clarified that special courts presided over by sessions judges have the jurisdiction to try offences under the Insolvency and Bankruptcy Code (IBC). The decision comes in response to an appeal against a Bombay High Court order, which had held that only special courts consisting of metropolitan or judicial magistrates could hear complaints under the IBC.
The case originated from a plea filed by two individuals challenging a sessions court order that had issued summons to them following a complaint filed by the Insolvency and Bankruptcy Board of India (IBBI). The petitioners argued before the High Court that the sessions judge lacked jurisdiction to entertain the complaint under the IBC.
The crux of the issue lies in the interpretation of Section 236 of the IBC, which empowers special courts under the Companies Act to try offences under the IBC as courts of sessions. The petitioners contended that the amendment to Section 435 of the Companies Act, which introduced two classes of special courts, implied that courts with metropolitan or judicial magistrates were deemed as special courts for trying cases under the IBC.
However, the High Court accepted this argument and concluded that proceedings initiated by the IBBI in the sessions court were not sustainable. It held that courts consisting of sessions judges were designated to try offences under the Companies Act, while courts consisting of magistrates were assigned offences under Acts other than the Companies Act, including the IBC.
The Supreme Court, in its ruling, disagreed with the High Court’s interpretation. It emphasized that the present case involved ‘legislation by incorporation’ and not ‘legislation by reference.’ The court elucidated that any amendment to Section 435 of the Companies Act after the enactment of the IBC would not affect the provisions of Section 236(1) of the IBC. Thus, special courts under the IBC consist of persons qualified to be sessions judges or additional sessions judges.
The apex court criticized the High Court for quashing the complaint solely on the ground that it was filed before a special court presided over by a sessions judge. It opined that the appropriate course of action would have been to direct the complaint to be withdrawn and presented before the court with jurisdiction.
This ruling has significant implications for the adjudication of offences under the IBC, providing clarity on the jurisdiction of special courts in such matters. It underscores the importance of interpreting statutory provisions in accordance with legislative intent and the broader legal framework.
The case also highlights the complexities inherent in the legal landscape surrounding insolvency and bankruptcy laws in India. As the IBC continues to evolve, it is imperative for courts to navigate these complexities judiciously to ensure effective implementation and uphold the principles of justice and fairness.
In conclusion, the Supreme Court’s decision reaffirms the authority of sessions judges to adjudicate offences under the IBC, thereby contributing to the clarity and coherence of India’s legal system.