The Supreme Court on Friday ruled that special courts with sessions judges can try offences under the Insolvency and Bankruptcy Code (IBC).
The verdict was delivered by the Division Bench of Justice BR Gavai and Justice Sandeep Mehta on a petition challenging the Bombay High Court order of February 14, 2022, which said that only special courts consisting of metropolitan or judicial magistrates were empowered to hear complaints under the IBC.
The Apex Court ruled that a Sessions judge had the jurisdiction to try matters under IBC and remanded the matter back to the High Court for a fresh decision, noting that the matter was not decided on merits.
On February 14, 2022, the single-judge Bench of Justice SK Shinde of the Bombay High Court observed that the objective of the legislature was not to burden a special court comprising a sessions judge with trials under the IBC.
The petition before the High Court had stated that the sessions judge did not have the jurisdiction to entertain the complaint filed by the IBBI.
Filed by two individuals, the petition assailed a sessions court order, which issued summons to them following a complaint filed by the Insolvency and Bankruptcy Board of India (IBBI), a statutory body under the IBC.
It noted that as per Section 236 of IBC, special courts under the Companies Act were empowered to try offences under IBC as a court of sessions.
The petitioners argued that the objective behind Section 236 was a speedy trial of offences and to achieve the same, there were two classes of special courts introduced.
One consisting of a judge holding office as sessions or additional sessions judge, and another consisting of metropolitan or judicial magistrate first class.
They contended that by amending Section 435 of the Companies Act, after Section 236 of IBC, the legislature intended that for speedy trial of offences under IBC, the courts with metropolitan magistrates or judicial magistrates were courts deemed to be special courts. Only these courts could try cases under the IBC, they argued.
The High Court noted that courts consisting of Sessions judges were to try offences under the Companies Act, whereas the courts consisting of magistrates were to try offences under Acts other than the Companies Act (including IBC).
The High Court concluded that the proceedings initiated by IBBI in the Sessions court were not sustainable.
It said the order-issuing process against the petitioners was without jurisdiction and unsustainable and hence, was quashed.
IBBI was represented by Additional Solicitor General SV Raju, advocates Rashi Rampal and Apoorv Khatore, and Advocate-on-Record (AoR) Vikas Mehta.
The respondents were represented by AoR Amir Arsiwala and advocate Dhaval Deshpande.
The State of Maharashtra was represented by AoR Aaditya Aniruddha Pande and advocates Anand Dilip Landge, Siddharth Dharmadhikari, Bharat Bagla, Sourav Singh, Aditya Krishna, Preet S Phanse and Adarsh Dubey.