Supreme Court: Sessions Judges Can Try IBC Offences

Supreme Court permits sessions judges to try Insolvency and Bankruptcy Code cases, rejecting Bombay High Court's ruling. Decision clarifies jurisdiction, impacting future IBC trials.

The Supreme Court made a significant ruling on Friday regarding the trial of offences under the Insolvency and Bankruptcy Code (IBC). The ruling came in the case of Insolvency and Bankruptcy Board of India & Anr v Satyanarayan Bankatlal Malu & Ors.

A Division Bench of Justices BR Gavai and Sandeep Mehta declared that special courts with sessions judges possess the jurisdiction to try offences under the IBC. This decision was made in response to an appeal challenging a Bombay High Court order. The High Court had previously stated that only special courts comprising metropolitan or judicial magistrates could hear complaints under the IBC.

"We have held that the Sessions judge has the jurisdiction. Since the matter has not been decided on merits, we remand the matter to the (Bombay) High Court for a fresh decision," stated the top court.

The case originated from a Bombay High Court order dated February 14, 2022. Justice SK Shinde of the High Court had expressed that the legislative intent was to avoid burdening special courts, including those with sessions judges, with trials under the IBC.

The High Court's decision stemmed from a plea filed by two individuals challenging a sessions court's summons issued to them after a complaint filed by the Insolvency and Bankruptcy Board of India (IBBI). The plea argued that the sessions judge lacked jurisdiction to entertain the IBBI's complaint.

The petition highlighted Section 236 of the IBC, which empowers special courts under the Companies Act to try offences under the IBC as a court of sessions. The petitioners contended that the amendment to Section 435 of the Companies Act intended for speedy trials of IBC offences, designating courts with metropolitan or judicial magistrates as special courts for this purpose.

Contrary to the High Court's ruling, the Supreme Court reasoned that the case was one of 'legislation by incorporation,' not 'legislation by reference.' It clarified that amendments to the Companies Act after the enactment of the IBC wouldn't affect the provisions of Section 236(1) of the IBC. Therefore, special courts at that time solely comprised individuals qualified to be a Sessions Judge or an Additional Sessions Judge.

The Supreme Court disagreed with the High Court's decision to quash the complaint merely on the basis of it being filed before a Special Court presided by a Sessions Judge. The apex court emphasized that the High Court could, at most, have directed the complaint to be withdrawn and presented before the appropriate court with jurisdiction.

Representatives involved in the case included Additional Solicitor General SV Raju, advocates Rashi Rampal and Apoorv Khatore, Advocate-on-Record (AoR) Vikas Mehta for the IBBI, and AoR Amir Arsiwala, advocate Dhaval Deshpande for the respondents-accused, Satyanarayan Bankatlal Malu and Ramesh Satyanarayan Malu. The State of Maharashtra was represented by AoR Aaditya Aniruddha Pande and a team of advocates.