Special court with sessions judge can hear offences filed under insolvency code: SC

SC holds that special sessions judge can hear IBC complaints

The Supreme Court on April 19 held that sessions judges and additional sessions judges are empowered to hear criminal complaints filed under the Insolvency and Bankruptcy Code (IBC), 2016.

In doing so, the court has reversed the Bombay High Court verdict from 2022, which held that only a special court comprising metropolitan magistrate established under the Companies Act, 2013, would have the authority to hear criminal complaints under the IBC.

A bench of justices BR Gavai and Sandeep Mehta said, "We have held that the Sessions judge has the jurisdiction."

In 2022, the Bombay High Court quashed summons issued by the court of additional sessions judge in Mumbai under section 73(a) and 235 A of the IBC. While 73(a) deals with punishment for false representation, section 235A states that a person who violates the provisions of the code is punishable with a penalty of Rs 1 lakh.

The court had ruled that under Section 435 of the Companies Act, 2013  a special court with a sessions judge and an additional sessions judge was established for the firs time. This court had the jurisdiction to hear and decide offences under the Act. When the Act was amended in 2017, it created a special court comprising a metropolitan magistrate or a judicial magistrate. Thus, the intention of the government was clear that only special courts could hear criminal cases pertaining to IBC.

"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."

The court interpreted the insertion of a special provision in 2017 creating courts with metropolitan magistrates was only for the purpose of IBC. Not granting the jurisdiction to a special sessions court was to ensure that the court was not burdened with the cases from both IBC and the Companies Act.

The Insolvency and Bankruptcy Board of India (IBBI), which is tasked with regulating IBC in India filed an appeal against this judgment of Bombay High Court in 2022.