LatestLaws.in Who will take cognizance of insolvency offences: by Rakesh Kumar Singh
Insolvency and Bankruptcy Code, 2016 has created several special offences. It has provided for trial of these offences by special mechanism. Section2!6 reads as under"
#2!6. $rial of offences by Special Court. %1& 'ot(ithstandin) anythin) in the Code of Criminal *rocedure, 1+! %2 of 1+-&, offences under this Code shall be tried by the Specia Speciall Court Court establ establish ished ed under under Chapte Chapterr /III of the Companies ct, ct, 201! %1 of 201!&.
%2& 'o Court shall take co)niance of any offence punishable under this ct, save on a complaint made by the Board or the Central 3overnment or any person authorised by the Central 3overnment in this behalf.
%!& $he provisions of the Code of Criminal *rocedure, 1+! %2 of 1+-& shall apply to the proceedin)s before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to be a Court of Session and the person conductin) a prosecution before a Special Court shall be deemed to be a *ublic *rosecutor.
%-& %-& 'ot( 'ot(it iths hsta tand ndin in) ) anyt anythi hin) n) cont contai aine ned d in the the Code Code of Crim Crimin inal al *roced *rocedure ure,, 1+!, 1+!, in case case of a compla complaint int under under subse subsecti ction on %2&, %2&, the presen presence ce of the person person author authorise ised d by the Central Central 3overn 3overnmen mentt or the Board before the Court tryin) the offences shall not be necessary unless the Court re4uires his personal attendance at the trial5.
2.
$he $he afore aforesa said id clea clearly rly say sayss that that only only the spe speci cial al cour courtt (hich (hich has has bee been n esta establ blis ishe hed d under under the the
Companies ct can try the offences. Special court under Companies ct is constituted by virtue of Section-! (hich reads as under"
#-!. 7stablishment of Special Courts. %1& $he Central 3overnment may, for the purpose of providin) speedy trial of offences punishable under this this ct ct (ith (ith impris imprisonm onmen entt of t(o years years or more8, more8, by notifi notificat cation ion,, estab establis lish h or desi)n desi)nate ate as many many Specia Speciall Courts Courts as may may be necess necessary ary"" *rovided that all other offences shall be tried, as the case may be, by a
LatestLaws.in 9etropolitan 9a)istrate or a :udicial 9a)istrate of the ;irst Class havin)
%2& Special Special Court shall consist of a sin)le
%!& person person shall not be 4ualified for appointment as a
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$he $he sect sectio ion n clear clearly ly )ive )ivess a discr discret etio ion n to the the Cent Centra rall 3over 3overnm nmen entt to esta establ blis ish h or desi desi)n )nat atee a
special court. 'o(, 'o(, unless such special court is established or desi)nated by the central )overnment under the Companies ct, there (ill be no court (hich can try an offence punishable under the Insolvency and Bankruptcy Code, 2016.
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Sect Sectio ion n2! 2!6 6 has use used d the e>p e>pre ress ssio ion n #shal #shalll be tried tried55 there thereby by clea clearly rly indi indica cati tin) n) a mand mandat atee
that the offences have to be tried by a special court and not by any other court. Can (e say that if special court is not constituted, the normal ecutive in creatin) special court, an offender cannot be left (ithout punishment.
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$he $he ar)u ar)ume ment nt may may sou sound nd attr attrac acti tive ve but but har hardl dly y hold holdss )rou )round nd.. Sect Sectio ion n- and and of Cr* Cr*C C and and
Section2! of Insolvency and Bankruptcy Code, 2016 are re4uired to be considered at this sta)e and therefore they are reproduced as under"
#-. $rial of offences under the Indian *enal Code and other la(s. % 1& ll offences under the Indian *enal Code %- of 160& shall be investi)ated, in4uired into, tried, and other(ise dealt (ith accordin) to the provisions hereinafter contained.
LatestLaws.in %2& ll offences under any other la( shall be investi)ated, in4uired into, tried, and other(ise dealt (ith accordin) to the same provisions, but sub
. Savin). 'othin) contained in this Code shall, in the absence of a specific provision to the contrary, affect any special or local la( for the time bein) in force, or any special
2!. *rovisions of this Code to override other la(s. $he provisions of this this Code Code shall shall have have effec effect, t, not(ith not(ithsta standi ndin) n) anythi anythin) n) incons inconsist istent ent there(ith contained in any other la( for the time bein) in force or any instrument havin) effect by virtue of any such la(5.
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@ne @ne thin) thin) imm immed edia iate tely ly bec becom omes es cle clear ar i.e. i.e. app applic licab abili ility ty of pro provi visi sion onss of Cr*C Cr*C is is sub< sub
any enact enactmen mentt provid providin) in) the manner manner and and furthe furtherr that that Cr*C Cr*C shall shall not affec affectt any any specia speciall la(. la(. Insolvency and Bankruptcy Code, 2016 is special la( and therefore it cannot be affected by Cr*C and even provisions of Cr*C (ill be subecutive cannot have supremacy over the le)islative enactment.
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It is at at this this sta sta)e )e tha thatt (e may may not notee the the sour source ce of of po(e po(err of the the norm normal al
$here cannot be any dispute that even normal
#26. Courts by (hich offences are triable. Sub
LatestLaws.in %iii %iii&& any any othe otherr Cour Courtt by (hic (hich h such such offe offenc ncee is sho( sho(n n in the the ;irs ;irstt Schedule to be triable" *rovided that any offence under section !6, section !6, section !6B, section !6C, section !6A or section !67 of the Indian *enal Code %- of 160& shall be tried as far as practicable by a Court presided over by a (oman.
shall, l, when when any any Co Cour urtt is %b& %b& any any offen fence unde nder any oth other la( la( shal mentioned in this behalf in such la(, la(, be tried by such Court and (hen no Court is so mentioned, may be tried by
%i& the =i)h Court, or %ii& any other Court by (hich such offence is sho(n in the ;irst Schedule to be triable5.
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hat hat is int inter eres esti tin) n) is to to note note that that it is is Secti Section on26 26 (hi (hich ch real really ly empo empo(e (ers rs diff differ eren entt court courtss to
try offences. Clause%b& deals (ith offences under other la(. It clearly says that offence under other la( shall be triable by the court mentioned in such la(. @nly (hen no court is mentioned in such la( that (e need to further read the provision (hich clarifies that in such situation the offence may be tried by the =i)h Court or the court indicated in the Schedule. 9eanin) thereby that if the la( mentions a court for trial of its offences, then there cannot be any deviation from the same. It provides for normal ecutive authority5. eason is obvious. 9entionin) of anythin) in la( is a le)islative function (hereas implementation of the same is e>ecutive function. s such, (hether any special court is establish established ed or not is immaterial immaterial for the purpose of Section Section 26%b& of Cr*C as mentionin) of court in the special la( is relevant. Section2!6 of Insolvency and Bankruptcy Code, 2016 has mentioned that special court shall try the offences. s such, it is only that court (hich can try the offences and not any other normal
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It is at at this this sta sta)e )e,, (e nee need d to con consi side derr the the effe effect ct of of a
Atti!"r!Rehman vs #C$ I 1++6 SC +6. In terms of A9C ct, a 9unicipal 9a)istrate (as re4uir re4uired ed to deal deal (ith (ith the offen offence cess therein therein but the 3overn 3overnmen mentt had not appointe appointed d any such such 9unicipal 9a)istrate. It (as held therein that even 9etropolitan 9a)istrate could have dealt (ith the offences if 9unicipal 9a)istrate (as not appointed. It the said
LatestLaws.in Code provides for an overridin) provision. Secondly, in the said case, the specific provision of Section26 Cr*C dealin) (ith offences under other la( (as not noticed (hich empo(ers normal
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=o(eve =o(ever, r, anot another her impo importa rtant nt ratio ratio of the the case case is very very usefu usefull even even for the the presen presentt purpose purpose.. $he $he
relevant portion of the
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'o(, 'o(, suppos supposee the Centr Central al )overn )overnme ment nt constit constitute utess specia speciall courts courts under under the Compa Companie niess ct. ct.
$he ne>t issue (ould be related to co)niance. Section2!6 does not talk about the authority (hich can take co)niance. It also does not say that other provisions of Companies ct related to procedure for offences shall be applicable. Section2!6 is rather limited to the namin) of the court, in contradiction to the )eneral scheme, (hich shall try the offences.
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'o(, 'o(, Sect Section ion2! 2!6%! 6%!&& beco becomes mes very very si)ni si)nific ficant ant.. It It reads reads as under" under"
%!& $he provisions of the Code of Criminal *rocedure, 1+! %2 of 1+-& shall apply to the proceedin)s before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to be a Court of Session and the person conductin) a prosecution before a Special Court shall be deemed to be a *ublic *rosecutor.
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It does does not not say say that that prov provis isio ions ns of Cr*C Cr*C (ill (ill appl apply y to the the offe offenc nces es.. It simp simply ly says says that that
provisions (ill apply to the proceedin)s before the Special Court. 9eanin) thereby that there
LatestLaws.in should be a special court and also there should be some proceedin) before it. $hen the provisions of Cr*C (ill apply to that proceedin). Simple. $he Section then says that for the purpose of those provisions, the special court shall by a deemin) fiction be treated as a court of sessions.
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$he ct cont contemp emplat lates es only only the the trial trial to be condu conducte cted d by the the Specia Speciall Court. Court. $hus $hus the the Court Court of of
Session is specified to conduct a trial and no other court can conduct the trial of offences under the ct. hy the *arliament provided that only a Court of session can be specified as a Special Court? 7vidently the le)islature (anted the Special Court to be Court of Session. =ence the particular Court of Session, even after bein) specified as a Special Court, (ould continue to be essentially a Court of Session and desi)nation of it as a Special Court (ould not denude it of its character or even po(ers as a Court of Session. $he trial in such a court can be conducted only in the manner provided in Chapter /III of the Code (hich contains a fasciculus of provisions for #$rial before a Court of Session5.
1.
e kno( kno( that that co)ni co)nian ance ce takin takin) ) po(er po(er of of Sessio Sessions ns Court Court is is provid provided ed in Sect Section ion1+ 1+! ! Cr*C Cr*C
and theref therefore ore unless unless the case case falls falls (ithin (ithin this this provis provision ion,, the Court Court of Sessio Sessions ns canno cannott take take co)niance. Section1+! of the Cr*C has to be understood in the aforesaid backdrop. $he section imposes an interdict on all Courts of Session a)ainst takin) co)niance of any offence as a court of ori)in ori)inal al ceptions to the aforesaid interdict. @ne is, (hen the Code itself has provided differently in e>pres e>presss lan)ua lan)ua)e )e re)ard re)ardin) in) takin) takin) of co)ni co)nianc ance, e, and the second second is (hen (hen any any other other la( has has provided differently in e>press lan)ua)e re)ardin) takin) co)niance of offences under such la(. $he (ord #e>pressly5 (hich is employed in Section1+! denotin) to those e>ceptions is indicative of the le)islative mandate that a Court of Session can depart from the interdict contained in the section only if it is provided differently in clear and unambi)uous terms. In other (ords, unless it is positively and specifically provided differnetly no Court of Session can take co)niance of any offence directly, (ithout the case bein) committed to it by a ma)istrate. 'either in the Cr*C nor in the ct there is any provision (hatsoever, not even by implication, that the specified Court of Session %Special Court& can take co)niance of the offence under the ct as a court of ori)inal
LatestLaws.in preliminary formalities (hich ma)istrates have to do until the case is committed to the Court of session.
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It is cont conte> e>tu tual ally ly rele releva vant nt to noti notice ce that that Spec Specia iall Cour Courts ts crea create ted d unde underr cert certai ain n othe otherr
enactments have been specially empo(ered to take co)niance of the offence (ithout the accused bein) committed to it for trial, %e.). Section!6 of the 'A*S ct, Section!! of *@CS@ ct&. It is si)nificant that there is no similar provision in the Insolvency and Bankruptcy Bankruptcy Code, 2016.
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It seems seems that that the there re has has been been some some draf draftin tin) ) omiss omission ions. s. In Sec Sectio tion2 n2!6, !6, the the la( la( maker maker take taken n
care to introduce the concept that special court constituted under Companies ct (ill try the offences but seemin)ly they failed to note that there (as another provision in the Companies ct dealin) (ith procedure related to the offences. It (as Section-!6 readin) as under"
#-!6. @ffences triable by Special Courts. %1& 'ot(ithstandin) anythin) contained in the Code of Criminal *rocedure, 1+! %2 of 1+-&, %a& all offences specified under subsection %1& of section -! shall be triable only by the Special Court established for the area in (hich the re)istered office of the company in relation to (hich the offence is committed or (here there are more Special Courts than one for such area, by such one of them as may be specified in this behalf by the =i)h Court concernedF
%b& (here a person accused of, or suspected of the commission of, an offence under this ct is for(arded to a 9a)istrate under subsection %2& or subsection %2& of section 16 of the Code of Criminal *rocedure, 1+! %2 of 1+-&, such 9a)istrate may authorise the detention of such person in such custody as he thinks fit for a period not e>ceedin) fifteen days in the (hole (here such 9a)istrate is a :udicial 9a)istrate and seve seven n days days in the the (hol (holee (her (heree such such 9a)i 9a)ist stra rate te is an 7>ec 7>ecut utiv ivee 9a)ist 9a)istrat rate" e" *rovid *rovided ed that that (here (here such such 9a)ist 9a)istrat ratee consi consider derss that that the detention of such person upon or before the e>piry of the period of detention is unnecessary, he shall order such person to be for(arded to the Special Court havin)
LatestLaws.in %c& the Special Court may e>ercise, in relation to the person for(arded to it unde underr clau clause se %b&, %b&, the the same ame po(e po(err (hic (hich h a 9a)i 9a)ist stra rate te havi havin) n) ercise under section 16 of the Code of Criminal *rocedure, 1+! %2 of 1+-& in relation to an accused person (ho has been for(arded to him under that sectionF and
%d& a Special Court may, upon perusal of the police report of the facts const constitu itutin tin) ) an offence under this Act or upon a complaint in that behal behalf, f, take take co)ni co)nian ance ce of that that offen offence ce (ithou (ithoutt the accus accused ed bein) bein) committed to it for trial.
%2& hen tryin) an offence under this ct, a Special Court may also try an offence other than an offence under this ct (ith (hich the accused may, may, under the Code of Criminal *rocedure, 1+! %2 of 1+-& be char)ed at the same trial.
%!& %!& 'ot( 'ot(ith ithst stan andi din) n) anyt anythi hin) n) cont contai aine ned d in the the Code Code of Crim Crimin inal al *rocedure, 1+! %2 of 1+-&, the Special Court may, if it thinks fit, try in a summary (ay any offence under this ct (hich is punishable (ith imprisonment for a term not e>ceedin) three years" *rovided that in the case of any conviction in a summary trial, no sentence of imprisonment for a term e>ceedin) one year shall be passed" *rovided further that (hen at the commencement of, or in the course of, a summary trial, it appears to the Special Court that the nature of the case is such that the sentence of imprisonment for a term e>ceedin) one year may have to be passed or that it is, for any other reason, undesirable to try the case summarily, the Special Court shall, after hearin) the parties, record an order to that effect and thereafter recall any (itnesses (ho may have been e>amined and proceed proceed to hear or rehear rehear the case in accordan accordance ce (ith the procedure procedure for the re)ular trial5.
1. 1.
bare bare look look at the the provi provisi sion on )oes )oes to sho( sho( that that the the Speci Special al Cour Courtt has been been )ive )iven n po(er po(er to
directly take co)niance of offences even in the absence of any committal. hat is ho(ever clear is that the said po(er applies only to # an offence under this Act 5 means an offence punishable under the Companies ct. @ne may tend to say %by referrin) to clause2 of Section-!6& that Special
LatestLaws.in Court may try any other offence. =o(ever, on a bare readin) of the provision, it (ill become clear that such po(er is available only (hen the Special Court is tryin) an offence under the Companies ct and not other(ise. s such, the Special Court cannot stretch its po(er to take co)niance of offence punishable under any other la( includin) Insolvency and Bankruptcy Code, 2016. It is at this sta)e that the la( makers appear to have failed to notice the necessity of providin) special po(ers of co)niance.
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*roce *rocedur dural al statu statuss of offen offence cess under under Insol Insolve vency ncy and and Bankr Bankrup uptcy tcy Code Code,, 2016 2016 is same same as (as (as
the case (ith the offences under the unamended SCES$ ct (here trial (as to be before Special Court but process process of co)nian co)niance ce (as not provided provided therein and therefore therefore in several several
Conclusion:
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ll cases for offences punishable under Insolvency and Bankruptcy Code, 2016 have to firstly filed before a 9a)isterial CourtF
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$he 9a)isterial Court then (ill take co)niance and (ill commit the case to the Special CourtF
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Special Court (ill then be able to try the caseF
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Spec Specia iall Cour Courtt cann cannot ot dire direct ctly ly take take co)n co)ni ian ance ce for for offe offenc nces es unde underr Inso Insolv lven ency cy and and Bankruptcy Code, 2016F
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7ven remand proceedin)s have to be done by the 9a)istrate like other normal offencesF
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Special Court has no po(er to )rant remand durin) investi)ationF
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3overnment cannot avoid constitutin) Special Court under Companies ct (hich has a clear bearin) on the offences under Insolvency and Bankruptcy Code, 2016F
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If Special Court is not constituted, there (ould arise a clear problem for institution of proceedin)sF
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=o(ever, nonconstitution of Special Court (ill have no bearin) on the investi)ation of offencesF
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Special Court dealin) (ith only the offences under Insolvency and Bankruptcy Code, 2016 cannot e>ercise its po(er available under the Companies ctF
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Special Court if is dealin) primarily (ith offences under the Companies ct, can also deal (ith any other offence by virtue of its po(er available therein and such other offence may include offences under Insolvency and Bankruptcy Code, 2016. GGGGGGGGGGG
