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Insolvency and Bankruptcy Board of India vs. Satyanarayan Bankatlal Malu and Ors.

Not available · 2024 INSC 319Decided 19 Apr 2024
Not available
Justice B.R. Gavai · Justice Sandeep Mehta

Background

After a company's insolvency resolution process was withdrawn based on a settlement that the ex-directors then failed to honor, the Insolvency and Bankruptcy Board of India filed a criminal complaint against the ex-directors for offences under the Insolvency and Bankruptcy Code. A Sessions Judge issued process against them, but the Bombay High Court quashed the proceedings, holding that a Sessions Judge lacked jurisdiction to try such offences under Section 236 of the Code.

Decision Breakdown

The Supreme Court examined Section 236(1) of the Code, which states that offences under it "shall be tried by the Special Court" and that such Special Courts "shall be deemed to be a Court of Session", meaning that the reference to trial procedure incorporates that of a Sessions Court. The Court held that offences under the Code carrying imprisonment of two years or more must be tried by a Special Court presided over by a Sessions Judge or Additional Sessions Judge (not a Magistrate). It ruled that the High Court erred in quashing the complaint entirely instead of merely directing that it be presented before the appropriate court, allowed the appeal, and remitted the matter back to the High Court to decide the case afresh on its merits.

Lesson Learnt

Offences under the Insolvency and Bankruptcy Code carrying a punishment of two years or more must be tried by a Sessions-level Special Court, and even where a complaint is initially filed before the wrong forum, courts should generally redirect it to the correct court rather than quashing it outright.

Official source (sci.gov.in)View Judgment (PDF)

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