1. Complaint under Section 236, Insolvency and Bankruptcy Code — Non-compliance with settlement terms — Challenge to jurisdiction of Special Court presided by Sessions Judge. (Para 1 , 2 )
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2024 Supreme(SC) 355
SUPREME COURT OF INDIA
B.R. GAVAI, SANDEEP MEHTA, JJ.
Insolvency and Bankruptcy Board of India – Appellant
Versus
Satyanarayan Bankatlal Malu and Others – Respondents
Criminal Appeal No. 3851 of 2023
Decided On : 19-04-2024
Important Points
IMPORTANT POINT
Offences punishable under Insolvency and Bankruptcy Code, 2016 having imprisonment of two years or more will have to be tried by a Special Court presided by a Sessions Judge or an Additional Sessions Judge.
Offences punishable under Insolvency and Bankruptcy Code, 2016 having imprisonment of two years or more will have to be tried by a Special Court presided by a Sessions Judge or an Additional Sessions Judge.
Subject
Insolvency and Bankruptcy Law - Criminal Jurisdiction
Act Referred
CIVIL PROCEDURE CODE: S.100
COMPANIES ACT: S.435(3)
CRIMINAL PROCEDURE CODE: S.190, S.193, S.200
INSOLVENCY AND BANKRUPTCY CODE: S.236, S.73(a), S.235(a), S.14, S.12(a)
MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT: S.55
MOTOR VEHICLES ACT: S.2(18)
ORISSA TAXATION ACT: S.2(c)
COMPANIES ACT: S.435(3)
CRIMINAL PROCEDURE CODE: S.190, S.193, S.200
INSOLVENCY AND BANKRUPTCY CODE: S.236, S.73(a), S.235(a), S.14, S.12(a)
MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT: S.55
MOTOR VEHICLES ACT: S.2(18)
ORISSA TAXATION ACT: S.2(c)
Headnote
Insolvency and Bankruptcy Code, 2016 – Section 236 read with Sections 190, 193 and 200 of Criminal Procedure Code, 1973 – Non-compliance of terms of One Time Settlement (“OTS”) – Criminal prosecution of Ex-Directors of Company – Provision of Section 435 of Companies Act, 2013 with regard to Special Court would become a part of Section 236(1) of Code as on date of its enactment – If that be so, any amendment to Section 435 of Companies Act, 2013, after date on which Code came into effect would not have any effect on provisions of Section 236(1) of Code – Special Court at that point of time only consists of a person who was qualified to be a Sessions Judge or an Additional Sessions Judge – Even if it is held that reference in Section 236(1) of Code is a ‘legislation by reference’ and not ‘legislation by incorporation’, still offences punishable under the Code having imprisonment of two years or more will have to be tried by a Special Court presided by a Sessions Judge or an Additional Sessions Judge – Special Court presided by a Sessions Judge or an Additional Sessions Judge will have jurisdiction to try complaint under the Code. (Paras 43, 45 and 48)
Facts of the case:
Present appeal challenges judgment and order dated 14th February 2022, passed by Single Judge of High Court of Judicature at Bombay in Writ Petition No. 2592 of 2021, thereby allowing petition filed by Respondents challenging order dated 17th March 2021 passed by Sessions Judge. Sessions Judge had directed issuance of process against Respondents on account of a Complaint filed by Insolvency and Bankruptcy Board of India under Section 236 of the Insolvency and Bankruptcy Code, 2016 read with Sections 190, 193 and 200 of Code of Criminal Procedure, 1973 for the offences punishable under Section 73(a) and Section 235A of Code.
Findings of Court:
since the learned single judge of the High Court has not considered the merits of the matter, the matter is remitted to the learned single judge of the High Court for considering the petition of the respondents afresh on merits.
Result : Appeal allowed.
Legal Category Hierarchy
- insolvency and bankruptcy law
- statutory interpretation
- practice and procedure
Advocates appeared:
For the Appellant(s) : Mr. S V Raju, Sr. Adv. Mr. Vikas Mehta, AOR Ms. Rashi Rampal, Adv. Mr. Hitarth, Adv.
For the Respondent(s): Mr. Amir Arsiwala, AOR Mr. Anand Dilip Landge, Adv. Mr. Siddharth Dharmadhikari, Adv. Mr. Aaditya Aniruddha Pande, AOR Mr. Bharat Bagla, Adv. Mr. Sourav Singh, Adv. Mr. Aditya Krishna, Adv. Ms. Preet S. Phanse, Adv. Mr. Adarsh Dubey, Adv.
For the Appellant(s) : Mr. S V Raju, Sr. Adv. Mr. Vikas Mehta, AOR Ms. Rashi Rampal, Adv. Mr. Hitarth, Adv.
For the Respondent(s): Mr. Amir Arsiwala, AOR Mr. Anand Dilip Landge, Adv. Mr. Siddharth Dharmadhikari, Adv. Mr. Aaditya Aniruddha Pande, AOR Mr. Bharat Bagla, Adv. Mr. Sourav Singh, Adv. Mr. Aditya Krishna, Adv. Ms. Preet S. Phanse, Adv. Mr. Adarsh Dubey, Adv.
Table of Contents
2. Whether reference to Special Courts under Companies Act in the Code constitutes legislation by reference or incorporation, determining the impact of subsequent amendments on jurisdiction. (Para 4 , 5 , 6 , 8 , 9 , 12 , 13 , 14 , 15 )
3. The specific reference to Special Courts in a self-contained code constitutes legislation by incorporation, meaning subsequent amendments to the referred Act do not alter the jurisdiction. (Para 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 )
4. Specific reference to a statutory provision in a self-contained code amounts to legislation by incorporation, freezing the provision as it existed at the time of enactment. (Para 43 , 44 )
5. Appeal allowed — High Court order set aside — Special Court presided by Sessions Judge held to have jurisdiction — Matter remitted for decision on merits. (Para 46 , 47 , 48 )
6. What is the legal distinction between legislation by reference and legislation by incorporation?
Legislation by reference is a citation where subsequent amendments to the referred statute apply to the citing statute. Legislation by incorporation involves the bodily lifting of provisions into a new statute, making them an integral part such that subsequent amendments to the original statute do not affect the incorporating statute. (Para 26 , 27 , 34 )
7. Does the reference to Special Courts under the Companies Act in Section 236(1) of the IBC constitute legislation by reference or incorporation?
It is legislation by incorporation. Because the reference is specific and the IBC is a self-contained code, the provisions regarding Special Courts were incorporated as they existed at the time of the Code's enactment, and subsequent amendments to the Companies Act do not apply. (Para 41 , 42 , 43 , 44 )
8. How does the status of a statute as a self-contained code affect the application of referential legislation doctrines?
When a statute is a self-contained code, the application of legislation by reference or incorporation loses significance if the two Acts can coexist without conflict. However, specific references in such codes generally lean toward incorporation rather than general reference. (Para 37 , 38 , 40 )
JUDGMENT :
B.R. GAVAI, J.
| INDEX | |
| I. | FACTUAL BACKGROUND |
| II. | SUBMISSIONS |
| III. | CONSIDERATION OF STATUTORY PROVISIONS |
| IV. | CONSIDERATION OF PRECEDENTS |
| V. | CONCLUSION |
I. FACTUAL BACKGROUND
1. This appeal challenges the judgment and order dated 14th February 2022, passed by the learned Single Judge of the High Court of Judicature at Bombay in Writ Petition No. 2592 of 2021, thereby allowing the petition filed by Satyanarayan Bankatlal Malu and Ramesh Satyanarayan Malu, the Ex-Directors of M/s. SBM Paper Mills Pvt. Ltd. (hereinafter referred to as ‘the Respondents’) challenging the order dated 17th March 2021 passed by the learned Additional Sessions Judge, 58th Court in Special Case No. 853 of 2020 (‘learned Sessions Judge’ for short). The learned Sessions Judge had directed issuance of process against the Respondents on account of a Complaint filed by the Insolvency and Bankruptcy Board of India (hereinafter referred to as ‘the Appellant-Board’) under Section 236 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the Code”) read with Sections 190, 193 and 200 of the Code of Criminal Procedure, 1973 (“Cr.P.C.) for the offences punishable under Section 73(a) and Section 235A of the Code.
2. The facts in brief, giving rise to the present appeal are as under:
2.1 M/s. SBM Paper Mills Private Limited (hereinafter referred to as “the Corporate Debtor”) filed a petition on 4th September 2017 under Section 10 of the Code for initiation of the Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) of itself vide CP/1362/I&BC/NCLT/MB/MAH/2017. The National Company Law Tribunal, Mumbai Bench (hereinafter referred to as “the NCLT”) vide order dated 17th October 2017, admitted the Petition and directed the moratorium to commence as prescribed under Section 14 of the Code and directed certain statutory steps to be taken as a consequence thereof. Vide the said order, the NCLT also appointed Mr. Amit Poddar as the Interim Resolution Professional (hereinafter referred to as “RP”) to carry out the functions as prescribed under the provisions of the Code.
2.2 In the meanwhile, Mr. Satyanarayan Malu, i.e. the Respondent/Ex-Director of the Corporate Debtor filed an application being M.A. No. 1396/2018 before the NCLT under Section 12A of the Code for the withdrawal of the aforesaid petition under Section 10 in light of a One Time Settlement (“OTS” for short) entered into with the sole Financial Creditor, i.e. Allahabad Bank. On the other hand, the RP had also filed an application being M.A. No. 827/2018 for the approval of the Resolution Plan. The NCLT vide order dated 20th December 2018 allowed the M.A. No. 1396/2018 filed by the Respondent while observing the consent for withdrawal of the petition by the sole Financial Creditor vide letter dated 27th November 2018.
2.3 However, on account of non-compliance of the terms of the OTS by the Respondents, the NCLT issued a Show-Cause Notice against them vide order dated 11th March 2019. The NCLT further found it to be a fit case to propose the prosecution of the Respondents vide order dated 20th August 2019 while hearing an application filed by the sole Financial Creditor being M.A. 494 and 495 of 2019 thereby seeking prosecution of the Respondents.
2.4 Thereafter, on 22nd September 2020, the Appellant-Board filed a Complaint against the Respondents before the Sessions Judge in Special Case No. 853/2020 under the aforementioned provisions and for offences punishable under Section 73(a) and 235A of the Code for the non-compliance of the terms of the OTS and for not having filed the M.A. 1396/2018 under Section 12A of the Code through the RP. The Sessions Judge vide Order dated 17th March 2021 directed issuance of process against the Respondents and further directed them to be summoned on the next date of hearing.
2.5 Being aggrieved thereby, the Respondents filed a Writ Petition No. 2592 of 2021 before the High Court of Judicature at Bombay, p
