The Judge of the Court of Sessions is not empowered to try breaches of the Bankruptcy Code: Bombay HC

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The Bombay High Court has said that only Special Courts composed of Metropolitan Magistrates or First Class Judicial Magistrates are entitled to hear claims under the Insolvency and Bankruptcy Code (IBC), not Compound Courts judges of the Court of Session.

Judge SK Shinde was hearing a plea filed by two residents of Nagpur, challenging an order of the Mumbai Court of Sessions subpoenaing them in a complaint filed by the Insolvency and Bankruptcy Board of India (IBBI), a statutory body under the IBC. The motion stated that the Sessions Judge had no jurisdiction to hear the complaint filed by IBBI.

The petition added that, pursuant to Section 236 of the IBC, special courts under the Companies Act were empowered to try offenses under the IBC as a court of session. The petitioners argued that the objective behind Section 236 was speedy trial of offenses and to achieve this two classes of special courts were introduced. One consists of a Judge serving as a Sessions Judge or Additional Sessions Judge, and another consists of a Metropolitan or Judicial Magistrate First Class.

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Attorney Amir Arsiwala, arguing for the petitioners, argued that by amending Section 435 of the Companies Act, after Section 236 of the IBC, the legislature intended that for a speedy trial of offenses under the IBC, the Metropolitan Magistrate or the Judicial Magistrate shall be courts deemed to be special courts.

The High Court accepted this assertion and observed that the aim of the legislature was not to overload a special court of session judge with trials under the IBC.

“If trials for offenses under the IB Code were also to be tried by the Special Court consisting of a Sessions Judge or an Additional Sessions Judge, it would be frustrating to oppose the expedited trial, for which the special courts were created,” noted Judge Shinde.

The court said that courts composed of session judges should try offenses under the Companies Act, while courts composed of magistrates should try offenses under laws other than the Companies Act. With this, the Court concluded that the proceedings initiated by the IBBI in the Court of Sessions were not viable. The order-issuing process against the petitioners was found to be incompetent, unsustainable and therefore quashed.

However, at the request of lawyers Pankaj Vijayan and Mohammed Varawala appearing for the Indian Insolvency and Bankruptcy Board, the enforcement of the order has been stayed by Judge Shinde until March 14.

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