On Friday, the Supreme Court declared that offenses under the Insolvency and Bankruptcy Code (IBC) can be tried by special courts presided over by sessions judges.

A Division Bench, comprising Justices BR Gavai and Sandeep Mehta, made this determination in response to an appeal challenging a Bombay High Court ruling that limited the jurisdiction to hear complaints under the IBC to special courts composed of metropolitan or judicial magistrates.

"We have held that the Sessions judge has the jurisdiction. Since the matter has not been decided on merits, we remand the matter to the (Bombay) High Court for a fresh decision," the Supreme Court said today.

Justice SK Shinde of the Bombay High Court issued the order on February 14, 2022, noting that the legislature's intention was to avoid overburdening special courts presided over by sessions judges with trials related to the Insolvency and Bankruptcy Code (IBC).

The High Court's decision stemmed from a petition filed by two individuals challenging a sessions court's issuance of summons to them in response to a complaint filed by the Insolvency and Bankruptcy Board of India (IBBI), a statutory body under the IBC. The petition argued that the sessions judge lacked jurisdiction to entertain the complaint filed by the IBBI.

The plea highlighted that according to Section 236 of the IBC, special courts established under the Companies Act were authorized to adjudicate offenses under the IBC in their capacity as sessions courts.

The petitioners contended that the purpose of Section 236 was to facilitate expeditious trials of offenses. To achieve this goal, two categories of special courts were established.

The petitioners asserted that the legislature's intention to expedite the trial of IBC offenses was evident in the amendment to Section 435 of the Companies Act, which came after Section 236 of the IBC. They argued that this amendment designated courts with metropolitan magistrates or judicial magistrates as deemed special courts for the swift adjudication of IBC cases. Therefore, according to the petitioners, only these designated courts had the authority to try cases under the IBC.

The High Court accepted this contention.

The High Court observed that courts presided over by sessions judges were designated to try offenses under the Companies Act, while courts with magistrates were tasked with adjudicating offenses under Acts apart from the Companies Act, including the Insolvency and Bankruptcy Code (IBC).

Based on these observations, the High Court concluded that the proceedings initiated by the Insolvency and Bankruptcy Board of India (IBBI) in the sessions court were not legally valid. The order issuing summons against the petitioners was deemed to be without jurisdiction and unsustainable. Consequently, the High Court quashed the order.

The Supreme Court has diverged from this conclusion reached by the High Court.

Before the Supreme Court, the Insolvency and Bankruptcy Board of India (IBBI) was represented by Additional Solicitor General SV Raju, advocates Rashi Rampal and Apoorv Khatore, and Advocate-on-Record (AoR) Vikas Mehta.

The respondents were represented by AoR Amir Arsiwala and advocate Dhaval Deshpande.

The State of Maharashtra was represented by AoR Aaditya Aniruddha Pande and advocates Anand Dilip Landge, Siddharth Dharmadhikari, Bharat Bagla, Sourav Singh, Aditya Krishna, Preet S Phanse, and Adarsh Dubey.