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Special Courts under Companies Act, 2013

By August 29, 2020 August 31st, 2020 2 Comments

A. INTRODUCTION:

The Ministry of Corporate Affairs vide notification dated 18th May, 2016 has notified certain provisions under the Companies Act, 2013 (“CA, 2013”) for the setting up of Special Courts to specifically deal with and dispose of criminal offences under the CA, 2013 which are punishable with imprisonment of a period of 2 years or more in an expeditious manner. The main objective for the setting up of Special Courts is to divide the disposal mechanism i.e. the grave offences would be tried by the Special Courts, whereas the minor contraventions and violations would be tried by magistrate courts.

B. PROVISIONS UNDER CA, 2013:

Chapter XXVIII constituting Sections 435 to 446B deals with the Special Courts under the CA, 2013.

1.Establishment:

Pursuant to Section 435 of the CA, 2013, Special Courts can be established or designated as per the direction of the Central Government through a notification for the purpose of speedy trial of offences under the CA, 2013. A Special Court shall be presided by a single judge holding office as a Sessions Judge or Additional Sessions Judge, in the event of offences punishable with imprisonment for a period of two years or more and a Metropolitan Magistrate or Judicial Magistrate of First Class, in the cases of other offences, who shall be appointed by the Central Government in concurrence with the Chief Justice of the High Court within whose jurisdiction the judge to be appointed would be working.

2. Offences Triable:

  • Those offences which provide for imprisonment under the CA, 2013 for a period of 2 years or more.
  • Where the Magistrate thinks fit that detention is not necessary and the case is forwarded for any offence committed under the CA, 2013. This shall be applicable in situations wherein the investigation cannot be completed within a period of 24 hours as per the Code of Criminal Procedure (“CrPC”) and there is reason to believe that the accusation or the information would be well-founded and the detention shall be for a period of 15 days minimum, if ordered by a Judicial Magistrate or a period of 7 days in the event ordered by an Executive Magistrate, as per the case. The Special Court shall have the same power as that of a Magistrate who may have the jurisdiction to try the case.
  • Cognizance of offences under the CA, 2013 without an accused being committed to it for trial upon complaint being filed in that behalf or in accordance with the police report with respect to facts which would constitute such offence.
  • At the same trial, try an offence which may be charged for the accused under CrPC along with the offence under the CA, 2013.
  • An offence may be tried in a summary way if deemed fit by the Special Court under the CA, 2013 which may be punishable with an imprisonment for a term which shall not exceed 3 years. However, in such a case, any such conviction in such trial, the person shall not be sentenced to imprisonment for a period exceeding 1 year.

3. Prosecution before Special Court:

A prosecution before a Special Court shall be conducted by a Public Prosecutor in accordance with the CrPC.

4. Non-Cognizable Offences:

The courts shall not take any cognizance of offences committed under the CA, 2013 which has been alleged to have been committed by any company or any officer except when a complaint in writing is made by the Registrar, a shareholder or member of the company or of a person authorized by the Central Government in this behalf. Courts may take cognizance of offences relating to the issue and transfer of securities and non-payment of dividend on a complaint made in writing by a person authorized by the Securities and Exchange Board of India. However, in the event a complaint has been made by a Registrar or person authorized by the Central Government, it shall not be mandatory for such person to be present unless required by the court. The aforesaid shall not be applicable to any action taken by the liquidator of a company in respect of matters in relation to winding up of companies under the CA, 2013. It may also be noted here that liquidator shall in no manner whatsoever be considered as the officer of the company for the purpose of the aforesaid.

5. Appeal

Any appeals with respect to any orders of the Special Courts shall lie with the High Court of that particular jurisdiction.

It may be noted that if any offence has been committed under the CA, 2013 which is triable by a Special Court and the Special Court is yet to be established, such an offence shall be tried by a Court of Sessions or the Court of Metropolitan Magistrate or a Judicial Magistrate of First Class exercising jurisdiction over the particular area.

6. Factors determining punishment level:

While deciding the amount of fine or imprisonment, the Special Courts shall have due regard to the factors which include the size of the company, nature of business carried on by the company, injury to the public interest, nature of the default and the repetition of default.

C. DIFFERENCE BETWEEN NATIONAL COMPANY LAW TRIBUNAL AND SPECIAL COURTS:

Parameters: Special Courts: National Company Law Tribunal (NCLT):
Provisions under CA, 2013. Chapter XXVIII deals with Special Courts under the CA, 2013. Section 408 of the CA, 2013 deals with the constitution of the NCLT.
Nature: Special Courts are courts which are judicial bodies. Adjudicating Authority (Quasi Judicial Body)
Presided by: A single judge holding office as a Sessions Judge or Additional Sessions Judge and a Metropolitan Magistrate or Judicial Magistrate of First Class, in the cases of other offences. A President, Judicial Members and Technical Members.
Deals with cases in relation to: All offences under the CA, 2013 and any offences in relation to companies under CrPC. Arrangement and Compromise, Winding up, Revival of Companies, Oppression and Mismanagement.
Forum for Appeal: High Court of the particular jurisdiction of the Special Court. National Company Law Appellate Tribunal.

D. VARIOUS SPECIAL COURTS UNDER CA, 2013:

Name of the State/Union Territory: Name of the Special Court:
Jammu & Kashmir Courts of Additional Special Judge, Anti-Corruption at Jammu & Srinagar.
Goa Court of District Judge-1 & Additional Sessions Judge, Panaji.
Dadar & Nagar Haveli, Silvassa Court of Principle District and Sessions Judge.
Gujarat Court of Principle District and Sessions Judge, Ahmedabad (rural) Mirzapur.
Madhya Pradesh 9th Additional Sessions Judge, Gwalior.
Andaman and Nicobar Islands Court of Additional District and Session Judge, Port Blair.
West Bengal 2nd Special Court, Calcutta
Nagaland Court of District and Sessions Judge, Kohima
Arunachal Pradesh West Sessions Dividon, Yupia
Mizoram Court of District and Sessions Judge at Aizwal
Whole State of Maharashtra except Pune, Ahmednagar, Kolhapur, Solapur, Satara, Sangli, Ratnagiri and Sindhudurg Districts of the State of Maharashtra Presiding Officers of Court No. 37 and 58 of the City Civil and Sessions Court, Greater Mumbai
Maharashtra Court of District Judge-1 and Additional Sessions Judge, Pune
Districts of Coimbatore, Dharmapuri, Dindigul, Erode, Krishnagiri, Namakkal, Nilgiris, Salem and Tiruppur I Additional District and Sessions Court, Coimbatore
Manipur Sessions Judge, Imphal East
Puducherry II Additional District Sessions Court, Puducherry
Punjab Court of Sessions Judge and 2nd Additional Sessions Judge, SAS Nagar
Haryana Court of Sessions Judge and 2nd Additional Sessions Judge, Gurgaon
Chandigarh Court of Sessions Judge and 2nd Additional Sessions Judge, Chandigarh
Rajasthan Court of Special Judge, (Sati Niwaran), Jaipur
Chhattisgarh Sessions Judge, Bilaspur
Meghalaya  Court of District and Sessions Judge, Shillong
Bihar Court of Additional District and Sessions Judge, Patna
Karnataka LIX Additional City and Sessions Judge, Bengaluru
Assam  Additional District and Sessions Judge No. 1, Kamrup (M), Guwahati
Odisha  District and Sessions Judge, Cuttack
Lakshwadeep District and Sessions Court, Kavaratti
Kerala  Additional District and Sessions Court VII, Ernakulam
Uttar Pradesh  9th Court of Additional District and Sessions Judge, Kanpur Nagar
Delhi Court of Additional Sessions Judge-03, Southwest District, Dwaraka
Andhra Pradesh Court of IV Additional District Judge-cum-II Additional Metropolitan Sessions Judge, Vishakapatnam.
Telangana Special Court of trial of Economic Offences-cum-VIII Additional Metropolitan Sessions Judge Court- cum-XXII Additional Chief Judge, City Civil Court, Hyderabad.

E. CONCLUSION:

Considering the fact that Special Courts are established exclusively for redressing offences committed by companies, these courts are considered to be extremely efficient in comparison to Sessions Courts. Such a step is an invite move to additionally improve the simplicity of doing business, authorize corporate administration/governance and decrease the burden with regard to the number of suits pending at different courts.

Authors: Prashant Jain, Co-Founder & Partner; Abhishek Gupta, Associate.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. For any queries, the authors can be reached at (i) prashant@samistilegal.in (ii) abhishek@samistilegal.in.

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