Special Courts under IBC limited to Sessions Judge qualifications existing at Code's enactment under Section 236(1)

The SC held that Special Courts under the Insolvency and Bankruptcy Code (IBC) are limited to Sessions Judge or Additional Sessions Judge qualifications as existed when the Code was enacted. The Court distinguished between legislation by reference and incorporation, ruling that Section 236(1) of the IBC specifically incorporates Chapter XXVIII of the Companies Act, 2013 as it existed at enactment. Therefore, subsequent 2018 amendments to Section 435 of the Companies Act do not apply to IBC proceedings. The HC judgment was quashed and the appeal was allowed.

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Issues Involved:
1. Jurisdiction of Special Courts to try offences under the Insolvency and Bankruptcy Code, 2016 ("the Code").
2. Whether the reference to Special Courts under Section 236(1) of the Code is a "legislation by incorporation" or "legislation by reference".
3. Validity of the High Court's quashing of the complaint on jurisdictional grounds.

Summary:

I. Jurisdiction of Special Courts to Try Offences Under the Code:
The Supreme Court addressed whether the Special Court presided by a Sessions Judge or an Additional Sessions Judge has jurisdiction to try offences under the Code. The High Court had quashed the complaint on the grounds that the Special Court did not have jurisdiction following the Companies (Amendment) Act, 2017, which stipulated that only offences under the Companies Act could be tried by such Special Courts.

II. Legislation by Incorporation vs. Legislation by Reference:
The Supreme Court analyzed whether Section 236(1) of the Code, which states that "offences under this Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act, 2013," constitutes "legislation by incorporation" or "legislation by reference."

Key Points:
- Legislation by Incorporation: The Court held that Section 236(1) of the Code is "legislation by incorporation." This means the provisions regarding Special Courts from Section 435 of the Companies Act, 2013, as they existed when the Code came into effect, were bodily lifted and incorporated into the Code.
- Effect of Amendments: Since it is legislation by incorporation, subsequent amendments to Section 435 of the Companies Act, 2013, do not affect the provisions of Section 236(1) of the Code. Therefore, the Special Courts as defined in the Companies Act at the time the Code was enacted continue to apply.

III. Validity of High Court's Quashing of the Complaint:
The Supreme Court found that the High Court erred in quashing the complaint solely on jurisdictional grounds. Even if the reference was considered "legislation by reference," the offences under the Code punishable with imprisonment of two years or more would still fall under the jurisdiction of Special Courts presided by a Sessions Judge or an Additional Sessions Judge.

Conclusion:
- The Supreme Court quashed and set aside the High Court's judgment and order dated 14th February 2022.
- It was held that the Special Court presided by a Sessions Judge or an Additional Sessions Judge has jurisdiction to try the complaint under the Code.
- The matter was remitted to the High Court for fresh consideration on merits.

The judgment underscores the importance of understanding legislative intent and the distinction between legislation by incorporation and legislation by reference in determining the applicability of statutory provisions.

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