TaxTMI 
TaxTMI 
2024 (4) TMI 914
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts. 2.6 Hence, this Appeal. II. SUBMISSIONS 3. We have heard Shri S.V. Raju, learned Additional Solicitor General of India ("ASG" for short) appearing for the Appellant- Board and Shri Amir Arsiwala, Advocate on Record, appearing for the Respondents/Ex-Directors of the Corporate Debtor. 4. Shri S.V. Raju, learned ASG submitted that the learned Single Judge of the High Court has grossly erred in quashing the proceedings. Shri Raju submitted that the learned Single Judge of the High Court has grossly erred in holding that, in view of the Companies (Amendment) Act, 2017 (which came into effect from 7th May 2018), only the offences committed under the Companies Act can be tried by Special Court consisting of Sessions Judge or Additional Sessions Judge. He submitted that the reasoning given by the learned Single Judge that the offences other than the Companies Act cannot be tried by the Special Court consisting of Sessions Judge or Additional Sessions Judge is totally in ignorance of the provisions of sub-section (1) of Section 236 of the Code. 5. Learned ASG submitted that sub-section (1) of Section 236 of the Code provides that the offences under the Code shall be tried by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is Court in the case of Girnar Traders (3) vs. State of Maharashtra and others (2011) 3 SCC 1. 9. Learned ASG further submits that the Statement of Objects and Reasons (SOR) to the Companies (Amendment) Act, 2017, amending the Companies Act, 2013 clearly shows that the amendment is for the purposes of restricting only to the Companies Act and not for any other purpose. He therefore submits that the finding of the learned Single Judge of the High Court that in view of the Companies (Amendment) Act, 2017, the Special Court consisting of Sessions Judge or Additional Sessions Judge will not have the jurisdiction to entertain the complaint in question is totally erroneous. 10. Learned ASG submits that, in any event, the learned Single Judge of the High Court has erred in quashing the complaint. It is submitted that, in the event the learned Single Judge found that the Special Court consisting of Sessions Judge or Additional Sessions Judge did not have jurisdiction and it is the Special Court of Metropolitan Magistrate or Judicial Magistrate First Class which has jurisdiction, then it should have returned the complaint for presentation of the same before the competent court having juri....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reference is made by the subsequent statute. Learned counsel submits that in the present case, a general reference is made to Chapter XXVIII of the Companies Act. It is therefore submitted that, since a general reference is made, the present case would not be a case of 'legislation by incorporation' but would be a case of 'legislation by reference'. 16. Learned counsel submits that in any case, the Respondents Nos.1 and 2 have a good case on merits. He submits that the learned Single Judge of the High Court has not considered the merits of the matter and in the event this Court holds that the learned Single Judge was not justified in quashing the proceedings, the matter be remitted to the learned Single Judge of the High Court for deciding it afresh on merits. 17. Shri Vikas Mehta, learned Advocate on Record for the Appellant-Board, in rejoinder, reiterated the submissions made by Shri S.V. Raju, learned ASG. He submits that the legislative intent is clear. If the legislature wanted to take out the offences punishable under the Code from the ambit of Chapter XXVIII of the Companies Act, 2013, nothing prevented it from making an amendment to the Code itself. III. CONSIDERATION O....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ss having jurisdiction to try any offence under this Act or under any previous company law. (2) A Special Court shall consist of a Single Judge who shall be appointed by the Central Government with the concurrence of the Chief Justice of the High Court within whose jurisdiction the judge to be appointed is working. (3) A person shall not be qualified for appointment as a Judge of a Special Court unless he is, immediately before such appointment, holding office of a Sessions Judge or an Additional Sessions Judge." Section 435 (after the 2018 Amendment) "435. Establishment of Special Courts.-(1) The Central Government may, for the purpose of providing speedy trial of offences under this Act, except under section 452, by notification, establish or designate as many Special Courts as may be necessary. (2) A Special Court shall consist of- (a) a single judge holding office as Session Judge or Additional Session Judge, in case of offences punishable under this Act with imprisonment of two years or more; and (b) a Metropolitan Magistrate or a Judicial Magistrate of the First Class, in the case of other offences, who shall be appointed by the Central Government with the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate or a Judicial Magistrate of the First Class in the case of other offences, i.e., offences punishable with imprisonment of less than two years. 24. It is thus clear that Section 435 of the Companies Act, 2013 as it originally existed, provided for only one class of Special Courts i.e. a person holding office of a Sessions Judge or an Additional Sessions Judge and all offences under the Companies Act, 2013 were required to be tried by such Special Courts. The 2015 Amendment to Section 435 also provided for only one class of Special Courts i.e. a person holding the rank of a Sessions Judge or an Additional Sessions Judge. The change that was brought out was that, only offences punishable under the Companies Act, 2013 with imprisonment of two years or more were to be tried by the Special Courts, whereas all other offences i.e. offences punishable with imprisonment of less than two years were to be tried by the jurisdictional Metropolitan Magistrate or the Judicial Magistrate of the First Class. By the 2018 Amendment, two classes of Special Courts were established. The first class of Special Courts comprised of an officer holding the office as Sessions Judge or Additional Sessions ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... so much so that the repeal of the former leaves the latter wholly untouched. In the case, however, of a reference or a citation of one enactment by another without incorporation, the effect of a repeal of the one "referred to" is that set out in Section 8(1) of the General clauses Act : "8. (1) Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals and re-enacts, with or without modification, any provision of a former enactment, then references in any other enactment or in any instrument to the provision so repealed shall, unless a different intention appears: be construed as references to the provision so re-enacted." On the other hand, the effect of incorporation is as stated by Brett, L.J. in Clarke v. Bradlaugh [1881 8 QBD 63] : "Where a statute is incorporated, by reference, into a second statute the repeal of the first statute by a third does not affect the second." This is analogous to, though not identical with the principle embodied in Section 6-A of the General Clauses Act enacted to define the effect of repeals effected by repealing and amending Acts which runs in these terms: "6-A. Where any Central Act or Regulati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n by 'incorporation' but a definition by 'reference' and therefore amendment to the said definition would also be applicable for the purposes of taxation under the Orissa Taxation Act. 29. Rejecting the said contention and referring to various earlier judgments, this Court observed thus: "29. The question then remains as to whether these vehicles though registrable under the Act are motor vehicles for the purpose of the Taxation Act. It has already been pointed out that before the amendment vehicles used solely upon the premises of the owner, though they may be mechanically propelled vehicles adapted for use upon roads were excluded from the definition of 'motor vehicle'. If this definition which excludes them is the one which is incorporated by reference under Section 2(c) of the Taxation Act, then no tax is leviable on these vehicles under the Taxation Act. Shri Tarkunde for the State of Orissa contends that the definition of 'motor vehicle' in Section 2(c) of the Taxation Act is not a definition by incorporation but only a definition by reference, and as such the meaning of 'motor vehicle' for the purpose of Section 2(c) of the Taxation Act would be the same as defined from t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t quarter is refundable. If this be the purpose and object of the Taxation Act, when the motor vehicle is defined under Section 2(c) of the Taxation Act as having the same meaning as in the Motor Vehicles Act, 1939, then the intention of the Legislature could not have been anything but to incorporate only the definition in the Motor Vehicles Act as then existing, namely, in 1943, as if that definition was bodily written into Section 2(c) of the Taxation Act. If the subsequent Orissa Motor Vehicles Taxation (Amendment) Act, 1943, incorporating the definition of 'motor vehicle' referred to the definition of 'motor vehicle' under the Act as then existing, the effect of this legislative method would, in our view, amount to an incorporation by reference of the provisions of Section 2(18) of the Act in Section 2(c) of the Taxation Act. Any subsequent amendment in the Act or a total repeal of the Act under a fresh legislation on that topic would not affect the definition of 'motor vehicle' in Section 2(c) of the Taxation Act. This is a well-accepted interpretation both in this country as well as in England which has to a large extent influenced our law. This view is further reinforced by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, so that in effect the "Local Act" was held to be the enactment of a Special Law for the acquisition of land for the special purpose. It was in the context of these and several other provisions which pointed to the absorption of certain of the provisions of the Land Acquisition Act into the "Local Act" with vital modifications that Privy Council observed at p. 266: "But Their Lordships think that there are other and perhaps more cogent objections to this contention of the Secretary of State, and their Lordships are not prepared to hold that the subsection in question, which was not enacted till 1921, can be regarded as incorporated in the Local Act of 1911. It was not part of the Land Acquisition Act when the Local Act was passed, nor in adopting the provisions of the Land Acquisition Act is there anything to suggest that the Bengal Legislature intended to bind themselves to any future additions which might be made to that Act. It is at least conceivable that new provisions might have been added to the Land Acquisition Act which would be wholly unsuitable to the local code. Nor again, does Act 19 of 1921 contain any provision that the amendments enacted by it are to be treated....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Section 2. The question was whether by virtue of Section 8 of the General Clauses Act, the definition of the word "employer" in clause (e) of Section 2 of the Coal Mines Provident Fund and Bonus Schemes Act should be construed with reference to the definition of the word, "owner" in clause (1) of Section 2 of Act 35 of 1952, which repealed the earlier Act and re-enacted it. It may be mentioned that according to Section 2(1) of Act 35 of 1952 the word "owner", when used in relation to a mine, means "any person who is the immediate proprietor or lessee or occupier of the mine or of any part thereof and in the case of a mine the business whereof is being carried on by a liquidator or receiver, such liquidator or receiver...." The expression "coal mine" is separately defined in clause (b) of Section 2 of the Coal Mines Provident Fund and Bonus Schemes Act, 1948. Ramaswami, J. speaking for the Court observed at p. 261 : "As a matter of construction it must be held that all works, machinery, tramways and sidings, whether above or below ground, in or adjacent to a coal mine will come within the scope and ambit of the definition only when they belong to the coal mine. In other wor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion Act." [ Emphasis supplied ] 30. It is thus clear that this Court found that, if the vehicles do not use the roads, notwithstanding that they are registered under the Motor Vehicles Act, they cannot be taxed under the Orissa Taxation Act. This Court held that the intention of the Legislature could not have been anything but to incorporate only the definition in the Motor Vehicles Act, as it existed in 1943, as if that definition was bodily written into Section 2(c) of the Orissa Taxation Act. It further held that, if the subsequent Orissa Motor Vehicles Taxation (Amendment) Act, 1943, incorporating the definition of 'motor vehicle' referred to the definition of 'motor vehicle' under the Motor Vehicles Act, as it existed at the time of enactment of the subsequent Act; the effect of this legislative method would amount to an incorporation by reference to the provisions of Section 2(18) of the Motor Vehicles Act in Section 2(c) of the Orissa Taxation Act. It was further held that, any subsequent amendment in the Motor Vehicles Act or a total repeal of the Motor Vehicles Act under a fresh legislation on that topic would also not affect the definition of 'motor vehicle' in Sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dure specified three grounds on which a second appeal could be brought to the High Court and one of these grounds was that the decision appealed against was contrary to law. It was sufficient under Section 100 as it stood then that there should be a question of law in order to attract the jurisdiction of the High Court in second appeal and, therefore, if the reference in Section 55 were to the grounds set out in the then existing Section 100, there can be no doubt that an appeal would lie to this Court under Section 55 on a question of law. But subsequent to the enactment of Section 55, Section 100 of the Code of Civil Procedure was substituted by a new section by Section 37 of the Code of Civil Procedure (Amendment) Act, 1976 with effect from February 1, 1977 and the new Section 100 provided that a second appeal shall lie to the High Court only if the High Court is satisfied that the case involves a substantial question of law. The three grounds on which a second appeal could lie under the former Section 100 were abrogated and in their place only one ground was substituted which was a highly stringent ground, namely, that there should be a substantial question of law. This was the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....poration is a common legislative device employed by the legislature, where the legislature for convenience of drafting incorporates provisions from an existing statute by reference to that statute instead of setting out for itself at length the provisions which it desires to adopt. Once the incorporation is made, the provision incorporated becomes an integral part of the statute in which it is transposed and thereafter there is no need to refer to the statute from which the incorporation is made and any subsequent amendment made in it has no effect on the incorporation statute. Lord Esher, M.R., while dealing with legislation in incorporation in In re Wood's Estate [(1886) 31 Ch D 607] pointed out at p. 615: "If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act just as if they had been actually written in it with the pen, or printed in it, and, the moment you have those clauses in the later Act, you have no occasion to refer to the former Act at all." Lord Justice Brett, also observed to the same effect in Clarke v. Bradlough [(1881) 8 QBD 63, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... operation of the Pre-emption Act and the expression 'agricultural land' in the later Act has to be read as if the definition in the Alienation of Land Act, 1900, had been bodily transposed into it." The decision of this Court in Bolani Ores Ltd. v. State of Orissa [(1974) 2 SCC 777 : AIR 1975 SC 17 : (1975) 2 SCR 138] also proceeded on the same principle. There the question arose in regard to the interpretation of Section 2(c) of the Bihar and Orissa Motor Vehicles Taxation Act, 1930 (hereinafter referred to as "the Taxation Act"). This section when enacted adopted the definition of "motor vehicle" contained in Section 2(18) of the Motor Vehicles Act, 1939. Subsequently, Section 2(18) was amended by Act 100 of 1956 but no corresponding amendment was made in the definition contained in Section 2(c) of the Taxation Act. The argument advanced before the Court was that the definition in Section 2(c) of the Taxation Act was not a definition by incorporation but only a definition by reference and the meaning of "motor vehicle" in Section 2(c) must, therefore, be taken to be the same as defined from time to time in Section 2(18) of the Motor Vehicles Act, 1939. This argument was negat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... their significance particularly when the two Acts can coexist and operate without conflict. 87. However, since this aspect was argued by the learned counsel appearing for the parties at great length, we will proceed to discuss the merit or otherwise of this contention without prejudice to the above findings and as an alternative plea. These principles have been applied by the courts for a considerable period now. When there is general reference in the Act in question to some earlier Act but there is no specific mention of the provisions of the former Act, then it is clearly considered as legislation by reference. In the case of legislation by reference, the amending laws of the former Act would normally become applicable to the later Act; but, when the provisions of an Act are specifically referred and incorporated in the later statute, then those provisions alone are applicable and the amending provisions of the former Act would not become part of the later Act. This principle is generally called legislation by incorporation. General reference, ordinarily, will imply exclusion of specific reference and this is precisely the fine line of distinction between these two doctrines.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s discrimination and palpable arbitrariness and consequently invite the wrath of Article 14 of the Constitution. While referring to the principle stated in Hindusthan Coop. Insurance Society Ltd. [(1930-31) 58 IA 259 : AIR 1931 PC 149] and clarifying the distinction between the two doctrines, the Court declined to apply any specific doctrine and primarily based its view on the plea of discrimination but still observed: (Maharashtra SRTC case [(2003) 4 SCC 200] , SCC p. 208, para 11) "11. ... The fact that no clear-cut guidelines or distinguishing features have been spelt out to ascertain whether it belongs to one or the other category makes the task of identification difficult. The semantics associated with interpretation play their role to a limited extent. Ultimately, it is a matter of probe into legislative intention and/or taking an insight into the working of the enactment if one or the other view is adopted. The doctrinaire approach to ascertain whether the legislation is by incorporation or reference is, on ultimate analysis, directed towards that end. The distinction often pales into insignificance with the exceptions enveloping the main rule." 123. In the case in han....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isition Act in the provisions of the MRTP Act, 1966. 40. It will also be relevant to note that this Court in a catena of cases has held that the Code is a self-contained Code. Reference in this respect could be made to the following judgments of this Court: (i) Innoventive Industries Limited vs ICICI Bank and another (2018) 1 SCC 407; (ii) Principal Commissioner of Income Tax vs Monnet Ispat and Energy Limited (2018) 18 SCC 786; (iii) E.S. Krishnamurthy and others vs Bharath Hi-Tech Builders Private Limited (2022) 3 SCC 161; (iv) Pratap Technocrats Private Limited and others vs Monitoring Committee of Reliance Infratel Limited and another (2021) 10 SCC 623; (v) V. Nagarajan vs. SKS Ispat and Power Limited and others (2022) 2 SCC 244; (vi) Embassy Property Developments Private Limited vs State of Karnataka and others (supra); and (vii) Bharti Airtel Ltd. and another vs Vijaykumar V. Iyer and others (supra). V. CONCLUSION 41. Applying these legal principles, we will have to analyze the provisions of Section 236(1) of the Code. Under Section 236(1) of the Code, reference is "offences under this Code shall be tried by the Special Court established under Chapter....