Defences
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This article is written by Sharanya Ramakrishnan who is pursuing a Diploma in Companies Act, Corporate Governance & SEBI Regulations from Lawsikho.

Introduction

Although the Indian Judiciary is well commended for the quality and excellence of its judgments and its diligent efforts in delivering the same, ‘timely justice’ is still an uphill battle. Long periods of time taken in disposal of cases can defeat justice. Cases which require immediate relief are severely affected because of the tardy judicial process. Thus, to tackle this problem, Special Courts have been established to ensure effective and quick disposal of cases.

Special Courts under the Companies Act, 2013

The definition of court under Section 2(29) the Companies Act, 2013, (hereinafter referred to as “the Act”) also includes a Special Court constituted under Section 435 of the Act. Chapter XXVIII of the Act deals with Special Courts. 

In the month of May, 2015, a provision was made under Section 435 of the Companies Act, 2013 (hereinafter referred to as “the Act”) enabling the Central Government to constitute or designate Special Courts through a notification in order to enable speedy trial of offences under the Act.

However, the Companies (Amendment) Act, 2020 has excluded offences under Section 452 (punishment provided for wrongful withholding of any property) of the Act to fall under the jurisdiction of Special Courts. 

Composition and Structure of Special Courts

The composition of Special Courts is bifurcated into two parts depending on the nature of offences to be dealt with by it. A Special Court shall consist of the following:

  1. 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
  2.  A Metropolitan Magistrate or a Judicial Magistrate of the First Class, in the case of other offences.

The judge shall be appointed by the Central Government in consensus with the Chief Justice of the High Court within whose jurisdiction the judge to be appointed is working.

Offences triable by Special Courts

Offences for which imprisonment of 2 years or more is prescribed shall be tried only by the Special Court constituted for the area in which the registered office of the company in relation to which the offence is committed. In case there more Special Courts than one for such area, by such one of them as may be stated in this behalf by the High Court concerned.

The offences that can be tried by the Special Court include but not limited to:

  1. Contravention of provisions of Section 336 of the Act (offences committed by Officers of Companies in liquidation) can warrant an imprisonment for a minimum period of 3 years.
  2. Commission of fraud within the meaning of Section 447 of the Act.
  3. Intentionally providing false evidence under Section 449 of the Act.

Powers and duties of Special Courts

  • Cases where an accused person is forwarded to the Special Court

In case any person accused of, or suspected of committing an offence under the Act, is forwarded to a Magistrate under Section 167(2) or Section 167(2A) of the Criminal Procedure Code, 1973, a detention may be authorised by the Magistrate of such person in custody. 

The maximum period of such detention shall be:

  1. 15 days if the Magistrate is a Judicial Magistrate
  2. 7 days if the Magistrate is an Executive Magistrate.

If, however, in the opinion of the Magistrate, detention of the aforesaid person upon or prior to the expiry of the detention period is not necessary, he shall pass an order for forwarding such person to the Special Court having jurisdiction.

As regards the person forwarded to it, the Special Court is vested with the same power as the Magistrate having jurisdiction to try a case under Section 167 of the Criminal Procedure Code may exercise in respect of an accused person forwarded to him.

  • Cognizance of offence by Special Court without the accused being committed to it for trial

The foremost step towards a trial is taking cognizance of an offence. Cognizance basically means taking a judicial or authoritative notice. However, Section 436 of the Act, allows the Special Court to discard this cardinal rule and proceed to take cognizance of an offence even without committing an accused to it for conducting a trial of the case on:

  1. Scrutiny of the police report received after the conclusion of the investigation consisting of the facts establishing an offence under the Act, or
  2. Receipt of a complaint in respect to the same.
  • Trial of other offences by the Special Court

The Special Court while trying offences under the Act, may also try any other offences committed under any other Acts, with which the accused may be charged at the same trial under the Criminal Procedure Code, 1973.

  • Summary trials by the Special Court
  • The Special Court may, if it thinks necessary to do so, try any offence under the Act in a summary manner if the punishment for the same is imprisonment for a maximum period of 3 years.
  • The Special Court can impose a sentence of imprisonment for a maximum period of 1 year for convictions in a summary trial.
  • The summary trial may be transformed into a regular trial in any of the following cases:
  1. At the beginning or during the course of the trial, the Special Court considers that the nature of the case is one which may require passing of a sentence of imprisonment for a period exceeding 1 year or;
  2. If the Special Court considers the continuing of the summary trial to be undesirable.

Thereafter, the Special Court shall proceed to hear or rehear the case according to the procedure for the regular trial after hearing the parties, recording an order in respect of the same and recalling any witnesses whose examination have taken place.

Application of the Criminal Procedure Code, 1973 to proceedings before the Special Court

The provisions contained in the Code of Criminal Procedure, 1973 shall be applicable to the proceedings conducted before the Special Court. In purpose of the same, the Special Court shall be deemed to be a Sessions Court or the court of Metropolitan Magistrate or a Judicial Magistrate of the First Class accordingly.  The person conducting proceedings before the Special Court shall be deemed to be a Public Prosecutor.

Offences under the Act to be Non-Cognizable

  • Every offence under the Act shall be deemed to be non-cognizable except offences as specified under Section 212(6) of the Act. Section 212 of the Act dealing with investigation by the Serious Fraud Investigation Office provides under sub-section (6) that, offence envisaged under Section 447 of the Act shall be cognizable.
  • A Court can take cognizance of an offence alleged to have been committed under the Act by any company or any officer only after receipt of a written complaint by the following persons;
  1. Registrar of Companies, or
  2. any shareholder of the company, or
  3. any member of the company, or
  4. any person authorized by the Central Government.
  • A court can take cognizance of offences in relation to issue and transfer of securities and non-payment of dividend on receipt of a written complaint by any person authorized by the Securities and Exchange Board of India.

However, the aforesaid provisions shall not apply to any prosecution by a company of any its officers as well as any action that might be taken by the liquidator of a company with regards to any of the matters specified in Chapter XX or in any winding-up provisions contained in the Act.

Factors to be taken into consideration by a Special Court for determining the level of punishment

The Special Court shall keep in mind the following factors, while deciding the gravity of punishment:

  1. Size of the particular company;
  2. Nature and type of business undertaken by the company;
  3. Injury capable of being caused to the public interest;
  4. Nature and size of the default committed; and
  5. Repetitive nature of the default.

Compounding of offences under the Act

The prior approval of Special Court was needed in order to compound certain offences under the Act. However, this provision was done away with by the Companies (Amendment) Ordinance, 2018

At present, the offences can be compounded by the National Company Law Tribunal, Regional Director or any other officer authorised by the Central Government as the case may be depending on the quantum of punishment.

Appeals/Revisions from the orders of a Special Court

The High Court within the local limits of whose jurisdiction the Special Court exists, is conferred with the power of hearing cases of appeals/revisions from the orders of such Special Court. The special court is treated as a Court of Session in this scenario.

States/Union Territories containing Special Courts 

  • Jammu and Kashmir
  • Gujarat 
  • Goa
  • Dadar and Nagar Haveli
  • West Bengal
  • Madhya Pradesh
  • Andaman and Nicobar Islands
  • Mizoram
  • Nagaland
  • Maharashtra
  • Arunachal Pradesh
  • Puducherry
  • Haryana
  • Punjab
  • Rajasthan
  • Chandigarh
  • Karnataka
  • Meghalaya
  • Assam
  • Odisha
  • Bihar
  • Kerala
  • Delhi
  • Lakshadweep
  • Uttar Pradesh
  • Telangana
  • Andhra Pradesh

Conclusion

Our judicial system is an image of the existing dynamics of the society and has the capacity to be an enabler in altering the society in its dynamic growth and development process. The Judiciary, thus shoulders a broad responsibility to ensure effective and swift delivery of justice. The establishment of Special Courts under the Companies Act, 2013 is a step towards achieving that goal. Prompt disposal of accumulated cases and ease in access to justice is the prime advantage achieved by the establishment of Special Courts. The Companies Act, 2013 has therefore provided a comprehensive framework regarding the duties and powers of such courts.


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