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CONSTITUTION OF SPECIAL

COURTS UNDER NEW


COMPANIES ACT
TABLE OF CONTENTS

DECLARATION........................................................................................................................1

ACKNOWLEDGEMENTS.......................................................................................................2

SCOPE OF STUDY...................................................................................................................5

OBJECTIVES............................................................................................................................5

RESEARCH METHODOLOGY...............................................................................................5

INTRODUCTION......................................................................................................................6

WHAT IS A SPECIAL COURT UNDER THE BILL?..............................................................7

Purpose...................................................................................................................................7

Establishment of Special Court (Section 435).......................................................................7

How do Special Courts Work?...............................................................................................7

OFFENCES UNDER THE COMPANIES ACT, 2013, FOR WHICH MINIMUM


PUNISHMENT IS 2 YEARS OR MORE.................................................................................8

POWERS OF SPECIAL COURT..............................................................................................9

Offences Triable.....................................................................................................................9

Appeal and Revision (Section 437)......................................................................................10

APPLICATION OF CODE TO PROCEEDINGS BEFORE SPECIAL COURT (SECTION


438)..........................................................................................................................................10

OFFENCES TO BE NON-COGNIZABLE (SECTION 439).................................................10

TRANSITIONAL PROVISIONS (SECTION 440).................................................................11

COMPOUNDING OF CERTAIN OFFENCES (SECTION 441)...........................................12

MEDIATION AND CONCILIATION PANEL (SECTION 442)............................................13

COMPANY PROSECUTORS (SECTION 443)......................................................................13

APPEAL AGAINST ACQUITTAL (SECTION 444)..............................................................13

COMPENSATION FOR ACCUSATION WITHOUT REASONABLE CAUSE (SECTION


445)..........................................................................................................................................14

APPLICATION OF FINES (SECTION 446)..........................................................................14

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SPECIAL POWER OF SPECIAL COURT.............................................................................14

CONCLUSION........................................................................................................................15

REFERENCES.........................................................................................................................16

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INTRODUCTION
The innocuous little Chapter XXVIII (dealing with Special Courts) has been one of the least
discussed and debated chapters of the Companies Bill, 2012. Neither the Parliament nor the
media appears to have paid any attention to it.

It is so because as a country we have become accustomed to specialist courts / tribunals,


being set up by the executive arm and/or whose setting up has been entrusted to the executive
arm. As a nation our response to a pothole on the road seems not to propel us towards
covering it up which would be the most prudent and affordable option but instead urges
us to build a flyover above it.

Special courts are one most commendable constitute introduced by this Act. This is trend
recently to constitute special courts for every single legal constitute. The main reason for
establishment of such special court is technicalities involved in these technical matters. The
Companies Act, 2013 has proposed to form "Special courts" for the purpose of providing
speedy trial and disposal of offences. Chapter XXVIII of the Companies Act, 2013, deals
with special courts.

The Central Government may, for the purpose of providing speedy trial of offences under this
Act establish or designate as many Special Courts as may be necessary. A Special Court is a
single judge Court 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.

A person shall not be qualified for appointment as a judge of a Special Court unless she is,
immediately before such appointment holding office of a Sessions Judge or an Additional
Sessions Judge.

Section 436 sets out the offences which are triable by special courts. As per section 436(1)(a)
all offences under sub-section (1) of section 435 of the Companies Act, 2013 shall be triable
by the special court for the area in which the registered office of the company in relation to
which the offence is committed or where there are more Special Courts than one for such
area, by such one of them as may be specified in this behalf by the High Court concerned.

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WHAT IS A SPECIAL COURT UNDER THE BILL?
A court established or designated by the Central Government by notification under the Act.1

PURPOSE
The purpose of establishing a special court appears to be to provide a speedy trial of
offences, punishable under the Companies Act, 2013, which are punishable with
imprisonment of 2 years or more, the Ministry of Corporate Affairs has notified the
provisions dealing with Special Courts with effect from 18 May 2016. The intention behind
setting up these courts is to let magistrate courts try minor violations, and that graver offences
should be dealt by Special Courts.

ESTABLISHMENT OF SPECIAL COURT (SECTION 435)


The Central Government may for the purpose of providing speedy trial of offences
punishable under this Act with imprisonment of two years or more, by notification, establish
or designate as many Special Courts as may be necessary.
Provided that all other offences shall be tried, as the case may be, by a Metropolitan
Magistrate or a Judicial Magistrate of the First Class having jurisdiction to try any offence
under this Act or under any previous company law.
A Special Court shall consist of a single judge appointed by the Central Government. The
Judge shall be appointed with the concurrence of the Chief Justice of the High Court within
whose jurisdiction the judge to be appointed is working.
A person shall not be qualified for appointment as a judge of Special Court unless he was
holding a Sessions Judge or an Additional Sessions Judge.

HOW DO SPECIAL COURTS WORK?


The Bill further provides that where a person is
(a) accused of, or
(b) suspected of the commission of, an offence under this Act
and such a case is forwarded to a Magistrate under sub-section (2) or sub-section (2A) of
section 167 of the Code of Criminal Procedure, 1973, the Magistrate may authorize the
detention of such person for a maximum period of 15 days or 7 days as the case may be. Such

1 Jeffrey. N. Gordon & Mark. J. Roe, Concept of special court (Cambridge University Press,
Cambridge, 2014), 305 (Last visited on 03.04.2017)

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person may thereafter be forwarded to the Special Court having jurisdiction.2

OFFENCES UNDER THE COMPANIES ACT, 2013, FOR


WHICH MINIMUM PUNISHMENT IS 2 YEARS OR MORE

Offence Who is Punishable? Section

False declaration of solvency by a Director Director 305(4)


during voluntary winding up

Intentionally and fraudulently concealing Officer (including any 336(1)


material information about the company, person in accordance
relating to properties, debts, creditors, with whose directions
financial statements from the Company or instructions the
Liquidator during winding up directors of the
company have been
Fraudulently misrepresenting material
accustomed to act)
information about the company to the
Company Liquidator during winding up

Taking in pawn or pledge or otherwise Any person who does 336(2)


receipt of the property, knowing it to be such act knowingly
pawned, pledged, or disposed of wherein
such property was pawned, pledged or
disposed off (in 12 months preceding the
commencement of the winding up) on credit
and not been paid for and was not in the
ordinary course of business

Commitment of fraud provided fraud in Any person found 447


question involves public interest guilty of such fraud

Intentionally giving false evidence upon any Any person giving 449
examination on oath or solemn affirmation, such false evidence
authorised under the Companies Act, 2013

2 http://www.pcaw.co.uk/policy_pub/newperspective.html (Last visited on 03.04.2017)

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Offence Who is Punishable? Section

Intentionally giving false evidence in any


affidavit, deposition or solemn affirmation,
in or about the winding up of any company
under the Companies Act, 2013, or otherwise
in or about any matter arising under the
Companies Act, 2013

POWERS OF SPECIAL COURT


1. The Special Court may exercise, with respect to the accused or suspected person forwarded
to it by the relevant Magistrate, the same power which a Magistrate having jurisdiction to try
a case may exercise under section 167 of the Code of Criminal Procedure, 1973 in relation to
an accused person. The Bill has subtly introduced the concept of detention / trial of a
suspected person. There appears no real rationale for it.
2. A Special Court may also take cognizance of an offence under this Act without the accused
being committed to it for trial upon:
a) perusal of the police report of the facts constituting an offence; or
b) upon a complaint in that behalf.

OFFENCES TRIABLE
As per the provisions of the Companies Act, 2013, following offences are triable by Special
Courts:
(i) offences for which the Companies Act, 2013, provides for imprisonment of 2 years or more;
(ii)cases forwarded by a Magistrate (where he thinks detention is unnecessary) for any offence
committed under the Companies Act, 2013. This provision will come into play when a
person is arrested and detained in custody, and it appears that the investigation cannot be
completed within the period of 24 hours as required under the Code of Criminal
Procedure, 1973 (CrPC) and there are grounds for believing that the accusation or
information is well-founded, and detention is authorized by Magistrate for a period not
exceeding 15 days (if ordered by Judicial Magistrate) or 7 days (if ordered by Executive
Magistrate), as the case may be. In such cases, the Special Court has the same power as
the Magistrate having jurisdiction to try such case;

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(iii) take cognizance of an offence under the Companies Act, 2013, without the accused being
committed to it for trial upon: (a) perusal of the police report of the facts constituting
such offence, or (b) if a complaint has been filed in that behalf;
(iv) try at the same trial an offence for which an accused may be charged under CrPC in
addition to an offence under the Companies Act, 2013;
(v)if the Special Court thinks fit, it may try in a summary way, any offence under the Companies
Act, 2013, which is punishable with imprisonment for a term not exceeding 3 years,
provided that in the case of any conviction in such trial, person cannot be sentenced for
imprisonment for a term exceeding 1 year.

APPEAL AND REVISION (SECTION 437)


Notably, for the purposes of entertaining appeal and revision, the High Court have been
granted jurisdiction, as if the Special Court within the local limits of the jurisdiction of the
High Court were a Court of Session trying cases within the local limits of the jurisdiction of
the High Court.

APPLICATION OF CODE TO PROCEEDINGS BEFORE


SPECIAL COURT (SECTION 438)
The provisions of the Code of Criminal Procedure, 1973 shall apply to the proceedings before
a Special Court. The Special Court shall be deemed to be a Court of Session and the person
conducting a prosecution before a Special Court be deemed to be a Public Prosecutor.

OFFENCES TO BE NON-COGNIZABLE (SECTION 439)


Every offence under this Act except the offences referred to in sub section (6) of Section
212 shall be deemed to be non cognizable within the meaning of the said code.3
No court shall take cognizance of any offence under this Act except on the complaint of
(a) the Registrar in writing,
(b) a shareholder of the company,
(c) a person authorised by the Central Government.
The court may take cognizance of offences relating to issue and transfer of securities and

3 http://www.supremelaw.org/cc/gilberts/intentm3.filed.htm#1871 (visited on 21st March,


2015)

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non-payment of dividend on complaint in writing by a person authorised by the Securities
and Exchange Board of India. Where the complainant is the Registrar or a person authorised
by the Central Government, the presence of such officer before the Court trying the offence
shall not be necessary. The court may require personal attendance of these complainants at
the trial.4

TRANSITIONAL PROVISIONS (SECTION 440)


Any offence committed under this Act, which is triable by a Special Court shall, until a
Special Court is established, be tried by a Court of Session exercising jurisdiction over the
area, notwithstanding anything contained in the Code of Criminal Procedure, 1973: Provided
that nothing contained in this section shall affect the powers of the High Court under section
407 of the Code to transfer any case or class of cases taken cognizance by a Court of Session
under this section.
Until a Special Court is established, any offence triable by a Special Court shall be tried by a
Court of Session. [Section 440]
This transitional provision came into force, when many Special Courts is being established
by another notification of same date 18 th May 2016. The notification established special
courts only in 8 states and Union Territories. In case of all other States and Union
Territories, this transition provision under Section 440 shall apply.
1. Courts of Additional Special Judge, Anti-Corruption at Jammu and Srinagar State of
Jammu and Kashmir
2. Presiding Officers of Court Nos. 37 and 58 of the City Civil and Sessions Court, Greater
Mumbai State of Maharashtra
3. Court of Principal District and Sessions Judge, Union territory of Dadra and Nagar
Haveli at Silvassa Union Territories of Dadra and Nagar Haveli and Daman and Diu
4. Court of District Judge -1 and Additional Sessions Judge, Panaji State of Goa
5. Court of Principal District and Sessions Judge, Ahmedabad (Rural), situated at Mirzapur,
Ahmedabad State of Gujarat
6. 9th Additional Sessions Judge, Gwalior Madhya Pradesh State of Madhya Pradesh
7. Court of Additional District and Session Judge, Port Blair, Andaman and Nicobar Islands
Union territory of Andaman and Nicobar Islands.
4 Robert H. Sitkoff, Application of court of proceedings under the provision of new concept of special court in
the new act, http://cua.mit.edu/ketterle_group/Research_topics, visited on April 15, 2015

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8. 2nd Special Court, Calcutta State of West Bengal

COMPOUNDING OF CERTAIN OFFENCES (SECTION 441)


Any offence punishable under this Act with fine only, may either before or after the
institution of any prosecution be compounded by
(a) the Tribunal; or
(b) where the maximum amount of fine which may be imposes for such offence does not
exceed five lakh rupees, by the Regional Director or any officer authorised by the Central
Government, on payment or credit, by the company or the officer to the Central Government
of a sum as the Tribunal or the Regional Director or officer may specify. This sum shall not
exceed the maximum amount of the fine which may be imposed for the offence so
compounded. The sum if any, paid by way of additional fee shall be taken into account.
Any offence shall not be compounded if the investigation against such company has been
initiated or is pending under this Act. An offence cannot be compounded within a period of
three years from the date on which a similar offence committed by it or him was
compounded.
Every application for the compounding of an offence shall be made to the Registrar who shall
forward the same, together with his comments thereon, to the Tribunal or the Regional
Director or any officer authorised by the Central Government.
Where any offence is compounded, its intimation shall be given by the company to the
Registrar within seven days from the date on which the offence is so compounded.
Where any offence is compounded before the institution of any prosecution, no prosecution
shall be instituted in relation to such offence.
Where the compounding of any offence is made after the institution of any prosecution, the
company or its officer in relation to whom the offence is so compounded shall be discharged.
The Tribunal or the Regional Director or any officer authorised by the Central government,
may direct by an order any officer or other employee of the company to file or register such
return, account or other document within specified on payment of fee or additional fee.5
Any officer or other employee of the company who fails to comply with any order made by
the Tribunal or the Regional Director or any officer shall be punishable with imprisonment
for a term which may extend to six month or with fine not exceeding one lakh rupees or with
both. Any offence which is punishable under this Act, with imprisonment or fine, or with

5 http://webjcli.ncl.ac.uk/2005/issue3/lewis3.html (Last visited on 2nd April, 2017)

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imprisonment or fine or with both, shall be compoundable with the permission of the Special
Court. Any offence which is punishable under this Act, with imprisonment only, or with
imprisonment and also with fine, shall not be compoundable.

MEDIATION AND CONCILIATION PANEL (SECTION 442)


The Central Government shall maintain a panel of experts to be called as the Mediation and
Conciliation Panel for mediation between the parties during the pendency of any
proceedings before the Central Government or the Tribunal or the Appellate Tribunal.
Any of the parties to the proceedings may apply for referring the matter pertaining to such
proceedings to the Mediation and Conciliation Panel. The Central Government or the
Tribunal or the Appellate Tribunal before which any proceeding is pending may suo motu
refer any matter pertaining to such proceeding to the Mediation and Conciliation Panel. The
Mediation and Conciliation Panel shall follow the prescribed procedure and dispose of the
matter referred to it within a period of three months from the date of such reference and
forward its recommendation to the Central Government or the Tribunal or the Appellate
Tribunal.
Any party aggrieved by the recommendation of the Mediation and Conciliation Penal may
file objection to the Central Government or the Tribunal or the Appellate Tribunal.

COMPANY PROSECUTORS (SECTION 443)


The Central Government may appoint generally, or for any case, or in any case, or for any
specified class of cases in any local area, one or more persons, as company prosecutors for
the conduct of prosecutions arising out of this Act and the persons so appointed as company
prosecutors shall have all the powers and privileges conferred by the Code on Public
Prosecutors appointed under section 24 of the Code.

APPEAL AGAINST ACQUITTAL (SECTION 444)


The Central Government may, in any case arising under this Act, direct any company
prosecutor or authorise any other person either by name or by virtue of his office, to present
an appeal from an order of acquittal passed by any court, other than a High Court, and an
appeal presented by such prosecutor or other person shall be deemed to have been validly
presented to the appellate court.

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COMPENSATION FOR ACCUSATION WITHOUT
REASONABLE CAUSE (SECTION 445)
The provision of Section 250 of the Code of Criminal Procedure, 1973 shall apply mutatis
mutandis to compensation for accusation without reasonable cause before the Special Court
or the Court of Session.6

APPLICATION OF FINES (SECTION 446)


The court imposing any fine under this Act may direct that the whole or any part thereof shall
be applied in or towards payment of the costs of the proceedings, or in or towards the
payment of a reward to the person on whose information the proceedings were instituted.

SPECIAL POWER OF SPECIAL COURT


1. When trying an offence under the Act, a Special Court may also try an offence other than
an offence under the Act with which the accused may, under the Code of Criminal Procedure,
1973 be charged at the same trial.
2. Notwithstanding anything contained in the Code of Criminal Procedure, 1973 the Special
Court may, if it thinks fit, try in a summary way any offence under this Act, which is
punishable with imprisonment for a term not exceeding three years. However, the maximum
sentence of imprisonment in a summary trial on conviction shall not exceed one year.

6 William W. Bratton, Provision for compensation without reasonable cause,


http://papers.ssrn.com/sol3/papers.cf. (Last visited on 03.04.2017)

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CONCLUSION
ConstitutionofatribunalisbyitselfhighlydebatableintheentireschemeoftheIndian
Constitution. Constituting a special court to administer criminal justice is not only
unnecessarybutalsoharmfultotheintegrityofthejudiciary.Wehavetopullupouractand
believethatsystemshaveloopholes,deficienciesandshortcomings.Theanswertothatisnot
inallcasescreatinganalternatesystem.
Anadditionalcauseforworryisthatthiswholeconceptdoesnotappeartobedebatedinthe
Parliament.GiventhemannerinwhichtheBillwaspassedinthelowerhouse,averyin
depthanalysisoftheseprovisionsiswarrantedandwouldbeofvitalconsequence.
Politiciansandparticularlythegovernmentsofthepasthaveshownlittlerespectfortheletter
of thelaw.Itwouldbefoolishtoallowtheexecutiveorentrustitwithcreatingaparallel
criminaljusticeadministeringsystemwithpowersforprovisionofsummaryjustice.Criminal
justiceadministrationshouldhavesacrosanctpositioninthejudicialsystem.Itcannotbe
belittledandtamperedwithinthisfashion.

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REFERENCES

BOOKS:
DateyV.S.,StudentsGuidetoCorporateLaws,(Taxmann,5thEd.)
K.Majumdar,Dr.G.K.KapoorCompanyLaw&Practice,(Taxmann,5thEd.)

WEBSITES:
https://www.legistify.com/blogs/view_detail/100-special-courts-under-the-companies-
act-2013-notified
http://www.legallyindia.com/views/entry/special-courts-under-the-companies-act-
2013-notified-corpcomms-elp-in-com
http://www.companiesact.in/Companies-Act-2013/New-Concept-Detail/6/Special
%20Courts
http://ebook.mca.gov.in/default.aspx

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