Special Courts

Special Courts

Special courts are one most commendable constitute introduced by this Act. Companies Act, 2013 has provided space for “Special Court” by inserting a new section in the Act. With the intention to punish the guilty, the Legislature has bring in, the Special Courts in the Companies Act, 2013. The Companies Act, 2013 overrides the related provisions of the CrPC.

Need of Special Court: Slowing down of trial of offences and delaying judgments affects the interest of the related parties of Companies. Scams happening over the last few decades in the corporate world have increased the need of setting up of Special Court. The main reason for establishment of such special court is technicalities involved in these technical matters and Speedy trial of all the offences under the Act.

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.

Advantages of Special Court:

§    It will facilitate in good corporate governance and  stricter implementation of the Law.

§        Speedy Trial of all the offences under the Act.

Bare Act Language:

Definition:

As stated in section 2(29) of CA, 2013 ‘Court’ means – Special Courts established under Section 435 of the CA, 2013.

435. Establishment of Special Courts.[1](Notified on 18^th May, 2016)

1.      The Central Government may, for the purpose of providing speedy [2]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.

[3]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.

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.

Use of the Word “Special Court” under the Act:

S. No.	Section No.	Title of Section
1.	209	Search and seizure.
2.	212	Investigation into affairs of company by Serious Fraud Investigation Office
3.	274	Directions for filing statement of affairs
4.	435	Establishment of special courts
5.	439	Offences triable by special courts
6.	437	Appeal and revision.
7.	438	Application of Code to proceedings before a special court
8.	440	Transitional provisions.
9.	441	Compounding of certain offences.
10.	445	Compensation for accusation without reasonable cause.

The Ministry of Corporate Affairs has notified the provisions dealing with ‘Special Courts’ with effect from 18 May 2016. 

A.   Places of Special Courts:

 The Central government hereby, after obtaining the concurrence of the respective Chief justices of the High Courts, designates the following Courts mentioned in the Table below as Special Courts for the purposes of trial of offences Unfishable under the Companies Act, 2013 with imprisonment of two years or more in terms of section 435 of the Companies Act, 2013.

B.   Constitution of Special Courts:

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.

§ Single Judge: A Special Court shall consist of a single judge 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.

§ Qualification of judge: Such judge of a Special Court shall be qualified only if he is immediately before such appointment, holding office of a Sessions Judge or an Additional Sessions Judge.

C.   Scope of Appeal and Revision:

[4]Special courts are subject to the jurisdiction of the relevant High Court in the same manner as the criminal courts come under it, under the Code of Criminal Procedure, 1973. If Special court is within the local limits of the jurisdiction of High Court, then whenever the Court of Session is trying cases, in such case High Court has the power to appeal and revision.

D.   Code of proceeding Before Special Court:

Section 438 provides that the provisions of the Code of Criminal Procedure, 1973 shall apply to the proceedings before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to be a Court of Session and the person conducting a prosecution before a Special Court shall be deemed to be a Public Prosecutor.

E.    How do special courts work?

The Act 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.  Where Such magistrate considers that the detention of such person upon or before the expiry of the period of detention is unnecessary, he shall order such person to be forwarded to the Special Court having jurisdiction.

F.    Jurisdiction of the Special Court

All offence specified under section 435(1) of Companies Act shall be triable only by the Special Court for the area in which the registered office of the company in relation to which the offence is committed.

G.     Offence Trailed by Special Court As per the provisions of the Companies Act, 2013, following offences are triable by Special Courts:

1.Offences for which the Companies Act, 2013, provides for imprisonment of 2 years or more

2.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.

3.A Special Court may also take cognizance of an offence under this Act without the accused being committed to it for trial upon:

• Perusal of the police report of the facts constituting an offence; or
• Upon a complaint in that behalf.

H.   Special Powers of the 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.

I.       Offence to be Non- Cognizable

This Section provides that every offence except those offences referred to in sub- section (6) of section 212 shall be deemed to be non-cognizable within the meaning of the said code.

§ Court shall take the offence as cognizable only on receipt of complaint made by:

v  Registrar

v  Shareholder of Company

v  Person authorized by Central Government

§ Court may take the offence as cognizable, offence relating to issue and transfer of securities and nonpayment of dividend, on a complaint in writing, by a person authorized by the SEBI.

Nothing of section 439 applicable on prosecution by a Company of any of its Officer.

§ Attendance of Complainant: Where the complainant is the Registrar or a person authorized by the Central Government as given under sub-section (2), the presence of such officer before the court trying the offences shall not be necessary unless the court requires this personal attendance at the trial.

§ Non-application of sub-section (2) on the action of the liquidator:- The provisions of sub- section (2) shall not apply to any action taken by the liquidator or a Company in respect of any offence alleged to have been committed in respect of any of the matter in chapter XX or in any other provision of this Act relating to winding up of the Companies.

J.     Offence Cognizable:

o   Providing misleading or false information on Incorporation.

o   Misstatement in Prospectus

o   Fraudulently inducing a person to invest money

o   Personating for acquisition of securities

o   Destruction of Documents.

K.   MEDIATION AND CONCILIATION PENAL (SECTION 442):

Meanings:

Mediation: In common parlance mediation means intervention of some third party in a dispute with the intention to resolve the dispute.

Conciliation: Conciliation means the process of adjusting or settling disputes in a friendly manner through extra judicial means.

The new provision introduced by CA, 2013 . Section 442 of the CA, 2013 deals with the constitution and functioning of the mediation and conciliation panel in order to dispose the matter.

       I.            Central Government to maintain the Panel of Meditators: The Central Government Shall maintain  a panel of experts to be known as Mediation and conciliation panel for mediation between the parties during the pendency of any proceedings before the Central Government or the Tribunal or Appellate Tribunal  under this Act.Hence, it is important that the case should be pending before the central tribunal or the Tribunal or Appellate Tribunal  under this Act

    II.            Panel  Consisting of Experts: The panel shall consist of such number of experts having such qualification as may be prescribed

 III.            Filing of the application :Application for mediation and conciliation can be made by

§ Any of the parties to the proceedings( It shall be accompanied with such fees and in such form as may be prescribed )

§ The Central Government or the Tribunal or the Appellate Tribunal before which nay proceeding is pending may, suo moto refer any ,matter pertaining to such proceedings to such number of experts as it may deem fit.

  IV.            Appointment of expert/s from panel: The Central Government or the tribunal or the Appellate Tribunal before which any proceeding is pending may appoint one or more experts from the panel as may be deemed fit.

     V.            Fees Terms & Conditions of the Experts : The fee and other terms and conditions of the   experts of Mediation & Conciliation Panel shall be such as may be prescribed

  VI.            Procedure for the disposal of matter: In order to dispose of the  matter, the Mediation And Conciliation Panel shall follow such procedure as may be prescribed .

VII.            Period for the disposal of matter: The Mediation And Conciliation Panel shall dispose of the matter reffered to it within the period of three         months and from the date of such refrence and forward its recommendations to the Central Government or the Tribunal or Appellate Tribunal as the case may be

VIII.            Filing of the Objections on the Recommendations of the Panel: Any party aggrieved by the recommendations of the Mediation And Conciliation may file objections to the Central Government or the tribunal or the Appellate Tribunal  as the case may be.

L.    COMPANY PROSECUTORS (SECTION 443):

§  Appointment: 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) company prosecutors for the conduct of prosecutions arising out of this Act. 

§  Power & Privileges: The Company Prosecutor shall have all the powers and privileges conferred to Public Prosecutors appointed under section 24 Code of Criminal Procedure, 1973.

M.   APPEAL AGAINST ACQUITTAL (SECTION 444):The Central government may direct

§  Any company prosecutor, or

§  Authorized any other person either by name or by virtue of his office, to present an appeal from an order to acquittal passed by any court, other than a High Court..

Appeal presented by such prosecutor or other person shall be deemed to have been validly presented to the appellate court.

N.   COMPENSATION FOR ACCUSATION WITHOUT REASONABLE CAUSE (SECTION 445):

The provision of Section 250 fo 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.

O.   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.

P.     APPLICATION OF FINES (SECTION 446):

The new provision made in Companies Act, 2013 with regard to Special Court is a boon and all concerned parties can hope for speedy settlement of cases. Since it is made exclusively for Companies, and for the specific offences, it could be more effective and efficient than general session Courts. It helps in better enforcement of Corporate Governance.

Q.   Offences under the Companies Act, 2013, for Which Minimum Punishment is 2 Years or More

Section	Offence	Who is Punishable
305(4)	False declaration of solvency by a Director during voluntary winding up	Director
336(1)	Intentionally and fraudulently concealing material information about the company, relating to properties, debts, creditors, financial statements from the Company Liquidator during winding up	Officer (including any person in accordance with whose directions or instructions the directors of the company have been accustomed to act
	Fraudulently misrepresenting material information about the company to the Company Liquidator during winding up
336(2)	Taking in pawn or pledge or otherwise receipt of the property, knowing it to be pawned, pledged, or disposed of wherein such	Any person who does such act knowingly
447	Commitment of fraud provided fraud in question involves public interest	Any person found guilty of such fraud
449	Intentionally giving false evidence upon any examination on oath or solemn affirmation, authorised under the Companies Act, 2013	Any person giving such false evidence
	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

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[1] Notified by notification dated 18th May, 2016.

[2] Substituted by The Companies (Amendment) Act, 2015 w.e.f. 29th of May, 2015. for the words "trial of offences under this Act", the words "trial of offences punishable under this Act with imprisonment of two years or more"

[3] Inserted by The Companies (Amendment) Act, 2015 w.e.f. 29th of May,

[4] Section 437