Offences Under IBC Triable By Special Court Where Registered Office Is Located: Madhya Pradesh High Court

The Madhya Pradesh High Court on 9 April held that offences under the Insolvency and Bankruptcy Code, 2016 (IBC) must be tried by the Special Court having jurisdiction over the place where the company's registered office is situated, and not on the basis of the residence of directors or the place of alleged non-compliance.

A Single-Judge Bench of Justice Rajesh Kumar Gupta directed the Insolvency and Bankruptcy Board of India to file its complaint against Vinay Bhadauria before the competent Special Court having jurisdiction. He observed:

“The contention of the respondent that the cause of action has arisen at Gwalior on account of residence of the directors or alleged continuing defaults cannot be accepted in the present case, in light of the special statutory scheme governing trial of offences under the IBC, which clearly mandates jurisdiction based on the location of the registered office.”

Bhadauria approached the High Court seeking quashing of a complaint filed by the Insolvency and Bankruptcy Board of India before the Additional District and Sessions Judge, Gwalior, under Section 236 of the IBC, alleging offences under various provisions of the Code.

He argued that the summons were issued without complying with the mandatory requirement under Section 204(3) of the Code of Criminal Procedure, 1973, as the authorities did not furnish a copy of the complaint. He also submitted that the trial court took cognizance mechanically, without applying its mind and without passing a reasoned order.

Bhadauria further raised a preliminary objection on territorial jurisdiction, which the Trial Court rejected. He submitted that the company's registered office was situated in New Delhi and the allegations arose from non-compliance with directions of the National Company Law Tribunal, New Delhi.

He relied on the notification dated 27 July 2016 issued by the Ministry of Corporate Affairs and contended that only the Special Court having jurisdiction over the place of the registered office (New Delhi in this case) could try the offences. He therefore argued that the Gwalior court lacked jurisdiction.

The Board countered that the alleged offences occurred in Gwalior, where the suspended directors resided and failed to cooperate, resulting in continuing contraventions. It submitted that this established the jurisdiction of the Gwalior courts.

Referring to Section 60(1) of the IBC, the High Court observed:

“…this Court finds that the jurisdiction to try offences under the IBC is specifically conferred upon the Special Court linked to the place where the registered office of the company is situated. The said provision overrides the general provisions of the Cr.P.C. relating to territorial jurisdiction.”

Accordingly, the High Court disposed of the petition. It clarified that if the complaint is refiled within the prescribed period, the issue of limitation shall not be pressed against the Board.

For Petitioner: Advocate Praveen Surange

For Respondent: Advocate Ram Pathak