IBC Offences Triable Only By Special Court Where Company's Registered Office Is Located: Madhya Pradesh HC

The Madhya Pradesh High Court has held that offences under the Insolvency and Bankruptcy Code, 2016 can be tried only by the Special Court having jurisdiction over the place where a company's registered office is situated, ruling that a Gwalior court lacked inherent jurisdiction to entertain a complaint against a company whose registered office is in New Delhi.

“From the bare reading of section 436 it is clear that offences shall be triable only by the Special Court established under section 435 having territorial jurisdiction where the registered office of the company is situated. It relevant to refer the Annexure D-1, wherein it is clear that as per notification dated 18.05.2016 wherein at S. No. 6 of the list, L.d. IX Additional District & Sessions Judge, Gwalior is having jurisdiction only with respect to State of Madhya Pradesh. While the registered office of the company against which the complaint is relates is admittedly situated at New Delhi. Therefore, Trial Court lacked inherent jurisdiction to take cognizance of the complaint.”, it said.

The order was passed by Justice Rajesh Kumar Gupta in a petition filed under Section 482 of the Code of Criminal Procedure seeking quashing of a complaint dated January 5, 2021, lodged by the Insolvency and Bankruptcy Board of India under Section 236 of the IBC.

IBBI alleged offences relating to non-cooperation with the resolution professional, fraudulent conduct during the insolvency process, transactions defrauding creditors, misconduct in the course of insolvency proceedings, contravention of a resolution plan, and violation of provisions of the Insolvency and Bankruptcy Code for which no specific penalty is provided and was registered as before the IX Additional District and Sessions Judge, Gwalior.

The petitioner challenged the proceedings on the ground of lack of territorial jurisdiction, submitting that the company's registered office is situated in New Delhi and that the allegations arose out of alleged non-compliance with directions issued by the National Company Law Tribunal.

It was argued that the statutory scheme under the IBC mandates that jurisdiction is tied to the location of the registered office, and reliance was placed on the Supreme Court's decision in Pradeep S. Wodeyar v. State of Karnataka.

Opposing the plea, the IBBI contended that the suspended directors were residents of Gwalior and had committed acts of non-compliance within its jurisdiction. It argued that the alleged contraventions were continuing in nature and, therefore, courts in Gwalior would have jurisdiction under Sections 177, 178 and 179 of the CrPC.

Rejecting these submissions, the court held that the special statutory framework governing IBC offences overrides the general provisions of the CrPC relating to territorial jurisdiction.

“In view of the aforesaid statutory provisions, 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.”

The court noted that it was undisputed that the registered office of the company is situated in New Delhi and that the allegations stem from alleged non-compliance with directions issued by the NCLT Principal Bench at New Delhi.

It further observed that, as per the relevant notification issued by the Ministry of Corporate Affairs, the designated Special Court for the National Capital Territory of Delhi is the court at Dwarka.

Holding that the assumption of jurisdiction by the Gwalior court was contrary to the statutory mandate, the High Court directed that the complaint be presented before the competent Special Court at New Delhi.

“Consequently, the present petition is disposed of with a direction to the respondent/complainant/Board to file the complaint before the competent Special Court having jurisdiction at New Delhi/competent court having jurisdiction, in accordance with law. It is made clear that this Court has not expressed any opinion on the merits of the case and all issues are left open to be adjudicated by the competent court.”

The court further directed that the original complaint be returned to the complainant for refiling before the appropriate court, and clarified that if such filing is undertaken within three months, the issue of limitation shall be ignored.

“The concerned Special Court is directed to return the original copy of the complaint filed by the Board/complainant and relevant certified copies by replenishing it with photocopy of the same and respondent/complainant is directed to file the same before the competent court/special court having jurisdiction.”, the court said.

“If the petitioner files such complaint before the competent/concerned court within a period of three months from the date of passing of this order, then the aforesaid Special/competent court is expected to ignore the point of limitation, if any," it added.