Special Courts - Winding Up, Company Law B Com Notes | EduRev

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Special Courts

Section 435 to 446 under Chapter XXVIII of the Companies Act, 2013 contains provisions as to establishment of Special Courts and offences triable by the Special Courts.

Establishment of Special Courts.

Section 435 of the Act contains the provisions as to Establishment of Special Courts. According to this Section:

  1. The Central Government may, for the purpose of providing speedy trial of offences under this Act, by notification, establish or designate as many Special Courts as may be necessary.
  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.

Offences triable by Special Courts (Section 436)

This Section provides a new provision as to offences triable by Special Courts, notwithstanding anything contained in the Code of Criminal procedure, 1973.

Under this Section:

  1. all offences under this Act shall be triable only by the Special Court established 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.
  2. where a person accused of, or suspected of the commission of, an offence under this Act is forwarded to a Magistrate under Sub-Section (2) or Sub-Section (2A) of Section 167 of the Code of Criminal Procedure, 1973, such Magistrate may authorise the detention of such person in such custody as he thinks fit for a period not exceeding fifteen days in the whole where such Magistrate is a Judicial Magistrate and seven days in the whole where such Magistrate is an Executive Magistrate.

When trying an offence under this Act, a Special Court may also try an offence other than an offence under this Act with which the accused may, under the Code of Criminal Procedure, 1973 be charged at the same trial.

The Special Court may try in a summary way any offence if it is punishable with imprisonment up to 3 years.

Appeal and revision(Section 437)

Section 437 of the Act contains the provisions as to Appeal and revision. According to this Section:

The High Court may exercise, so far as may be applicable, all the powers conferred by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973 on a High Court, as if a 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)

Section 435 of the Act contains the provisions as to Establishment of Special Courts. According to this Section:

According to this Section, 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.

Offences to be non-cognizable (Section 439)

According to this Section, subject to the Code of Criminal Procedure, 1973, 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.

Further, no court shall take cognizance of any offence under this Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, a shareholder of the company or of a person authorised by the Central Government in that behalf.

Section 439 deals with the offences that are considered of non-cognizable nature under the Companies Act, 2013.

The term ‘Non-cognizable offence’ as defined under Section 4 of the Cr.PC. is an offence for which a police officer may not arrest without warrant.

(a) Offences under the Companies Act, 2013 deemed as non-cognizable: Overriding the provisions given under the Code of Criminal Procedure, 1973, every offence under this Act except the offences referred to in Section 212 (6) of the Companies Act, 2013, which deals with the investigation into affairs of company by Serious Fraud Investigation Office (SIFO), shall be deemed to be non-cognizable within the meaning of the said Code.

Therefore, the offences as covered under Section 212 (6) shall now be deemed to be cognizable where police officer may arrest person without warrant and are non-bailable. The Companies Act, 2013 establishes the offence covered under the Section 212 (6) as a public wrong which has to be prevented and controlled. This non-bailable nature of the offences deters the offender and the others from committing further and similar offences.

(b) Cognizance of offence: A court shall take cognizance of any offence under this Act which is alleged to have been committed by any company or any officer thereof only on the written complaint of:

  1. The Registrar.
  2. A shareholder of the company, or
  3. Of a person authorised by the Central Government in that behalf.

Provided that the court may take cognizance of offences relating to issue and transfer of securities and non-payment of dividend, on a complaint in writing, by a person authorised by the Securities and Exchange Board of India.

Provided that nothing in this Sub-Section shall apply to a prosecution by a company of any of its officers.

However, in case of government companies as per the Notification no. G.S.R. 463 (E) dated 5th June 2015, court shall take cognizance of any offences under this Act which is alleged to have been committed by any company or any officer thereof on the complaint in writing of a person authorized by the Central Government in that behalf. 

(c) Attendance of complainant: Where the complainant is the Registrar or a person authorised 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 his personal attendance at the trial.

(d) 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 of a company in respect of any offence alleged to have been committed in respect of any of the matters in Chapter XX or in any other provision of this Act relating to winding up of companies.

The liquidator of a company shall not be deemed to be an officer of the company within the meaning of Sub-Section (2).

Transitional provisions (Section 440)

Under this Section, 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.

Compounding of certain offences (Section 441)

This Section contains the provisions as to compounding of offences. In terms of this Section, subject to the Code of Criminal Procedure, 1973, any offence punishable under this Act with fine only, may, either before or after the institution of any prosecution, be compounded by:

  • the Tribunal, or
  • where the maximum amount of fine which may be imposed 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, as the case may be, the officer, to the Central Government of such sum as that Tribunal or the Regional Director or any officer authorised by the Central Government, as the case may be, may specify.

Mediation and Conciliation Panel (Section 442) 

Alternative dispute resolution in India is not new and it was in existence even under the previous Arbitration Act, 1940. The Arbitration and Conciliation Act, 1996 has been enacted to accommodate the harmonisation mandates of UNCITRAL Model. To streamline the Indian legal system the traditional civil law known as Code of Civil Procedure (CPC), 1908 has also been amended and Section 89 has been introduced. Section 89 (1) of CPC provides an option for the settlement of disputes outside the court. It provides that where it appears to the court that there exist elements, which may be acceptable to the parties, the court may formulate the terms of a possible settlement and refer the same for arbitration, conciliation, mediation or judicial settlement. Due to extremely slow judicial process, there has been a big thrust on Alternate Dispute Resolution mechanisms in India.

‘Alternative Dispute Resolution’ (ADR) refers to any means of settling disputes outside the courtroom. Normally ADRs are Cost Effective, Fast, Flexible and Fair. ADR includes dispute resolution processes and techniques that act as a means for disagreeing parties to come to an agreement short of litigation. It is informal. There are various forms or ways of resolving disputes under ADR and generally classified into at least four types: (1) Negotiation (2) Mediation (3) Collaborative Law and (4) Arbitration. Despite historic resistance, ADR has gained widespread acceptance among both the general public and the legal profession in recent years.

Mediation and Conciliation

Section 442 of the Companies Act, 2013 provides for maintenance of Mediation and Conciliation Panel. It states that the Central government shall maintain a panel of experts for mediation between the parties. Such panel may to be called Mediation and Conciliation Panel. The parties during the pendency of any proceedings before the Central Government or the Tribunal or the Appellate Tribunal under the Act may resort to mediation under these provisions.

After receiving application for referring the matter to Mediation and Conciliation Panel, the Central Government or Tribunal or the Appellate Tribunal, as the case may be, shall appoint one or more experts from such Panel. The matter is required to be disposed off within a period of three months from the date of such reference. The Panel is required to forward its recommendations to the Central Government or Tribunal or the Appellate Tribunal, as the case may be, within that period.

The aggrieved party may file its objections to the Central Government or Tribunal or the Appellate Tribunal, as the case may be. The Central Government or Tribunal or the Appellate Tribunal, may, suo motu, refer any matter pertaining to such proceedings to experts from the Panel.

Difference between Mediation and Conciliation

The meaning of these words as understood in India appears to be similar. ‘Mediation’ is a way of settling disputes by a third party who helps both sides to come to an agreement, which each considers acceptable. Mediation can be ‘evaluative’ or ‘facilitative’. ‘Conciliation’, is a procedure like mediation but the third party, the conciliator, takes a more interventionist role in bringing the two parties together and in suggesting possible solutions to help achieve a settlement. The difference lies in the fact that the ‘conciliator’ can make proposals for settlement, ‘formulate’ or ‘reformulate’ the terms of a possible settlement while a ‘mediator’ would not do so but would merely facilitate a settlement between the parties.

From the very wording it appears that the ‘Mediation and Conciliation Panel’ as contemplated under Section 442 (as the name suggests) will adopt dual approach of ‘Mediation’ as well as ‘Conciliation’ in settling the disputes.

Power of Central Government to appoint Company Prosecutors (Section 443)​

Under this Section:

  • 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 on Public Prosecutors appointed under Section 24 of the Cr. PC.

Appeal against acquittal (Section 444) 

According to this Section:

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.

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

Compensation for accusation without reasonable cause (Section 445)

According to this Section, the provisions of Section 250 of the Code of Criminal Procedure, 1973 shall apply 'mutatis mutandis' (with such changes as may be necessary) to compensation for accusation without reasonable cause before the Special Court or the Court of Session.

Application of fines (Section 446)

Under this Section, 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.

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