Supreme Court of India
INSOLVENCY AND BANKRUPTCY BOARD OF INDIAversusSATYANARAYAN BANKATLAL MALU & ORS.
- Citation
- 2024 INSC 319
- Decided
- 19 April 2024
- Disposal
- Appeal(s) allowed
Holding
Section 236(1) of the Insolvency and Bankruptcy Code incorporates the provisions of Section 435 of the Companies Act, 2013 as they existed at the Code’s commencement, so offences under the Code are triable by a Special Court presided by a Sessions Judge or Additional Sessions Judge.
Summary
The Insolvency and Bankruptcy Board of India (IBBI) filed a criminal complaint under Sections 73(a) and 235A of the Insolvency and Bankruptcy Code, 2016 (IBC) against the former directors of SBM Paper Mills for non‑compliance with a One‑Time Settlement ordered by the NCLT. The Sessions Judge issued process, but the respondents challenged the jurisdiction of the Special Court, arguing that after the 2018 amendment to Section 435 of the Companies Act, 2013, only offences under the Companies Act could be tried by a Special Court of a Sessions Judge, while IBC offences should go to a magistrate. The High Court quashed the complaint on this ground. The Supreme Court examined whether Section 236(1) of the IBC incorporates the provisions of Section 435 of the Companies Act (legislation by incorporation) or merely references it (legislation by reference). It held that the reference is specific and constitutes incorporation, so the provision as it stood when the IBC came into force governs, meaning a Special Court presided by a Sessions Judge or Additional Sessions Judge has jurisdiction. Consequently, the High Court’s order was set aside and the matter remitted for fresh consideration on merits.
Issues considered
- The correct interpretation of the reference to ‘Special Court established under Chapter XXVIII of the Companies Act, 2013’ in Section 236(1) of the Insolvency and Bankruptcy Code – whether it is legislation by incorporation or by reference.
- Whether amendments to Section 435 of the Companies Act, 2013 made after the commencement of the IBC affect the jurisdiction of the Special Court for offences under the IBC.
- The appropriate forum for trial of offences under Sections 73(a) and 235A of the IBC – a Special Court of a Sessions Judge/Additional Sessions Judge or a Metropolitan/Judicial Magistrate.
Legislation cited
- Code of Criminal Procedure, 1973s. 190, s. 193, s. 200
- Companies Act, 2013s. 435 (as amended 2015), s. 435 (as amended 2018), s. 435 (original)
- Insolvency and Bankruptcy Code, 2016s. 235A, s. 236(1), s. 73(a)
Subjects
Special CourtLegislation by incorporationLegislation by referenceWant of jurisdictionInsolvencyBankruptcyCorporate Insolvency Resolution ProcessCode of Criminal Procedure
Judgment
[2024] 5 S.C.R. 1 : 2024 INSC 319
Insolvency and Bankruptcy Board of India
v.
Satyanarayan Bankatlal Malu & Ors.
(Criminal Appeal No. 3851 of 2023)
19 April 2024
[B.R. Gavai* and Sandeep Mehta, JJ.]
Issue for Consideration
Special Court under the Insolvency and Bankruptcy Code, 2016
would be as provided u/s. 435 of the Companies Act as it existed
at the time when the Code came into effect, or it would be as
provided u/s.435 after the 2018 Amendment; and the reference to
‘Special Court established under Chapter XXVIII of the Companies
Act, 2013’ in s. 236(1) is ‘legislation by incorporation’ or ‘legislation
by reference’.
Headnotes
Insolvency and Bankruptcy Code, 2016 – ss.236, 73(a) and
235A – Trial of offences by Special Court – Petition by the
Corporate Debtor for initiation of the Corporate Insolvency
Resolution Process – Petition admitted and interim Resolution
Professional appointed – Meanwhile, the respondent/Ex-
Director of the Corporate Debtor filed an application for the
withdrawal in light of One Time Settlement and the same was
allowed by the NCLT – On account of non-compliance of the
terms of the OTS by the respondents, the NCLT found it to be
a fit case to prosecute the respondents – Appellant-Board then
filed a complaint against the respondents before the Sessions
Judge u/ss. 73(a) and 235A – Sessions Judge directed issuance
of process against the respondents – Respondents filed writ
petition before the High Court for the quashing the order
passed by the Sessions Judge for the want of jurisdiction –
High Court allowed the petition – Correctness:
Held: Special Court presided by a Sessions Judge or an Additional
Sessions Judge would have jurisdiction to try the complaint under
the Code – Under s. 236(1) the reference is only to the fact that
the offences under the Code shall be tried by the Special Court
established under Chapter XXVIII of the Companies Act, 2013
– Reference is not general but specific – Instant case is a case
of ‘legislation by incorporation’ and not a case of ‘legislation by
* Author
2 [2024] 5 S.C.R.
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reference’ – Provision with regard to Special Court has been bodily
lifted from s. 435 of the Companies Act, 2013 and incorporated
in s. 236(1) – Provision of s. 435 of the Companies Act, 2013
with regard to Special Court would become a part of s. 236(1) as
on the date of its enactment – Any amendment to s. 435 of the
Companies Act, 2013, after the date on which the Code came into
effect would not have any effect on the provisions of s. 236(1) –
Special Court at that point of time only consists of a person who
was qualified to be a Sessions Judge or an Additional Sessions
Judge – Thus, the reasoning of the High Court that in view of the
2018 Amendment only the offences under the Companies Act
would be tried by a Special Court of Sessions Judge or Additional
Sessions Judge and all other offences including under the Code
shall be tried by a Metropolitan Magistrate or Judicial Magistrate
of the First Class, is untenable – High Court erred in quashing
the complaint only on the ground that it was filed before a Special
Court presided by a Sessions Judges – High Court could have
directed the complaint to be withdrawn and presented before the
appropriate court having jurisdiction – Impugned judgment passed
by the High Court is quashed and set aside. [Paras 41-46,48]
Legislation – ‘Legislation by incorporation’ or a ‘legislation
by reference’ – Distinction between:
Held: Effect of incorporation means the bodily lifting of the provisions
of one enactment and making it part of another so much so that the
repeal of the former leaves the latter wholly untouched – However,
in the case of a reference or a citation of the provisions of one
enactment into another without incorporation, the amendment or
repeal of the provisions of the said Act referred to in a subsequent
Act will also bear the effect of the amendment or repeal of the
said provisions. [Para 27]
Case Law Cited
Bolani Ores Ltd. v. State of Orissa [1975] 2 SCR 138 :
(1974) 2 SCC 777; Mahindra and Mahindra Ltd. v. Union
of India and another [1979] 2 SCR 1038 : (1979) 2
SCC 529; Ebix Singapore Private Limited v. Committee
of Creditors of Educomp Solutions Limited and another
[2021] 14 SCR 321 : (2022) 2 SCC 401; Embassy
Property Developments Private Limited v. State of
Karnataka and others [2019] 17 SCR 559 : (2020) 13 SCC
308; Bharti Airtel Ltd. and another v. Vijaykumar V. Iyer
[2024] 5 S.C.R. 3
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
and others [2024] 1 SCR 140 : (2024) SCC OnLine SC
4; Girnar Traders (3) v. State of Maharashtra and others
[2007] 9 SCR 383 : (2011) 3 SCC 1; Collector of Customs,
Madras v. Nathella Sampathu Chetty and Anr. [1962] 3
SCR 786 : AIR 1962 SC 316; New Central Jute Mills Co.
Ltd. v. Assistant Collector of Central Excise, Allahabad
& Ors. [1971] 2 SCR 92 : (1970) 2 SCC 820; Ujagar
Prints and others v. Union of India and others [1989] 1
SCR 344 : (1989) 3 SCC 488; Innoventive Industries
Limited v. ICICI Bank and another [2017] 8 SCR 33 :
(2018) 1 SCC 407; Principal Commissioner of Income
Tax v. Monnet Ispat and Energy Limited (2018) 18 SCC
786; E.S. Krishnamurthy and others v. Bharath Hi-Tech
Builders Private Limited [2021] 12 SCR 28 : (2022) 3
SCC 161; Pratap Technocrats Private Limited and others
v. Monitoring Committee of Reliance Infratel Limited and
another [2021] 8 SCR 938 : (2021) 10 SCC 623; V.
Nagarajan v. SKS Ispat and Power Limited and others
[2021] 14 SCR 736 : (2022) 2 SCC 244 – referred to.
List of Acts
Insolvency and Bankruptcy Code, 2016; Companies Act, 2013.
List of Keywords
Special Court; Legislation by incorporation; Legislation by reference;
Want of jurisdiction.
Case Arising From
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 3851
of 2023
From the Judgment and Order dated 14.02.2022 of the High Court
of Judicature at Bombay in WP No. 2592 of 2021
Appearances for Parties
S.V. Raju, A.S.G., Ms. Rashi Rampal, Apoorv Khatore, Vikas Mehta,
Advs. for the Appellant.
Amir Arsiwala, Dhaval Deshpande, Anand Dilip Landge, Siddharth
Dharmadhikari, Aaditya Aniruddha Pande, Bharat Bagla, Sourav
Singh, Aditya Krishna, Ms. Preet S. Phanse, Adarsh Dubey, Advs.
for the Respondents.
4 [2024] 5 S.C.R.
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Judgment / Order of the Supreme Court
INDEX
I. FACTUAL BACKGROUND Paras 1 to 2
II. SUBMISSIONS Paras 3 to 17
III. CONSIDERATION OF STATUTORY PROVISIONS Paras 18 to 25
IV. CONSIDERATION OF PRECEDENTS Paras 26 to 40
V. CONCLUSION Paras 41 to 49
Judgment
B.R. Gavai, J.
I. FACTUAL BACKGROUND
1. This appeal challenges the judgement and order dated 14 th
February 2022, passed by the learned Single Judge of the High
Court of Judicature at Bombay in Writ Petition No.2592 of 2021,
thereby allowing the petition filed by Satyanarayan Bankatlal Malu
and Ramesh Satyanarayan Malu, the Ex-Directors of M/s. SBM
Paper Mills Pvt. Ltd. (hereinafter referred to as ‘the Respondents’)
challenging the order dated 17th March 2021 passed by the learned
Additional Sessions Judge, 58th Court in Special Case No.853 of 2020
(‘learned Sessions Judge’ for short). The learned Sessions Judge had
directed issuance of process against the Respondents on account of
a Complaint filed by the Insolvency and Bankruptcy Board of India
(hereinafter referred to as ‘the Appellant-Board’) under Section 236
of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred
to as “the Code”) read with Sections 190, 193 and 200 of the Code
of Criminal Procedure, 1973 (“Cr.P.C.) for the offences punishable
under Section 73(a) and Section 235A of the Code.
2. The facts in brief, giving rise to the present appeal are as under:
2.1 M/s. SBM Paper Mills Private Limited (hereinafter referred to as
“the Corporate Debtor”) filed a petition on 4th September 2017
under Section 10 of the Code for initiation of the Corporate
Insolvency Resolution Process (hereinafter referred to as
“CIRP”) of itself vide CP/1362/I&BC/NCLT/MB/MAH/2017. The
National Company Law Tribunal, Mumbai Bench (hereinafter
[2024] 5 S.C.R. 5
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
referred to as “the NCLT”) vide order dated 17th October 2017,
admitted the Petition and directed the moratorium to commence
as prescribed under Section 14 of the Code and directed certain
statutory steps to be taken as a consequence thereof. Vide the
said order, the NCLT also appointed Mr. Amit Poddar as the
Interim Resolution Professional (hereinafter referred to as “RP”)
to carry out the functions as prescribed under the provisions
of the Code.
2.2 In the meanwhile, Mr. Satyanarayan Malu, i.e., the Respondent/
Ex-Director of the Corporate Debtor filed an application being
M.A. No. 1396/2018 before the NCLT under Section 12A of the
Code for the withdrawal of the aforesaid petition under Section
10 in light of a One Time Settlement (“OTS” for short) entered
into with the sole Financial Creditor, i.e., Allahabad Bank. On
the other hand, the RP had also filed an application being
M.A. No. 827/2018 for the approval of the Resolution Plan.
The NCLT vide order dated 20th December 2018 allowed the
M.A. No. 1396/2018 filed by the Respondent while observing
the consent for withdrawal of the petition by the sole Financial
Creditor vide letter dated 27th November 2018.
2.3 However, on account of non-compliance of the terms of the
OTS by the Respondents, the NCLT issued a Show-Cause
Notice against them vide order dated 11th March 2019. The
NCLT further found it to be a fit case to propose the prosecution
of the Respondents vide order dated 20th August 2019 while
hearing an application filed by the sole Financial Creditor being
M.A. 494 and 495 of 2019 thereby seeking prosecution of the
Respondents.
2.4 Thereafter, on 22nd September 2020, the Appellant-Board filed
a Complaint against the Respondents before the Sessions
Judge in Special Case No. 853/2020 under the aforementioned
provisions and for offences punishable under Section 73(a) and
235A of the Code for the non-compliance of the terms of the
OTS and for not having filed the M.A. 1396/2018 under Section
12A of the Code through the RP. The Sessions Judge vide Order
dated 17th March 2021 directed issuance of process against
the Respondents and further directed them to be summoned
on the next date of hearing.
6 [2024] 5 S.C.R.
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2.5 Being aggrieved thereby, the Respondents filed a Writ Petition
No. 2592 of 2021 before the High Court of Judicature at Bombay,
praying for the quashing and setting aside of the order dated
17th March 2021 passed by the Sessions Judge for the want
of jurisdiction. The High Court vide impugned judgement and
order dated 14th February 2022 allowed the Writ Petition No.
2592 of 2021 filed by the Respondents.
2.6 Hence, this Appeal.
II. SUBMISSIONS
3. We have heard Shri S.V. Raju, learned Additional Solicitor General
of India (“ASG” for short) appearing for the Appellant-Board and Shri
Amir Arsiwala, Advocate on Record, appearing for the Respondents/
Ex-Directors of the Corporate Debtor.
4. Shri S.V. Raju, learned ASG submitted that the learned Single Judge
of the High Court has grossly erred in quashing the proceedings. Shri
Raju submitted that the learned Single Judge of the High Court has
grossly erred in holding that, in view of the Companies (Amendment)
Act, 2017 (which came into effect from 7th May 2018), only the
offences committed under the Companies Act can be tried by Special
Court consisting of Sessions Judge or Additional Sessions Judge. He
submitted that the reasoning given by the learned Single Judge that
the offences other than the Companies Act cannot be tried by the
Special Court consisting of Sessions Judge or Additional Sessions
Judge is totally in ignorance of the provisions of sub-section (1) of
Section 236 of the Code.
5. Learned ASG submitted that sub-section (1) of Section 236 of the
Code provides that the offences under the Code shall be tried by the
Special Court established under Chapter XXVIII of the Companies
Act, 2013. He submits that the legislative intent is clear. There is no
general reference to the provisions of the Companies Act. He submits
that what has been done by sub-section (1) of Section 236 of the
Code is that the offences punishable under the Code are required
to be tried by the Special Court established under Chapter XXVIII
of the Companies Act, 2013
6. Shri Raju further submitted that the legislative intent is clear. A specific
provision of the Companies Act, 2013 has been incorporated in sub-
section (1) of Section 236 of the Code. It is submitted that, if the
[2024] 5 S.C.R. 7
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
legislative intent was that of legislation by reference, then a general
reference could have been made in sub-section (1) of Section 236
of the Code to Chapter XXVIII of the Companies Act. Learned ASG
therefore submitted that, if the reference made to the Special Court
established under Chapter XXVIII of the Companies Act, 2013 is held
to be legislation by incorporation, then the subsequent amendments
to the Companies Act, 2013 would not be applicable to the Code.
He submitted that since the Code has come into effect on 28th May,
2016, the provisions of Section 435, as it existed in Chapter XXVIII
of the Companies Act, 2013 then, would only be applicable. Learned
ASG in this respect refers to the judgments of this Court in the
cases of Bolani Ores Ltd. vs State of Orissa1 and Mahindra and
Mahindra Ltd. vs Union of India and another2.
7. Learned ASG further submits that the Code has been held to be a
complete Code in itself in a catena of judgments of this Court. In
this respect, he relied on the judgments of this Court in the cases
of Ebix Singapore Private Limited vs Committee of Creditors of
Educomp Solutions Limited and another3, Embassy Property
Developments Private Limited vs State of Karnataka and others4,
and Bharti Airtel Ltd. and another vs Vijaykumar V. Iyer and
others5.
8. Learned ASG submits that, if a statute is a complete Code in itself,
then normally a reference to the provisions of the prior statute
referred to in a subsequent statute would only have a restrictive
operation. In such a case, it would be a ‘legislation by incorporation’
and not a ‘legislation by reference’. In this respect, he relied on the
judgments of this Court in the case of Girnar Traders (3) vs. State
of Maharashtra and others6.
9. Learned ASG further submits that the Statement of Objects
and Reasons (SOR) to the Companies (Amendment) Act, 2017,
amending the Companies Act, 2013 clearly shows that the
amendment is for the purposes of restricting only to the Companies
1 [1975] 2 SCR 138 : (1974) 2 SCC 777
2 [1979] 2 SCR 1038 : (1979) 2 SCC 529
3 [2021] 14 SCR 321: (2022) 2 SCC 401
4 [2019] 17 SCR 559 : (2020) 13 SCC 308
5 [2024] 1 SCR 140 : 2024 SCC OnLine SC 4
6 [2007] 9 SCR 383 : (2011) 3 SCC 1
8 [2024] 5 S.C.R.
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Act and not for any other purpose. He therefore submits that the
finding of the learned Single Judge of the High Court that in view
of the Companies (Amendment) Act, 2017, the Special Court
consisting of Sessions Judge or Additional Sessions Judge will
not have the jurisdiction to entertain the complaint in question is
totally erroneous.
10. Learned ASG submits that, in any event, the learned Single Judge of
the High Court has erred in quashing the complaint. It is submitted
that, in the event the learned Single Judge found that the Special
Court consisting of Sessions Judge or Additional Sessions Judge
did not have jurisdiction and it is the Special Court of Metropolitan
Magistrate or Judicial Magistrate First Class which has jurisdiction,
then it should have returned the complaint for presentation of the
same before the competent court having jurisdiction.
11. Shri Amir Arsiwala, learned Advocate on Record appearing for the
Respondents raises a preliminary objection. He submits that the
point with regard to ‘legislation by incorporation’ was not argued
before the learned Single Judge of the High Court and therefore
the said contention cannot be permitted to be raised for the first
time in this Court.
12. Shri Arsiwala submits that the judgment of this Court in the case of
Bolani Ores Ltd. (supra) would not be applicable in the facts of the
present case inasmuch as, in the said case what was incorporated in
the subsequent statute was a definition of ‘motor vehicles’ as found
in the earlier statute i.e. Motor Vehicles Act, 1939. It is therefore
submitted that, the definition cannot be in a state of flux subject to
the mercy of amendments to the Central Act.
13. Similarly, he submits that the judgment of this Court in the case of
Mahindra and Mahindra Ltd. (supra) would not be applicable to
the facts of the present case inasmuch as, in the said case what
was referred in Section 55 of the Monopolies and Restrictive Trade
Practices Act, 1969 was a right to file an appeal on any of the
grounds mentioned in Section 100 of the Code of Civil procedure,
1908 (“CPC” for short). He submitted that in the said case, this Court
was considering a provision which provided a substantive right to file
an appeal. As such, a reference to Section 100 of the CPC was held
amounting to be an ‘incorporation’ as the substantive right of appeal
could not be left at the mercy of subsequent amendments to the CPC.
[2024] 5 S.C.R. 9
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
14. Insofar as the judgment of this Court in the case of Girnar Traders
(supra) is concerned, learned counsel submits that rather than the
said judgment supporting the case of the Appellant-Board, if the test
laid down in the said case is applied to the facts of the present case,
it will lead to a conclusion that the present case is that of ‘legislation
by reference’.
15. Relying on the judgments of this Court in the cases of Collector of
Customs, Madras vs Nathella Sampathu Chetty and Anr.7, New
Central Jute Mills Co. Ltd. vs. Assistant Collector of Central
Excise, Allahabad & Ors.8, and Ujagar Prints and others vs
Union of India and others9, he submits that what has to be taken
into consideration is the plain language used by the legislation in
the statute to which a reference is made by the subsequent statute.
Learned counsel submits that in the present case, a general reference
is made to Chapter XXVIII of the Companies Act. It is therefore
submitted that, since a general reference is made, the present case
would not be a case of ‘legislation by incorporation’ but would be a
case of ‘legislation by reference’.
16. Learned counsel submits that in any case, the Respondents Nos.1
and 2 have a good case on merits. He submits that the learned Single
Judge of the High Court has not considered the merits of the matter
and in the event this Court holds that the learned Single Judge was
not justified in quashing the proceedings, the matter be remitted to the
learned Single Judge of the High Court for deciding it afresh on merits.
17. Shri Vikas Mehta, learned Advocate on Record for the Appellant-
Board, in rejoinder, reiterated the submissions made by Shri S.V.
Raju, learned ASG. He submits that the legislative intent is clear. If
the legislature wanted to take out the offences punishable under the
Code from the ambit of Chapter XXVIII of the Companies Act, 2013,
nothing prevented it from making an amendment to the Code itself.
III. CONSIDERATION OF STATUTORY PROVISIONS
18. For considering the rival submissions, it will be necessary to refer
to Section 236(1) of the Code, which reads thus:
7 [1962] 3 SCR 786
8 [1971] 2 SCR 92 : (1970) 2 SCC 820
9 [1989] 1 SCR 344 : (1989) 3 SCC 488
10 [2024] 5 S.C.R.
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236. Trial of offences by Special Court.—(1)
Notwithstanding anything in the Code of Criminal
Procedure, 1973 (2 of 1974), offences under of this Code
shall be tried by the Special Court established under
Chapter XXVIII of the Companies Act, 2013 (18 of 2013).
19. It can thus be seen that Section 236(1) of the Code begins with a
non-obstante clause. It provides that the offences under the Code
shall be tried by the Special Court established under Chapter XXVIII
of the Companies Act, 2013. Chapter XXVIII of the Companies Act,
2013 deals with ‘Special Courts’.
20. For appreciating the rival submissions, it will also be necessary to
refer to Section 435 of the Companies Act, 2013, as it was originally
enacted; Section 435 after the amendment in 2015 by the Companies
(Amendment) Act, 2015, which came into effect from 29th May 2015
(hereinafter referred to as “the 2015 Amendment”); and Section 435
as it existed after the amendment by the Companies (Amendment)
Act, 2017 with effect from 7th May 2018 (hereinafter referred to as
“the 2018 Amendment”), which reads thus:
Section 435 (originally enacted)
“435. Establishment of Special Courts.—(1) The Central
Government may, for the purpose of providing speedy
trial of offences punishable 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.”
Section 435 (after the 2015 Amendment)
“435. Establishment of Special Courts.—(1) The Central
Government may, for the purpose of providing speedy trial
of offences punishable under this Act with imprisonment of
[2024] 5 S.C.R. 11
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
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.
(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.”
Section 435 (after the 2018 Amendment)
“435. Establishment of Special Courts.—(1) The Central
Government may, for the purpose of providing speedy trial
of offences under this Act, except under section 452, by
notification, establish or designate as many Special Courts
as may be necessary.
(2) A Special Court shall consist of—
(a) a single judge holding office as Session Judge
or Additional Session Judge, in case of offences
punishable under this Act with imprisonment of
two years or more; and
(b) a Metropolitan Magistrate or a Judicial
Magistrate of the First Class, in the case of
other offences, 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.”
21. It could thus be seen that as per Section 435(3) of the Companies
Act, 2013, as it existed on the date on which the Code came into
effect (i.e. after the 2015 Amendment), a person to be qualified for
appointment as a Judge of a Special Court was required to hold office
12 [2024] 5 S.C.R.
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of a Sessions Judge or an Additional Sessions Judge immediately
before his appointment as a Judge of a Special Court.
22. After Section 435 of the Companies Act, 2013 suffered an amendment
in the year 2015 by the 2015 Amendment (Act No. 21 of 2015), with
effect from 29th May, 2015, sub-section (1) thereof provided that
the Central Government may, for the purpose of providing speedy
trial of offences punishable under the said Act with imprisonment of
two years or more, by notification, establish or designate as many
Special Courts as may be necessary. It further provided that all
other offences shall be tried either by a Metropolitan Magistrate or
a Judicial Magistrate of the First Class having jurisdiction to try any
offence under the said Act or under any previous company law;
meaning thereby, the offences under the Companies Act punishable
with imprisonment of two years or more were to be tried by Special
Courts comprising of Sessions Judge or Additional Sessions Judge,
whereas all other offences punishable with imprisonment of less than
two years, were to be tried by the Courts of Metropolitan Magistrate
or Judicial Magistrate First Class having jurisdiction to try such
offences. Insofar as sub-sections (2) and (3) are concerned, there
was no change and as such, for being a person to be eligible for
appointment as a Judge of a Special Court it was necessary that he
occupied the office of a Sessions Judge or an Additional Sessions
Judge prior to his appointment.
23. Another amendment to Section 435 of the Companies Act, 2013 was
effected by the Companies (Amendment) Act, 2017 (i.e. Act No. 1
of 2018), with effect from 7th May, 2018. Vide the said amendment,
two classes of Special Courts were constituted. Firstly, a Special
Court presided by a single judge holding office as Session Judge
or Additional Session Judge, in case of offences punishable with
imprisonment of two years or more under the Companies Act, 2013;
and the second being presided by a Metropolitan Magistrate or a
Judicial Magistrate of the First Class in the case of other offences,
i.e., offences punishable with imprisonment of less than two years.
24. It is thus clear that Section 435 of the Companies Act, 2013 as it
originally existed, provided for only one class of Special Courts i.e. a
person holding office of a Sessions Judge or an Additional Sessions
Judge and all offences under the Companies Act, 2013 were required
to be tried by such Special Courts. The 2015 Amendment to Section
435 also provided for only one class of Special Courts i.e. a person
[2024] 5 S.C.R. 13
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
holding the rank of a Sessions Judge or an Additional Sessions
Judge. The change that was brought out was that, only offences
punishable under the Companies Act, 2013 with imprisonment of
two years or more were to be tried by the Special Courts, whereas
all other offences i.e. offences punishable with imprisonment of less
than two years were to be tried by the jurisdictional Metropolitan
Magistrate or the Judicial Magistrate of the First Class. By the 2018
Amendment, two classes of Special Courts were established. The first
class of Special Courts comprised of an officer holding the office as
Sessions Judge or Additional Sessions Judge, whereas the second
class of Special Courts comprised of Metropolitan Magistrate or a
Judicial Magistrate of the First Class. The offences punishable under
the Companies Act with imprisonment of two years or more were
required to be tried by a Special Court comprising of Sessions Judge
or Additional Sessions Judge, whereas all other offences i.e. the
offences punishable with imprisonment of less than two years were
to be tried by a Special Court comprising of Metropolitan Magistrate
or the Judicial Magistrate of the First Class.
25. The question that requires to be considered is, as to whether the
Special Court under the Code would be as provided under Section
435 of the Companies Act as it existed at the time when the Code
came into effect, or it would be as provided under Section 435 of
the Companies Act after the 2018 Amendment. The answer to that
question would depend upon as to whether the reference to ‘Special
Court established under Chapter XXVIII of the Companies Act, 2013’
in Section 236(1) of the Code is a ‘legislation by incorporation’ or
a ‘legislation by reference’. If it is held that it is a ‘legislation by
incorporation’, then the subsequent amendments would not have
any effect on the Code and the Special Court would continue to be
as provided under Section 435 of the Companies Act, as it existed
when the Code came into effect. Per contra, if it is held that it is a
‘legislation by reference’ then the subsequent amendments would
also be applicable to the Code and the Special Courts would be as
provided under Section 435 of the Companies Act after its amendment
by the 2018 Amendment.
IV. CONSIDERATION OF PRECEDENTS
26. A Constitution Bench of this Court in the case of Collector of
Customs, Madras vs Nathella Sampathu Chetty and Anr. (supra)
14 [2024] 5 S.C.R.
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has considered the distinction between ‘legislation by reference’
and ‘legislation by incorporation’. It will be apposite to refer to the
following observations of this Court in the said case:
“………To consider that the decision of the Privy Council
has any relevance to the construction of the legal effect
of the terms of Section 23-A of the Foreign Exchange
Regulation Act is to ignore the distinction between a
mere reference to or a citation of one statute in another
and an incorporation which in effect means the bodily
lifting of the provisions of one enactment and making it
part of another so much so that the repeal of the former
leaves the latter wholly untouched. In the case, however,
of a reference or a citation of one enactment by another
without incorporation, the effect of a repeal of the one
“referred to” is that set out in Section 8(1) of the General
clauses Act:
“8. (1) Where this Act, or any Central Act or Regulation
made after the commencement of this Act, repeals and
re-enacts, with or without modification, any provision
of a former enactment, then references in any other
enactment or in any instrument to the provision so
repealed shall, unless a different intention appears:
be construed as references to the provision so re-
enacted.”
On the other hand, the effect of incorporation is as stated
by Brett, L.J. in Clarke v. Bradlaugh [1881 8 QBD 63] :
“Where a statute is incorporated, by reference, into
a second statute the repeal of the first statute by a
third does not affect the second.”
This is analogous to, though not identical with the principle
embodied in Section 6-A of the General Clauses Act
enacted to define the effect of repeals effected by repealing
and amending Acts which runs in these terms:
“6-A. Where any Central Act or Regulation made
after the commencement of this Act repeals any
enactment by which the text of any Central Act or
Regulation was amended by the express omission,
[2024] 5 S.C.R. 15
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
insertion or substitution of any matter, then, unless a
different intention appears, the repeal shall not affect
the continuance of any such amendment made by
the enactment so repealed and in operation at the
time of such repeal.”
We say “not identical” because in the class of cases
contemplated by Section 6-A of the General clauses Act,
the function of the incorporating legislation is almost wholly
to effect the incorporation and when that is accomplished,
they die as it were a natural death which is formally effected
by their repeal. In cases, however, dealt with by Brett, L.J.
the legislation from which provisions are absorbed continue
to retain their efficacy and usefulness and their independent
operation even after the incorporation is effected.”
27. It could thus be seen that the effect of incorporation means the
bodily lifting of the provisions of one enactment and making it part
of another so much so that the repeal of the former leaves the latter
wholly untouched. However, in the case of a reference or a citation
of the provisions of one enactment into another without incorporation,
the amendment or repeal of the provisions of the said Act referred
to in a subsequent Act will also bear the effect of the amendment
or repeal of the said provisions.
28. In the case of Bolani Ores Ltd. (supra), this Court was considering
the question as to what would be the effect of amendment of the
definition of ‘motor vehicles’ for the purposes of Bihar and Orissa
Motor Vehicles Taxation Act, 1930 (for short “the Orissa Taxation
Act”). The Orissa Taxation Act had adopted the definition of ‘motor
vehicles’ as provided in the Motor Vehicles Act, 1939 for the purposes
of taxation. The definition at the time of adoption brought the motor
vehicle under the ambit of the said definition. It excluded the ‘motor
vehicles’ used solely upon the premises of the owner. However,
the said enactment suffered an amendment in the year 1956 and
specifically excluded vehicles of special type adapted for use only
in a factory or in any other enclosed premises. It was sought to be
urged on behalf of the State of Orissa that the definition of ‘motor
vehicles’ as adopted in Section 2(c) of the Orissa Taxation Act was
not the definition by ‘incorporation’ but a definition by ‘reference’ and
therefore amendment to the said definition would also be applicable
16 [2024] 5 S.C.R.
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for the purposes of taxation under the Orissa Taxation Act.
29. Rejecting the said contention and referring to various earlier
judgments, this Court observed thus:
“29. The question then remains as to whether these
vehicles though registrable under the Act are motor
vehicles for the purpose of the Taxation Act. It has
already been pointed out that before the amendment
vehicles used solely upon the premises of the owner,
though they may be mechanically propelled vehicles
adapted for use upon roads were excluded from the
definition of ‘motor vehicle’. If this definition which
excludes them is the one which is incorporated by
reference under Section 2(c) of the Taxation Act, then
no tax is leviable on these vehicles under the Taxation
Act. Shri Tarkunde for the State of Orissa contends
that the definition of ‘motor vehicle’ in Section 2(c) of
the Taxation Act is not a definition by incorporation but
only a definition by reference, and as such the meaning
of ‘motor vehicle’ for the purpose of Section 2(c) of the
Taxation Act would be the same as defined from time
to time under Section 2(18) of the Act. In ascertaining
the intention of the legislature in adopting the method of
merely referring to the definition of ‘motor vehicle’ under
the Act for the purpose of the Taxation Act, we have to
keep in mind its purpose and intendment as also that of
the Motor Vehicles Act. We have already stated what these
purposes are and having regard to them the registration
of a motor vehicle does not automatically make it liable
for taxation under the Taxation Act. The Taxation Act is
a regulatory measure imposing compensatory taxes for
the purpose of raising revenue to meet the expenditure
for making roads, maintaining them and for facilitating
the movement and regulation of traffic. The validity of the
taxing power under Entry 57 List II of the Seventh Schedule
read with Article 301 of the Constitution depends upon
the regulatory and compensatory nature of the taxes. It
is not the purpose of the Taxation Act to levy taxes on
vehicles which do not use the roads or in any way form
[2024] 5 S.C.R. 17
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
part of flow of traffic on the roads which is required to
be regulated. The regulations under the Motor Vehicles
Act for registration and prohibition of certain categories
of vehicles being driven by persons who have no driving
licence, even though those vehicles are not plying on the
roads, are designed to ensure the safety of passengers
and goods etc. etc. and for that purpose it is enacted to
keep control and check on the vehicles. Legislative power
under Entry 35 of List III (Concurrent List) does not bar
such a provision. But Entry 57 of List II is subject to the
limitations referred to above, namely, that the power of
taxation thereunder cannot exceed the compensatory
nature which must have some nexus with the vehicles
using the roads viz. public roads. If the vehicles do not
use the roads, notwithstanding that they are registered
under the Act, they cannot be taxed. This very concept is
embodied in the provisions of Section 7 of the Taxation
Act as also the relevant sections in the Taxation Acts of
other States, namely, that where a motor vehicle is not
using the roads and it is declared that it will not use the
roads for any quarter or quarters of a year or for any
particular year or years, no tax is leviable thereon and if
any tax has been paid for any quarter during which it is
not proposed to use the motor vehicle on the road, the
tax for that quarter is refundable. If this be the purpose
and object of the Taxation Act, when the motor vehicle is
defined under Section 2(c) of the Taxation Act as having the
same meaning as in the Motor Vehicles Act, 1939, then the
intention of the Legislature could not have been anything
but to incorporate only the definition in the Motor Vehicles
Act as then existing, namely, in 1943, as if that definition
was bodily written into Section 2(c) of the Taxation Act.
If the subsequent Orissa Motor Vehicles Taxation
(Amendment) Act, 1943, incorporating the definition
of ‘motor vehicle’ referred to the definition of ‘motor
vehicle’ under the Act as then existing, the effect of
this legislative method would, in our view, amount
to an incorporation by reference of the provisions of
Section 2(18) of the Act in Section 2(c) of the Taxation
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Act. Any subsequent amendment in the Act or a total
repeal of the Act under a fresh legislation on that topic
would not affect the definition of ‘motor vehicle’ in
Section 2(c) of the Taxation Act. This is a well-accepted
interpretation both in this country as well as in England
which has to a large extent influenced our law. This
view is further reinforced by the use of the word ‘has’ in
the expression “has the same meaning as in the Motor
Vehicles Act, 1939” in Section 2(c) of the Taxation Act,
which would perhaps further justify the assumption that
the Legislature had intended to incorporate the definition
under the Act as it then existed and not as it may exist
from time to time. This method of drafting which adopts
incorporation by reference to another Act whatever
may have been its historical justification in England in
this country does not exhibit an activists draftsmanship
which would have adopted the method of providing its
own definition. Where two Acts are complimentary or
interconnected, legislation by reference may be an easier
method because a definition given in the one Act may be
made to do as the definition in the other Act both of which
being enacted by the same Legislature. At any rate, Lord
Esher, M.R. dealing with legislation by incorporation, in In
re. Wood’s Estate [(1886) 31 Ch D 607] said at p. 615:
“If a subsequent Act brings into itself by reference
some of the clauses of a former Act, the legal effect
of that, as has often been held, is to write those
sections into the new Act just as if they had been
actually written in it with the pen, or printed in it, and,
the moment you have these clauses in the later Act,
you have no occasion to refer to the former Act at all.”
The observations in Clarke v. Bradlaugh [(1881) 8 QBD
63 607] are also to the same effect. Brett, L.J. in that case
had said at p. 69:
“… there is a rule of construction that, where a statute
is incorporated by reference into a second statute,
the repeal of the first statute by a third statute does
not affect the second.”
[2024] 5 S.C.R. 19
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
30. In Secretary of State for India in Council v. Hindusthan
Cooperative Insurance Society Ltd. [AIR 1931 PC 149 : 132
IC 748 : LR 58 IA 259] the Privy Council was considering
a case where the incorporation effected in the statute viz.
the Calcutta Improvement Trust Act, 1911 — referred to
by their Lordships as the “Local Act” — was in express
terms and in the form illustrated by 54 and 55 Vict., Ch.
19. The “Local Act” in dealing with the acquisition of land
for the purposes designated by it, made provision for
the acquisition under the Land Acquisition Act, and the
provisions of the Land Acquisition Act were subjected
to numerous modifications which were set out in the
Schedule, so that in effect the “Local Act” was held to be
the enactment of a Special Law for the acquisition of land
for the special purpose. It was in the context of these and
several other provisions which pointed to the absorption
of certain of the provisions of the Land Acquisition Act into
the “Local Act” with vital modifications that Privy Council
observed at p. 266:
“But Their Lordships think that there are other and
perhaps more cogent objections to this contention of
the Secretary of State, and their Lordships are not
prepared to hold that the sub-section in question,
which was not enacted till 1921, can be regarded as
incorporated in the Local Act of 1911. It was not part
of the Land Acquisition Act when the Local Act was
passed, nor in adopting the provisions of the Land
Acquisition Act is there anything to suggest that the
Bengal Legislature intended to bind themselves to any
future additions which might be made to that Act. It is
at least conceivable that new provisions might have
been added to the Land Acquisition Act which would
be wholly unsuitable to the local code. Nor again,
does Act 19 of 1921 contain any provision that the
amendments enacted by it are to be treated as in any
way retrospective, or are to be regarded as affecting
any other enactment than the Land Acquisition Act
itself. Their Lordships regard the Local Act as doing
nothing more than incorporating certain provisions
20 [2024] 5 S.C.R.
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from an existing Act, and for convenience of drafting
doing so by reference to that Act, instead of setting
out for itself at length the provisions which it was
desired to adopt.”
It was further observed at p. 267:
“In this country it is accepted that where a statute is
incorporated by reference into a second statute, the
repeal of the first statute does not affect the second:
see the cases collected in Craies on Statute Law, 3rd
Edn. pp. 349-50. This doctrine finds expression in a
common-form section which regularly appears in the
amending and repealing Acts which are passed from
time to time in India …. The independent existence
of the two Acts is therefore recognized; despite the
death of the parent Act, its off-spring survives in the
incorporating Act. Though no such saving clause
appears in the General Clauses Act, their Lordships
think that the principle involved is as applicable in
India as it is in this country.
It seems to be no less logical to hold that where
certain provisions from an existing Act have been
incorporated into a subsequent Act, no addition to the
former Act, which is not expressly made applicable to
the subsequent Act, can be deemed to be incorporated
in it, at all events if it is possible for the subsequent
Act to function effectually without the addition.”
This Court in the Collector of Customs, Madras v. Nathella
SampathuChetty [AIR 1962 SC 316 : (1962) 3 SCR 786,
830-833 : (1962) 1 Cr LJ 364] considered the Privy Council
decision in the Hindustan Cooperative Insurance Society
Ltd. and distinguished that case and held the principle
inapplicable to the facts of that case.
31. In State of Bihar v. S.K. Roy [AIR 1966 SC 1995 :
1966 Supp SCR 259 : (1966) 2 LLJ 759] this Court was
considering the definition of “employer” in Section 2(e) of
the Coal Mines Provident Fund and Bonus Schemes Act,
1948, where that expression was defined to mean “the
owner of a coal mine as defined in clause (g) of Section
[2024] 5 S.C.R. 21
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
3 of the Indian Mines Act, 1923”. The Indian Mines Act,
1923, had been repealed and substituted by the Mines Act,
1952 (Act 35 of 1952). In the latter Act the word “owner”
had been defined in clause (1) of Section 2. The question
was whether by virtue of Section 8 of the General Clauses
Act, the definition of the word “employer” in clause (e) of
Section 2 of the Coal Mines Provident Fund and Bonus
Schemes Act should be construed with reference to the
definition of the word, “owner” in clause (1) of Section
2 of Act 35 of 1952, which repealed the earlier Act and
re-enacted it. It may be mentioned that according to
Section 2(1) of Act 35 of 1952 the word “owner”, when
used in relation to a mine, means “any person who is the
immediate proprietor or lessee or occupier of the mine or
of any part thereof and in the case of a mine the business
whereof is being carried on by a liquidator or receiver,
such liquidator or receiver….” The expression “coal mine”
is separately defined in clause (b) of Section 2 of the Coal
Mines Provident Fund and Bonus Schemes Act, 1948.
Ramaswami, J. speaking for the Court observed at p. 261:
“As a matter of construction it must be held that all
works, machinery, tramways and sidings, whether
above or below ground, in or adjacent to a coal mine
will come within the scope and ambit of the definition
only when they belong to the coal mine. In other
words, the word or occurring before the expression
‘belonging to a coal mine’ in the main definition has
to be read to mean ‘and’.”
This case, as well as the decision in New Central Jute
Mills Co. Ltd. v. Assistant Collector of Central Excise,
Allahabad [(1970) 2 SCC 820 : (1971) 2 SCR 92] are
distinguishable on the facts and legislation which this
Court was considering. In the New Central Jute Mills Co.
Ltd. case, the Privy Council decision in the Hindusthan
Cooperative Insurance Society Ltd. case was referred to
and distinguished. It is, however, contended by the learned
Solicitor General that both in Nathella Sampathu Chetty
case as well as the New Central Jute Mills Co. Ltd. case
this Court was considering the effects of the two Acts which
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were made by Parliament by Central legislation and it is,
therefore, not strictly a case of incorporation because the
Central Legislature is deemed to have, while making the
latter enactment, kept in view the provisions of the former
Act. In our view this may not be conclusive.
32. In Ram Sarup v. Munshi [AIR 1963 SC 553 : (1963) 3
SCR 858] a judgment of the Bench of five Judges of this
Court held that the repeal of the Punjab Alienation of Land
Act, 1900, had no effect on the continued operation of the
Punjab Pre-emption Act, 1913, and that the expression
“agricultural land” in the later Act had to be read as if the
definition of the Alienation of Land Act had been bodily
transposed into it. After referring to the observations of
Brett, L.J. in Clarke case, Rajagopala Ayyangar, J. speaking
for the Court observed at pp. 868-69:
“Where the provisions of an Act are incorporated by
reference in a later Act the repeal of the earlier Act
has, in general, no effect upon the construction or
effect of the Act in which its provisions have been
incorporated.
***
In the circumstances, therefore, the repeal of the
Punjab Alienation of Land Act of 1900 has no effect
on the continued operation of the Pre-emption Act
and the expression ‘agricultural land’ in the later Act
has to be read as if the definition in the Alienation of
Land Act had been bodily transposed into it.”
The above decision of this Court is more in point and
supports our conclusion. In our view, the intention of
Parliament for modifying the Motor Vehicles Act has
no relevance in determining the intention of the Orissa
Legislature in enacting the Taxation Act.”
[Emphasis supplied]
30. It is thus clear that this Court found that, if the vehicles do not use
the roads, notwithstanding that they are registered under the Motor
Vehicles Act, they cannot be taxed under the Orissa Taxation Act.
This Court held that the intention of the Legislature could not have
[2024] 5 S.C.R. 23
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
been anything but to incorporate only the definition in the Motor
Vehicles Act, as it existed in 1943, as if that definition was bodily
written into Section 2(c) of the Orissa Taxation Act. It further held
that, if the subsequent Orissa Motor Vehicles Taxation (Amendment)
Act, 1943, incorporating the definition of ‘motor vehicle’ referred to
the definition of ‘motor vehicle’ under the Motor Vehicles Act, as it
existed at the time of enactment of the subsequent Act; the effect
of this legislative method would amount to an incorporation by
reference to the provisions of Section 2(18) of the Motor Vehicles
Act in Section 2(c) of the Orissa Taxation Act. It was further held
that, any subsequent amendment in the Motor Vehicles Act or a total
repeal of the Motor Vehicles Act under a fresh legislation on that
topic would also not affect the definition of ‘motor vehicle’ in Section
2(c) of the Orissa Taxation Act.
31. This Court unequivocally held that the intention of Parliament for
modifying the Motor Vehicles Act had no relevance in determining
the intention of the Orissa Legislature in enacting the Orissa Taxation
Act. This Court held that the dumpers and rockers, which were used
by the miners in their premises though registrable under the Motor
Vehicles Act were not taxable under the Orissa Taxation Act as long
as they were working solely within the premises of the respective
owners.
32. In the case of Mahindra and Mahindra Ltd. (supra), Section 55 of
the Monopolies and Restrictive Trade Practices Act, 1969 (“MRTP
Act, 1969” for short) provided that any person aggrieved by an order
made by the Commission under Section 13 may prefer an appeal
to the Supreme Court on ‘one or more of the grounds specified in
Section 100 of the CPC’. Section 100 of the CPC at the time of the
incorporation of the MRTP Act specified three grounds on which a
second appeal could be brought to the High Court and one of the
grounds was that the decision appealed against was contrary to law.
However, by the Code of Civil Procedure (Amendment) Act, 1976
with effect from February 1, 1977, it was provided that a second
appeal shall lie to the High Court only if the High Court is satisfied
that the case involves a substantial question of law. It was sought
to be argued that substitution of the new Section 100 amounted to
repeal and re-enactment of the former Section 100 and therefore
the reference in Section 55 of the MRTP Act, 1969 to Section 100
of CPC must be construed as reference to the new Section 100 and
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the appeal would be tenable only on ground specified in the new
Section 100 of CPC i.e., on a substantial question of law.
33. Rejecting the said contention, this Court observed thus:
“8. The first question that arises for consideration
on the preliminary objection of the respondents is
as to what is the true scope and ambit of an appeal
under Section 55. That section provides inter alia
that any person aggrieved by an order made by the
Commission under Section 13 may prefer an appeal to
this Court on “one or more of the grounds specified
in Section 100 of the Code of Civil Procedure, 1908”.
Now at the date when Section 55 was enacted,
namely, December 27, 1969, being the date of
coming into force of the Act, Section 100 of the
Code of Civil Procedure specified three grounds
on which a second appeal could be brought to the
High Court and one of these grounds was that the
decision appealed against was contrary to law. It
was sufficient under Section 100 as it stood then that
there should be a question of law in order to attract
the jurisdiction of the High Court in second appeal
and, therefore, if the reference in Section 55 were
to the grounds set out in the then existing Section
100, there can be no doubt that an appeal would
lie to this Court under Section 55 on a question of
law. But subsequent to the enactment of Section
55, Section 100 of the Code of Civil Procedure was
substituted by a new section by Section 37 of the
Code of Civil Procedure (Amendment) Act, 1976 with
effect from February 1, 1977 and the new Section
100 provided that a second appeal shall lie to the
High Court only if the High Court is satisfied that the
case involves a substantial question of law. The three
grounds on which a second appeal could lie under
the former Section 100 were abrogated and in their
place only one ground was substituted which was
a highly stringent ground, namely, that there should
be a substantial question of law. This was the new
Section 100 which was in force on the date when
[2024] 5 S.C.R. 25
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
the present appeal was preferred by the appellant
and the argument of the respondents was that the
maintainability of the appeal was, therefore, required
to be judged by reference to the ground specified
in the new Section 100 and the appeal could be
entertained only if there was a substantial question
of law. The respondents leaned heavily on Section
8(1) of the General Clauses Act, 1897 which provides:
“Where this Act or any Central Act or Regulation made
after the commencement of this Act, repeals and re-
enacts, with or without modification, any provision
of a former enactment, then references in any other
enactment or in any instrument to the provision so
repealed shall, unless a different intention appears,
be construed as references to the provision so re-
enacted.”
and contended that the substitution of the new Section
100 amounted to repeal and re-enactment of the former
Section 100 and, therefore, on an application of the rule
of interpretation enacted in Section 8(1), the reference
in Section 55 to Section 100 must be construed as
reference to the new Section 100 and the appeal could be
maintained only on ground specified in the new Section
100, that is, on a substantial question of law. We do
not think this contention is well founded. It ignores the
distinction between a mere reference to or citation
of one statute in another and an incorporation which
in effect means bodily lifting a provision of one
enactment and making it a part of another. Where there
is mere reference to or citation of one enactment in
another without incorporation. Section 8(1) applies
and the repeal and re-enactment of the provision
referred to or cited has the effect set out in that
section and the reference to the provision repealed
is required to be construed as reference to the
provision as re-enacted. Such was the case in Collector
of Customs v. Nathella Sampathu Chetty [AIR 1962 SC
316 : (1962) 3 SCR 786] and New Central Jute Mills
Co. Ltd. v. Assistant Collector of Central Excise [(1970)
26 [2024] 5 S.C.R.
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2 SCC 820 : AIR 1971 SC 454 : (1971) 2 SCR 92]. But
where a provision of one statute is incorporated in
another, the repeal or amendment of the former does
not affect the latter. The effect of incorporation is as
if the provision incorporated were written out in the
incorporating statute and were a part of it. Legislation
by incorporation is a common legislative device employed
by the legislature, where the legislature for convenience
of drafting incorporates provisions from an existing statute
by reference to that statute instead of setting out for itself
at length the provisions which it desires to adopt. Once
the incorporation is made, the provision incorporated
becomes an integral part of the statute in which it is
transposed and thereafter there is no need to refer to
the statute from which the incorporation is made and
any subsequent amendment made in it has no effect
on the incorporation statute. Lord Esher, M.R., while
dealing with legislation in incorporation in In re Wood’s
Estate [(1886) 31 Ch D 607] pointed out at p. 615:
“If a subsequent Act brings into itself by reference
some of the clauses of a former Act, the legal effect
of that, as has often been held, is to write those
sections into the new Act just as if they had been
actually written in it with the pen, or printed in it, and,
the moment you have those clauses in the later Act,
you have no occasion to refer to the former Act at all.”
Lord Justice Brett, also observed to the same effect in
Clarke v. Bradlough [(1881) 8 QBD 63, 69] :
“.… there is a rule of construction that, where a statute
is incorporated by reference into a second statute,
the repeal of the first statute by a third statute does
not affect the second.”
This was the rule applied by the Judicial Committee of the
Privy Council in Secretary of State for India in Council v.
Hindustan Cooperative Insurance Society Ltd. [58 IA 259]
The Judicial Committee pointed out in this case that the
provisions of the Land Acquisition Act, 1894 having been
incorporated in the Calcutta Improvement Act, 1911 and
[2024] 5 S.C.R. 27
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
become an integral part of it, the subsequent amendment
of the Land Acquisition Act, 1894 by the addition of sub-
section (2) in Section 26 had no effect on the Calcutta
Improvement Act, 1911 and could not be read into it. Sir
George Lowndes delivering the opinion of the Judicial
Committee observed at p. 267:
“In this country it is accepted that where a statute is
incorporated by reference into a second statute, the
repeal of the first statute does not affect the second:
see the cases collected in Craies on Statute Law,
3rd Edn. pp. 349, 350 ... The independent existence
of the two Acts is, therefore, recognised; despite the
death of the parent Act, its offspring survives in the
incorporating Act.
It seems to be no less logical to hold that where
certain provisions from an existing Act have been
incorporated into a subsequent Act, no addition
to the former Act, which is not expressly made
applicable to the subsequent Act, can be deemed
to be incorporated in it, at all events if it is possible
for the subsequent Act to function effectually without
the addition.”
So also in Ram Sarup v. Munshi [AIR 1963 SC 553 :
(1963) 3 SCR 858] it was held by this Court that since
the definition of “agricultural land” in the Punjab Alienation
of Land Act, 1900 was bodily incorporated in the Punjab
Pre-emption Act, 1913, the repeal of the former Act had no
effect on the continued operation of the latter. Rajagopala
Ayyangar, J., speaking for the Court observed at p. 868-
69 of the Report:
“Where the provisions of an Act are incorporated by
reference in a later Act the repeal of the earlier Act has,
in general, no effect upon the construction or effect of
the Act in which its provisions have been incorporated.
In the circumstances, therefore, the repeal of the
Punjab Alienation of Land Act of 1900 has no effect
on the continued operation of the Pre-emption Act
28 [2024] 5 S.C.R.
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and the expression ‘agricultural land’ in the later Act
has to be read as if the definition in the Alienation of
Land Act, 1900, had been bodily transposed into it.”
The decision of this Court in Bolani Ores Ltd. v. State of
Orissa [(1974) 2 SCC 777 : AIR 1975 SC 17 : (1975) 2
SCR 138] also proceeded on the same principle. There the
question arose in regard to the interpretation of Section 2(c)
of the Bihar and Orissa Motor Vehicles Taxation Act, 1930
(hereinafter referred to as “the Taxation Act”). This section
when enacted adopted the definition of “motor vehicle”
contained in Section 2(18) of the Motor Vehicles Act, 1939.
Subsequently, Section 2(18) was amended by Act 100 of
1956 but no corresponding amendment was made in the
definition contained in Section 2(c) of the Taxation Act. The
argument advanced before the Court was that the definition
in Section 2(c) of the Taxation Act was not a definition by
incorporation but only a definition by reference and the
meaning of “motor vehicle” in Section 2(c) must, therefore,
be taken to be the same as defined from time to time in
Section 2(18) of the Motor Vehicles Act, 1939. This argument
was negatived by the Court and it was held that this was a
case of incorporation and not reference and the definition
in Section 2(18) of the Motor Vehicles Act, 1939 as then
existing was incorporated in Section 2(c) of the Taxation
Act and neither repeal of the Motor Vehicles Act, 1939 nor
any amendment in it would affect the definition of “motor
vehicle” in Section 2(c) of the Taxation Act. It is, therefore,
clear that if there is mere reference to a provision of
one statute in another without incorporation, then,
unless a different intention clearly appears, Section 8(1)
would apply and the reference would be construed as
a reference to the provision as may be in force from
time to time in the former statute. But if a provision of
one statute is incorporated in another, any subsequent
amendment in the former statute or even its total repeal
would not affect the provision as incorporated in the
latter statute. The question is to which category the
present case belongs.”
[Emphasis supplied]
[2024] 5 S.C.R. 29
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
34. This Court therefore held that if there was mere reference to a
provision of one statute in another without incorporation, then, unless
a different intention clearly appears, Section 8(1) of the General
Clauses Act would apply and the reference would be construed
as a reference to the provision in the former statute, as may be in
force from time to time. However, if a provision of one statute was
incorporated in another statute, then any subsequent amendment
in the former statute or even its total repeal would not affect the
provision as incorporated in the latter statute.
35. In the case of Girnar Traders (3) (supra), this Court was considering
the question, as to whether the provisions of the Land Acquisition
Act, 1894, with particular reference to Section 11-A, can be read into
and treated as part of the Maharashtra Regional and Town Planning
Act, 1966 (“MRTP Act, 1966” for short) on the principle of either
‘legislation by reference’ or ‘legislation by incorporation’?
36. It will be relevant to refer to the following observations of this Court
in the said case:
“86. At the very outset, we may notice that in the preceding
paragraphs of the judgment, we have specifically held
that the MRTP Act is a self-contained code. Once such
finding is recorded, application of either of the doctrines i.e.
“legislation by reference” or “legislation by incorporation”,
would lose their significance particularly when the two Acts
can coexist and operate without conflict.
87. However, since this aspect was argued by the learned
counsel appearing for the parties at great length, we will
proceed to discuss the merit or otherwise of this contention
without prejudice to the above findings and as an alternative
plea. These principles have been applied by the courts
for a considerable period now. When there is general
reference in the Act in question to some earlier Act
but there is no specific mention of the provisions
of the former Act, then it is clearly considered as
legislation by reference. In the case of legislation by
reference, the amending laws of the former Act would
normally become applicable to the later Act; but, when
the provisions of an Act are specifically referred and
incorporated in the later statute, then those provisions
30 [2024] 5 S.C.R.
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alone are applicable and the amending provisions of
the former Act would not become part of the later
Act. This principle is generally called legislation by
incorporation. General reference, ordinarily, will imply
exclusion of specific reference and this is precisely the
fine line of distinction between these two doctrines.
Both are referential legislations, one merely by way of
reference and the other by incorporation. It, normally, will
depend on the language used in the later law and other
relevant considerations. While the principle of legislation
by incorporation has well-defined exceptions, the law
enunciated as of now provides for no exceptions to the
principle of legislation by reference. Furthermore, despite
strict application of doctrine of incorporation, it may still not
operate in certain legislations and such legislation may fall
within one of the stated exceptions.
xxx xxx xxx
121. These are the few examples and principles stated by
this Court dealing with both the doctrines of legislation by
incorporation as well as by reference. Normally, when it
is by reference or citation, the amendment to the earlier
law is accepted to be applicable to the later law while in
the case of incorporation, the subsequent amendments
to the earlier law are irrelevant for application to the
subsequent law unless it falls in the exceptions stated by
this Court in M.V. Narasimhan case [State of M.P. v. M.V.
Narasimhan, (1975) 2 SCC 377 : 1975 SCC (Cri) 589] .
It could well be said that even where there is legislation
by reference, the Court needs to apply its mind as to
what effect the subsequent amendments to the earlier
law would have on the application of the later law. The
objective of all these principles of interpretation and
their application is to ensure that both the Acts operate
in harmony and the object of the principal statute is
not defeated by such incorporation. Courts have made
attempts to clarify this distinction by reference to various
established canons. But still there are certain grey areas
which may require the court to consider other angles of
interpretation.
[2024] 5 S.C.R. 31
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
122. In Maharashtra SRTC [(2003) 4 SCC 200] the Court
was considering the provisions of the MRTP Act as well
as the provisions of the Land Acquisition Act. The Court
finally took the view by adopting the principle stated in
U.P. Avas Evam Vikas Parishad [(1998) 2 SCC 467] and
held that there is nothing in the MRTP Act which precludes
the adoption of the construction that the provisions of the
Land Acquisition Act as amended by Central Act 68 of
1984, relating to award of compensation would apply with
full vigour to the acquisition of land under the MRTP Act,
as otherwise it would be hit by invidious discrimination
and palpable arbitrariness and consequently invite the
wrath of Article 14 of the Constitution. While referring
to the principle stated in Hindusthan Coop. Insurance
Society Ltd. [(1930-31) 58 IA 259 : AIR 1931 PC 149]
and clarifying the distinction between the two doctrines,
the Court declined to apply any specific doctrine and
primarily based its view on the plea of discrimination but
still observed: (Maharashtra SRTC case [(2003) 4 SCC
200] , SCC p. 208, para 11)
“11. … The fact that no clear-cut guidelines or distinguishing
features have been spelt out to ascertain whether it belongs
to one or the other category makes the task of identification
difficult. The semantics associated with interpretation play
their role to a limited extent. Ultimately, it is a matter of
probe into legislative intention and/or taking an insight into
the working of the enactment if one or the other view is
adopted. The doctrinaire approach to ascertain whether the
legislation is by incorporation or reference is, on ultimate
analysis, directed towards that end. The distinction often
pales into insignificance with the exceptions enveloping
the main rule.”
123. In the case in hand, it is clear that both these Acts
are self-contained codes within themselves. The State
Legislature while enacting the MRTP Act has referred
to the specific sections of the Land Acquisition Act in
the provisions of the State Act. None of the sections
require application of the provisions of the Land
Acquisition Act generally or mutatis mutandis. On
32 [2024] 5 S.C.R.
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the contrary, there is a specific reference to certain
sections and/or content/language of the section of the
Land Acquisition Act in the provisions of the MRTP
Act.”
[Emphasis supplied]
37. This Court has held that once a finding is recorded that an Act is a
self-contained code, then the application of either of the doctrines
i.e. “legislation by reference” or “legislation by incorporation” would
lose their significance particularly when the two Acts can coexist and
operate without conflict.
38. This Court further held that, in case of general reference in the Act in
question to an earlier Act but there being no specific mention of the
provisions of the former Act, then it would clearly be considered as
‘legislation by reference’. In such a case, the amending laws of the
former Act would become applicable to the later Act. However, when
the provisions of an Act are specifically referred and incorporated in
the later statute, then those provisions alone are applicable and the
amending provisions of the former Act would not become part of the
later Act.
39. This Court in the case of Girnar Traders (supra) held that, if the
legislature intended to apply the provisions of the Land Acquisition
Act generally and wanted to make a general reference, it could
have said that the provisions of the Land Acquisition Act would
be applicable to the MRTP Act, 1966. This Court observed that
such expression was conspicuous by its very absence. This Court
held that both these Acts i.e. Land Acquisition Act and the MRTP
Act, 1966 are self-contained codes within themselves. This Court
observed that the State Legislature while enacting the MRTP Act,
1966 has referred to the specific sections of the Land Acquisition
Act in the provisions of the State Act. This Court further observed
that none of the sections require application of the provisions of the
Land Acquisition Act generally or mutatis mutandis. On the contrary,
there was a specific reference to certain sections and/or content/
language of the section of the Land Acquisition Act in the provisions
of the MRTP Act, 1966.
40. It will also be relevant to note that this Court in a catena of cases has
held that the Code is a self-contained Code. Reference in this respect
could be made to the following judgments of this Cout:
[2024] 5 S.C.R. 33
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
(i) Innoventive Industries Limited vs ICICI Bank and another10;
(ii) Principal Commissioner of Income Tax vs Monnet Ispat
and Energy Limited11;
(iii) E.S. Krishnamurthy and others vs Bharath Hi-Tech Builders
Private Limited12;
(iv) Pratap Technocrats Private Limited and others vs Monitoring
Committee of Reliance Infratel Limited and another13;
(v) V. Nagarajan vs. SKS Ispat and Power Limited and others14;
(vi) Embassy Property Developments Private Limited vs State
of Karnataka and others (supra); and
(vii) Bharti Airtel Ltd. and another vs Vijaykumar V. Iyer and
others (supra).
V. CONCLUSION
41. Applying these legal principles, we will have to analyze the provisions
of Section 236(1) of the Code. Under Section 236(1) of the Code,
reference is “offences under this Code shall be tried by the Special
Court established under Chapter XXVIII of the Companies Act, 2013”.
42. It can thus be seen that the reference is not general but specific.
The reference is only to the fact that the offences under the Code
shall be tried by the Special Court established under Chapter XXVIII
of the Companies Act.
43. Applying the principle as laid down by this Court in various judgments,
since the reference is specific and not general, it will have to be held
that the present case is a case of ‘legislation by incorporation’ and
not a case of ‘legislation by reference’. The effect would be that the
provision with regard to Special Court has been bodily lifted from
Section 435 of the Companies Act, 2013 and incorporated in Section
236(1) of the Code. In other words, the provision of Section 435 of
10 [2017] 8 SCR 33 : (2018) 1 SCC 407
11 (2018) 18 SCC 786
12 [2021] 12 SCR 28 : (2022) 3 SCC 161
13 [2021] 8 SCR 938 : (2021) 10 SCC 623
14 [2021] 14 SCR 736 : (2022) 2 SCC 244
34 [2024] 5 S.C.R.
Digital Supreme Court Reports
the Companies Act, 2013 with regard to Special Court would become
a part of Section 236(1) of the Code as on the date of its enactment.
If that be so, any amendment to Section 435 of the Companies Act,
2013, after the date on which the Code came into effect would not
have any effect on the provisions of Section 236(1) of the Code. The
Special Court at that point of time only consists of a person who was
qualified to be a Sessions Judge or an Additional Sessions Judge.
44. It is further to be noted that the Code has also suffered two subsequent
amendments i.e. the 2015 Amendment and the 2018 Amendment.
If the legislative intent was to give effect to the subsequent
amendments in the Companies Act to Section 236(1) of the Code,
nothing prevented the legislature from amending Section 236(1) of
the Code. The legislature having not done that, the provision with
regard to the reference in Section 236(1) of the Code pertaining
to Special Court as mentioned in Section 435 of the Companies
Act, 2013 stood frozen as on the date of enactment of the Code.
As such, the learned Judge of the High Court has erred in holding
that in view of the subsequent amendment, the offences under the
Code shall be tried only by a Metropolitan Magistrate or a Judicial
Magistrate of the First Class.
45. We further find that the reasoning of the learned single judge of the
High Court that in view of the 2018 Amendment only the offences
under the Companies Act would be tried by a Special Court of
Sessions Judge or Additional Sessions Judge and all other offences
including under the Code shall be tried by a Metropolitan Magistrate
or a Judicial Magistrate of the First Class is untenable. For a moment,
even if it is held that the reference in Section 236(1) of the Code is
a ‘legislation by reference’ and not ‘legislation by incorporation’, still
the offences punishable under the Code having imprisonment of two
years or more will have to be tried by a Special Court presided by
a Sessions Judge or an Additional Sessions Judge. Whereas the
offences having punishment of less than two years will have to be
tried by a Special Court presided by a Metropolitan Magistrate or a
Judicial Magistrate of the First Class.
46. In any case, the learned single Judge of the High Court has grossly
erred in quashing the complaint only on the ground that it was filed
before a Special Court presided by a Sessions Judges. At the most,
the learned single judge of the High Court could have directed the
[2024] 5 S.C.R. 35
Insolvency and Bankruptcy Board of India v.
Satyanarayan Bankatlal Malu & Ors.
complaint to be withdrawn and presented before the appropriate
court having jurisdiction.
47. Shri Amir Arsiwala, learned Advocate-on-record for the respondent
Nos.1 and 2, had submitted that in the event this Court holds that
the Special Courts presided by a Sessions Judge or an Additional
Sessions Judge will have jurisdiction to try the complaint under
the Code, this Court should remand the matter to the High Court
for deciding the matter afresh on merits. It is submitted that the
respondents have a good case on merits and there has been no
adjudication on merits of the matter.
48. In the result, we allow the appeal. The impugned judgment and order
dated 14th February 2022, passed by the learned Single Judge of the
High Court of Judicature at Bombay in Writ Petition No.2592 of 2021 is
quashed and set aside. It is held that the Special Court presided by a
Sessions Judge or an Additional Sessions Judge will have jurisdiction
to try the complaint under the Code. However, since the learned single
judge of the High Court has not considered the merits of the matter,
the matter is remitted to the learned single judge of the High Court for
considering the petition of the respondents afresh on merits.
49. We place on record our deep appreciation for the valuable assistance
rendered by Shri S.V. Raju, learned ASG as well as Shri Amir Arsiwala
and Shri Vikas Mehta, learned counsel for the appearing parties.
Headnotes prepared by: Nidhi Jain Result of the case:
Appeal allowed.
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