Date: 19 April 2024

Case Name: Insolvency and Bankruptcy Board of India v. Satyanarayan Bankatlal Malu & Ors. 2024 INSC 319

JUDGMENT BY: HON. MR. JUSTICE B.R. GAVAI & HON. MR. JUSTICE SANDEEP MEHTA

The Supreme Court addressed two critical issues, clarifying the legal framework and procedural aspects related to Special Courts under Insolvency & Bankruptcy Code 2016 (“The Code”), impacting the interpretation and application of insolvency and bankruptcy proceedings in India. First, it examined whether the ‘Special Court’ under the Code should be as defined by Section 435 of the Companies Act 2013 (“The Act”) at the time the Code came into effect, or as per the amended Section 435 after the Companies (Amendment) Act 2017. The Act, the Court considered whether the reference to the Special Court in Section 236(1) of the Code constituted legislation by incorporation or by reference.

Key Observations:

The Supreme Court, referring to Collector of Customs, Madras v. Nathella Sampathu Chetty & Anr. (1962) 3 SCR 786, highlighted the distinction between ‘Legislation by Reference’ and ‘Legislation by Incorporation’.

• Legislation by Incorporation: Bodily lifts provisions from one enactment into another, meaning subsequent amendments to the original statute do not affect the incorporated provisions.

• Legislation by Reference: A mere reference to another statute, making the referred statute part of the new statute, subject to any amendments in the original statute.

Supreme Court’s Decision:

• The reference in Section 236(1) of the Code is specific: “offences under this Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act, 2013”.

• The provision regarding the ‘Special Court’ has been bodily lifted from Section 435 of the Companies Act and incorporated into Section 236(1) of the Code.

• This specificity indicates ‘Legislation by Incorporation’.

Conclusion: The Apex Court opined that the provision with respect to ‘Special Court’ had been bodily lifted from Section 435 of the Act and incorporated in Section 236(1) of the Code. As a result, any amendment to Section 435 of The Act 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. In the realm of statutory interpretation, this Judgment offers critical clarity on the application and interplay of legislative provisions and sets a precedent for future legal interpretations.

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