Special Courts and the Trial of Offences

In one line

The Central Government may establish Special Courts to try offences under the Act, staffed according to the gravity of the offence; those offences are non-cognizable and are prosecuted only on the complaint of the Registrar, a member or an authorised person; the lesser ones may be compounded by the Tribunal or the Regional Director; parties may be sent to mediation; and the punishment is fixed with regard to the size of the company, the nature of the default and its repetition, with lesser penalties for the smallest companies.

In exam wording: section 435 establishes the Special Courts, section 436 states what they try, section 439 makes offences non-cognizable, section 441 provides for compounding, and section 442 for the Mediation and Conciliation Panel.

Why the law has this at all

A company law offence is usually a failure to file, to disclose or to hold a meeting, and there are thousands of them. Two problems follow.

The first is delay. Company prosecutions in ordinary criminal courts joined a queue behind everything else, and a prosecution decided ten years after the failure to file punishes nobody usefully. Special Courts exist to shorten that queue, and section 436(3) lets them try summarily anything punishable with not more than three years.

The second is proportion. Not every default deserves a trial. A company that filed its return three months late has done something real but small. Section 441 lets the offence be compounded, that is settled on payment, by the Tribunal or, for smaller fines, by the Regional Director; section 442 offers mediation; section 446A tells the court to weigh the size of the company and the nature and repetition of the default; and section 446B halves the penalty for the smallest companies.

And the third idea, which runs through the whole Chapter, is control of who may prosecute. Section 439(2) allows a court to take cognizance only on the complaint of the Registrar, a shareholder or member, or a person authorised by the Central Government, so that a company's competitor or a disgruntled outsider cannot start a criminal case about its internal compliance.

Some words this chapter uses

Cognizable means an offence for which the police may arrest without warrant and investigate without an order. To compound an offence is to settle it on payment, so that the prosecution ends. The Regional Director is a person appointed as such by the Central Government. A summary trial is a shortened procedure with a limited sentencing power. Cognizance is a court's taking notice of an offence so as to proceed.

The Special Courts: section 435

Section 435(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.