Special Courts Under the Companies Act, 2013: Jurisdiction, Procedure, and What Recent Supreme Court Rulings Mean for Directors and Companies

A detailed guide to how corporate criminal prosecutions actually work in India — and why 2025–2026 has been a pivotal period for this framework

Introduction

For most founders and directors, “criminal liability” feels like something that belongs to a different world of company law — the world of insolvency, fraud, and regulatory enforcement, not everyday governance. But the Companies Act, 2013 carries a full chapter dedicated exclusively to criminal prosecution — Chapter XXVIII, Sections 435 to 446B — and a growing body of 2025–2026 Supreme Court and High Court rulings has meaningfully reshaped how, and by whom, these prosecutions can actually be triggered.

This matters more than most directors realise. Offences such as furnishing false statements, fraud under Section 447, or wrongful withholding of company property don’t just carry civil or regulatory consequences — some carry criminal liability triable before a specially constituted court, not an ordinary magistrate. Understanding the difference between what a private party can do and what only a statutory authority can trigger has become a live and frequently litigated question.

What Is a Special Court Under the Companies Act?

Section 435 empowers the Central Government to establish or designate Special Courts for the speedy trial of offences under the Companies Act. This provision was inserted by the Companies (Amendment) Act, 2015, and the first Special Courts were actually notified by the Ministry of Corporate Affairs in May 2016, designating existing Sessions and District Courts across states as Special Courts for this purpose.

A Special Court is composed of a single judge, appointed by the Central Government with the concurrence of the Chief Justice of the relevant High Court. Critically, a person is not qualified to be appointed as a judge of a Special Court unless they are, immediately before appointment, serving as a Sessions Judge or an Additional Sessions Judge — for offences punishable with imprisonment of two years or more. For less serious offences, a Metropolitan Magistrate or Judicial Magistrate of the First Class exercises this jurisdiction instead.

The rationale, as consistently articulated by the Ministry of Corporate Affairs and reflected in subsequent case law, is straightforward: company law offences frequently involve complex financial transactions, voluminous documentary evidence, and technical questions that benefit from adjudication by judges with seniority and experience — rather than being added to the general criminal docket of an already overloaded magistracy.

Where a Case Is Tried

Under Section 436, all offences under the Act triable by a Special Court must be tried only by the Special Court established for the area in which the registered office of the company concerned is situated. If more than one Special Court exists for that area, the concerned High Court designates which one hears the matter. This is a critical, and frequently overlooked, jurisdictional filter — the registered office, not the place where the alleged wrongdoing occurred or where the complainant resides, determines the forum.

A Notable Procedural Departure: Cognizance Without Committal

Ordinarily, under general criminal procedure, a Sessions-level court cannot take direct cognizance of an offence — a case must first be committed to it by a Magistrate. Section 436 dispenses with this requirement for Special Courts: they may take cognizance of an offence upon scrutiny of a police report or a complaint, without the accused first being committed to it. Special Courts may also try, in the same trial, offences beyond the Companies Act with which the accused could otherwise be jointly charged under ordinary criminal procedure — allowing, for instance, connected offences under the Bharatiya Nyaya Sanhita to be tried alongside a Companies Act charge in a single proceeding.

The Statutory Evolution: What Has Changed Since 2013

The Special Courts framework has been amended repeatedly since its introduction, and each amendment reflects a shift in policy:

• Companies (Amendment) Act, 2017 (effective 2018): refined the composition requirements for Special Court judges.
• Companies (Amendment) Act, 2020: excluded offences under Section 452 (wrongful withholding of company property) from the exclusive jurisdiction of Special Courts, and — significantly — narrowed the trigger for establishing Special Courts to offences under the Act generally, while separately tightening the framework around who may set the fraud-prosecution machinery under Section 212 in motion.
• Interplay with the Insolvency and Bankruptcy Code, 2016: Section 236(1) of the IBC provides that offences under the Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act. In 2024, the Supreme Court in Insolvency and Bankruptcy Board of India v. Satyanarayan Bankatlal Malu & Ors. clarified a subtle but important point of statutory interpretation: the reference to “Special Court” in Section 236(1) of the IBC is a case of “legislation by incorporation” rather than “legislation by reference.” In practical terms, this means that even though the Companies Act’s own Special Court composition rules have since been amended to route certain offences to a Magistrate, the Special Court presided over by a Sessions Judge or Additional Sessions Judge retains jurisdiction to try IBC offences, because the IBC incorporated the Companies Act provision as it stood at a fixed point in time rather than adopting it as it evolves. The Bombay High Court’s contrary view — that it lacked jurisdiction — was set aside by the Supreme Court, which also clarified that even a genuine jurisdictional error should ordinarily result in transfer of the complaint to the correct forum, not outright quashing.

Fraud, SFIO, and Who Can Actually Trigger a Prosecution — The 2025–2026 Turning Point

This is where the law has moved most significantly in the last eighteen months, and where the practical stakes for directors and companies are highest.

The Section 212(6) Bar on Private Complaints

Section 212(6) of the Companies Act contains a specific and stringent bar: cognizance of an offence under Section 447 (fraud) can be taken by a Special Court only on a written complaint filed by the Director of the Serious Fraud Investigation Office (SFIO) or an officer of the Central Government specifically authorised for this purpose. A private individual — a disgruntled business partner, a rival shareholder, an aggrieved employee — cannot, by filing a private criminal complaint, directly set a Section 447 fraud prosecution in motion.

Yerram Vijay Kumar v. State of Telangana (Supreme Court, January 2025/2026)

This recent Supreme Court ruling is now the leading authority clarifying the scope of that bar. The complainant in the underlying case had filed a private complaint alleging that the accused had falsified company records and passed board resolutions appointing directors with an intent to usurp management control — invoking, among other provisions, Sections 448 (false statement) and 451 (repeated default) of the Companies Act, alongside several IPC offences.

The Supreme Court held that because liability under Sections 448 and 451 is defined by reference to, and inextricably linked with, the punishment prescribed under Section 447, the statutory bar on private complaints under the second proviso to Section 212(6) applies equally to these connected offences — not just to a bare Section 447 charge. Put simply: a complainant cannot avoid the Section 212(6) bar simply by framing the prosecution under an adjacent section rather than Section 447 itself, where the substance of the allegation is fraud. The Court quashed the Companies Act charges accordingly, while allowing the connected IPC offences to proceed before the appropriate court, and directed that the correct recourse for a person alleging fraud in a company’s affairs is to approach the NCLT under Section 213 for an investigation to be ordered, rather than filing a private criminal complaint directly.

This decision is consistent with — and builds on — earlier High Court rulings taking the same view, including the Madras High Court in Sivananda Rajaram v. New Shipping Kaisha Ship Management Pvt. Ltd. and the Karnataka High Court in M. Gopal v. Ganga Reddy.

Vivo India Pvt. Ltd. v. SFIO (Punjab & Haryana High Court, July 2026)

In a separate but related development, the Punjab and Haryana High Court held that companies and individuals prosecuted by the SFIO are not entitled to a pre-cognizance hearing under the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) — the code that replaced the CrPC. The Court reasoned that the Companies Act constitutes a complete, self-contained procedural code for investigation, prosecution and cognizance in SFIO matters, and that an SFIO investigation report is statutorily deemed to be a police report under Section 212(15), placing it on a fundamentally different footing from a private complaint. The Court emphasised that the absence of a pre-cognizance hearing in the statutory scheme is a deliberate legislative choice, given that the accused already has an opportunity to be heard during the SFIO’s own investigation, where statements are recorded under oath.

Read together, these two 2025–2026 rulings tell a consistent story: Indian courts are increasingly insisting on a clear separation between statutory fraud investigation (SFIO-led, tightly regulated, and now insulated from being bypassed via disguised charges) and private, adversarial litigation dressed up as a criminal complaint. For companies and promoters, this is a meaningful — if double-edged — protection: it raises the bar against being dragged into a Section 447-adjacent prosecution by a private party with a commercial axe to grind, but equally means that once the SFIO is actually involved, the accused has fewer procedural off-ramps available at the cognizance stage.

The Decriminalisation Trend: Jan Vishwas Act, 2023 and Beyond

A parallel and equally important shift has been underway at the legislative level: a sustained government push to reduce the number of company law offences that carry criminal, imprisonment-based liability at all.

The Jan Vishwas (Amendment of Provisions) Act, 2023 amended 183 provisions across 42 central statutes, with the explicit goal of rebalancing the severity of offences against the gravity of prescribed punishment. For company law specifically, this has meant converting a number of previously imprisonment-linked, technical and procedural violations into purely monetary penalties, adjudicated administratively rather than criminally — reducing the number of matters that ever reach a Special Court in the first place.

This process is continuing. The Jan Vishwas (Amendment of Provisions) Bill, 2025 (“Jan Vishwas 2.0”), introduced in Parliament in September 2025, proposes to decriminalise a further 355 provisions across 16 central statutes, with a stated aim of reducing pendency in criminal courts and easing compliance costs for MSMEs and startups in particular. It is important for directors to note, however, that both the 2023 Act and the proposed 2025 Bill expressly avoid retrospective application — meaning decriminalisation benefits attach only to violations occurring after the relevant amendment takes effect, not to ongoing prosecutions for conduct that predates it.

This decriminalisation drive sits alongside a broader digitisation push: adjudication proceedings for penalties under Section 454 of the Companies Act are now conducted entirely through an electronic e-adjudication platform under the MCA21 V3 system, covering notice generation, hearings, and orders — part of a wider effort to keep pace with a company base that has nearly doubled, from roughly 9.5 lakh active companies as of March 2014 to over 18.5 lakh as of March 2025.

What This Means in Practice

For founders, directors, and companies navigating this framework, a few practical points follow directly from the above:

1. Not every serious-sounding allegation can be criminally prosecuted by a private party. If a dispute is dressed up as an allegation of fraud but is, in substance, a shareholder, contractual, or business disagreement, the correct forum is very often the NCLT (under Sections 213 or 241–242), not a private criminal complaint before a Special Court — and post-Yerram Vijay Kumar, courts are increasingly alert to attempts to bypass this distinction by charging under adjacent sections instead of Section 447 directly.
2. Jurisdiction follows the registered office, not the complainant’s location or where the alleged conduct occurred — a point worth checking early in any dispute involving a Special Court, since it affects venue strategy on both sides.
3. Once the SFIO is actually involved, the accused should not expect a pre-cognizance hearing or the procedural protections available in an ordinary criminal case — the Companies Act’s self-contained procedural scheme, as recently affirmed in Vivo India, largely displaces general BNSS protections at this stage.
4. Many technical and procedural lapses no longer carry criminal exposure at all, following the Jan Vishwas reforms — but this is not retrospective, so historical non-compliance predating the relevant amendment remains governed by the older, stricter regime.
5. The IBC and Companies Act Special Court frameworks remain linked, even where the two statutes’ internal composition rules diverge — as clarified in the Satyanarayan Bankatlal Malu ruling — so a jurisdictional objection in an IBC-linked prosecution should be raised carefully, since courts are now more inclined to transfer rather than outright quash a wrongly filed complaint.

Conclusion

The Special Courts framework under the Companies Act, 2013 was designed to bring speed and specialisation to corporate criminal prosecution. In 2025–2026, the Supreme Court and multiple High Courts have used that framework to draw a sharper line between statutory, SFIO-led fraud enforcement and private litigants attempting to use criminal process as a lever in what are, at bottom, civil or corporate disputes — while the legislature has simultaneously been paring back the number of purely technical lapses that attract criminal liability at all.

For companies and directors, the practical upshot is a system that is, in some respects, more protective against opportunistic private prosecutions than it was even two years ago — but correspondingly less forgiving, procedurally, once a genuine SFIO investigation is underway. Understanding which regime applies to a given allegation, at the outset, is often the single most consequential strategic decision in how such a matter unfolds.

This article is intended for general informational purposes and does not constitute legal advice. Directors, promoters, and companies facing an actual or threatened prosecution under the Companies Act should seek advice specific to the facts and forum involved.

If your company or board is navigating a regulatory notice, SFIO matter, or a threatened criminal complaint under the Companies Act, feel free to reach out to VNC Corporate & Legal, Advocates & Solicitors.