The Ministry of Corporate Affairs, through notification S.O. 2729(E) dated 18 June 2025, designated Special Courts under the Insolvency and Bankruptcy Code, 2016 to handle criminal prosecutions and offences arising under the Code. The notification aims to expedite adjudication of IBC-related criminal matters, which have seen mounting pendency across regular courts.
Background
The Insolvency and Bankruptcy Code, 2016 contains several provisions criminalising specific conduct during insolvency proceedings, including fraudulent and wrongful trading under Section 66, transactions defrauding creditors, and non-cooperation with insolvency professionals. Section 236 of the Code empowers the Central Government to designate Special Courts for the trial of offences punishable under the Act.
Despite these provisions, prosecution under the IBC's criminal provisions has historically been slow. Cases filed by resolution professionals and liquidators against errant promoters and directors have languished in regular criminal courts, often undermining the time-bound ethos of the IBC regime. The designation of Special Courts is intended to create dedicated judicial capacity for these matters.
Key Provisions
The notification establishes the following:
Designated courts: Specific courts in identified jurisdictions are designated as Special Courts for the purposes of Chapter VII (Offences and Penalties) of the IBC. These courts will have exclusive jurisdiction over offences punishable under the Code.
Jurisdictional scope: The Special Courts are designated to handle matters arising within their territorial jurisdiction, aligned with the location of the NCLT bench that adjudicated the underlying insolvency proceedings.
Expedited proceedings: As Special Courts under the IBC, these designated courts are expected to follow expedited procedural timelines consistent with the Code's emphasis on time-bound resolution.
Transitional provisions: Pending cases before regular courts that fall within the designated Special Courts' jurisdiction are expected to be transferred upon the notification taking effect.
Implications for Practitioners
The designation of Special Courts addresses a significant gap in the IBC enforcement framework. Resolution professionals and liquidators who have filed criminal complaints under Sections 66, 68, 69, and 70 of the Code can expect more focused judicial attention to these matters.
For practitioners representing corporate debtors' former management facing criminal proceedings under the IBC, the transfer to Special Courts may accelerate timelines for hearing and disposal. Defence strategies built on delay through procedural manoeuvring in regular criminal courts may become less effective.
Insolvency professionals should review pending criminal complaints to assess whether any procedural steps are required for transfer to the newly designated Special Courts, including updating the relevant NCLT benches on the status of criminal proceedings in their progress reports.