The Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992
1. Background and Purpose
In the early 1990s, India witnessed an increase in financial frauds and irregularities in the securities market.
Ordinary courts were slow in handling these complex financial offences.
To ensure speedy trial of offences relating to securities transactions, Parliament enacted The Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.
The main aim is to protect investors’ interest, maintain market integrity, and ensure swift justice in financial crimes.
2. Key Definitions
Securities → Shares, debentures, bonds, derivatives, and other instruments issued by companies and traded in stock exchanges.
Offences relating to securities → Frauds, insider trading, manipulation, misrepresentation, or violation of SEBI regulations.
Special Court → A court designated under the Act to try offences related to securities, functioning as a sessions court.
3. Main Provisions
(A) Establishment of Special Court
The Central Government can designate any Sessions Court or Court of Metropolitan Magistrate as a Special Court.
Special Courts have exclusive jurisdiction to try offences under:
Securities Contracts (Regulation) Act, 1956
SEBI Act, 1992
Any other law relating to securities transactions notified by the government.
(B) Trial Procedure
Trials in the Special Court are summary or regular trials, but with procedures to ensure speedy disposal.
Appeals from the Special Court go directly to the High Court.
Special Courts can also attach property or assets related to fraudulent securities transactions.
(C) Powers of Special Court
The Special Court has all powers of a Sessions Court under the Criminal Procedure Code.
Can summon witnesses, examine documents, and pass sentences as per relevant statutes.
Courts must give priority to cases under this Act to prevent undue delay.
(D) Penalties
Offenders may be punished with imprisonment, fines, or both, depending on the offence under the relevant securities laws.
SEBI can also impose civil penalties and restrictions on trading.
4. Case Laws
(i) Securities and Exchange Board of India (SEBI) v. Sahara India Real Estate Corporation Ltd. (2012, Supreme Court)
SEBI had accused Sahara of illegal collection of funds through optionally fully convertible debentures (OFCDs).
The Special Court played a key role in expediting the trial of securities fraud.
The Supreme Court upheld SEBI’s powers and the Special Court’s jurisdiction in handling complex financial fraud cases.
(ii) SEBI v. Reliance Industries Ltd. (1995, SAT)
Involved insider trading allegations.
Special Courts were used to try the criminal aspects of securities offences while SEBI handled civil penalties.
Established that fraud in securities transactions falls within the Special Court’s jurisdiction.
(iii) SEBI v. Sahara India (2011, Supreme Court)
Highlighted that the Special Court must work to prevent prolonged litigation and ensure investor protection.
The Court emphasized strict compliance with securities laws.
5. Constitutional and Legal Basis
Entry 62 of Union List (Seventh Schedule) → Parliament has power to regulate securities markets.
SEBI Act, 1992 empowers SEBI to investigate and regulate securities transactions.
The Special Court Act complements SEBI Act by providing criminal adjudication mechanism.
Ensures Articles 14 (Equality before law) and 21 (Right to fair trial) are protected while addressing securities offences.
6. Importance of the Act
Provides speedy trial mechanism for financial frauds in the securities market.
Protects investors’ interests and ensures confidence in the stock market.
Reduces burden on regular criminal courts.
Enhances enforcement of SEBI regulations and securities laws.
Supports India’s financial regulatory framework in handling complex corporate crimes.
✅ Summary:
The Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 was enacted to provide fast-track trials for securities frauds. It establishes Special Courts with powers of Sessions Courts to handle offences under SEBI and securities laws. Case laws like SEBI v. Sahara and SEBI v. Reliance show how Special Courts function to protect investors and maintain market integrity.
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