Mandatory Pre‑Cognizance Hearing under BNSS Section 223 Applies to SEBI Special Courts (Non‑Compliance Vitiates Cognizance)
1) Introduction
In Neville Tuli v. Securities and Exchange Board of Indi and Anr (Bombay High Court, decided on
15-07-2026), the petitioner (a director of Osian’s Connoisseurs of Art Pvt Ltd) challenged an order of the
SEBI Special Court, Mumbai, which had taken cognizance and issued process for an offence under
Section 24(2) of the SEBI Act, 1992 (failure to comply with SEBI directions / orders).
The central issue was narrow but consequential: since the prosecution was initiated by a complaint (as required by
Section 26 of the SEBI Act, 1992), was the SEBI Special Court bound to comply with the
first proviso to Section 223(1) of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS, 2023)—i.e., to give the
proposed accused an opportunity of hearing before taking cognizance?
SEBI argued that the SEBI Special Court is deemed to be a Court of Session (by Section 26-D(1) of the SEBI Act, 1992),
and therefore the “complaints to Magistrates” procedure in BNSS Section 223 should not constrain it. The petitioner contended that,
absent a contrary SEBI Act procedure, BNSS applies and the pre-cognizance hearing is mandatory.
2) Summary of the Judgment
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The Court answered the framed question in the affirmative:
the SEBI Special Court must give the accused an opportunity of hearing under the
first proviso to Section 223(1) BNSS, 2023 before taking cognizance on a complaint.
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The impugned order taking cognizance and issuing process was quashed solely for
non-compliance with the proviso to Section 223(1) BNSS.
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The matter was remitted: the Special Court was directed to hear the petitioner and then pass a fresh order on cognizance
in accordance with law.
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The High Court expressly kept all merits/contentions open and did not adjudicate the underlying SEBI allegations.
3) Analysis
A. Precedents Cited (and Their Role)
This was the judgment’s primary doctrinal anchor. The Supreme Court held that a complaint under
Section 44(1)(b) of the PMLA is governed by CrPC Sections 200–204 (and thus BNSS Sections 223–226),
and therefore the first proviso to Section 223(1) BNSS applies. Cognizance taken without hearing is liable to be set aside.
The Bombay High Court treated this as a clear statement that the new BNSS proviso operates even in prosecutions under a special statute
where complaints are filed in a Special Court, unless excluded.
ii) Parvinder Singh Vs. Directorate of Enforcement
The High Court relied on the Supreme Court’s characterization of the BNSS proviso as
substantive in nature—conferring a right linked to a fair trial under Article 21.
This strengthened the conclusion that compliance is not optional and that non-compliance makes cognizance
void ab initio.
iii) Tarsem Lal Vs. Directorate of Enforcement
Cited for the broader proposition that once a PMLA complaint is filed, the complaint-procedure provisions apply
because they are not inconsistent with PMLA. The High Court used this reasoning by analogy: absent inconsistency or exclusion,
BNSS fills procedural gaps.
iv) Sanjabij Tari Vs Kishore S Borcar and Ors and Ashok Vs. Fayaz Aahmad
SEBI invoked Sanjabij Tari to argue that in special-statute complaints (there, NI Act), pre-cognizance hearing is unnecessary.
The High Court distinguished it: NI Act Section 142 begins with a non obstante clause and provides a special
cognizance framework “notwithstanding” CrPC. That express statutory override justified dispensing with the BNSS Section 223 hearing in NI Act cases.
The SEBI Act lacks a comparable “notwithstanding BNSS/CrPC” override for the manner of taking cognizance.
v) Ajit Kumar Palit Vs State of West Bengal and State of West Bengal Vs Bejoy Kumar Bose and Ors
SEBI relied on these to argue that Special Courts/Special Judges can take cognizance without following the Magistrate complaint procedure.
The High Court distinguished them on their statutory setting: the West Bengal special-courts framework contained
explicit special procedure and overriding clauses. Those cases turned on a regime where allotment/assignment and statutory design
were treated as equivalent to cognizance and did not require the usual complaint formalities. The SEBI Act’s scheme, by contrast,
does not prescribe a special “manner of cognizance” that excludes BNSS Section 223.
vi) SEBI v. Ajay Agrawal
Cited for the characterization of the SEBI Act as a social welfare legislation designed to protect small investors.
Importantly, the High Court did not treat this as a reason to dilute procedural safeguards; rather, it framed it as part of the context
while still insisting that the legislature’s procedural mandate in BNSS must be honored unless clearly excluded.
Mentioned (via the Supreme Court’s reasoning quoted in Kushal Kumar Agarwal) to support the consistent line that special-statute
complaints can be governed by CrPC/BNSS complaint provisions absent inconsistency.
B. Legal Reasoning
i) The general rule: BNSS applies unless a special statute provides otherwise
The Court started from Section 4(2) BNSS, 2023: all offences under any other law are to be investigated, inquired into,
tried, and otherwise dealt with according to BNSS, subject to any special enactment regulating the manner/place of such proceedings.
This frames BNSS as the procedural “default,” displaced only by clear special procedure.
ii) The BNSS “paradigm shift”: pre-cognizance hearing is now mandatory
The first proviso to Section 223(1) BNSS is treated as a major departure from the earlier position (under CrPC Section 200)
that accused persons typically had no right of audience at the pre-cognizance stage. The Court emphasized the proviso’s
peremptory nature: if Section 223 governs the cognizance exercise, hearing cannot be bypassed.
iii) Parsing the SEBI Act: “mode” of cognizance is special; “manner” is not
The Court carefully separated:
(a) how prosecutions are initiated from
(b) how the court takes cognizance procedurally.
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Section 26 SEBI Act restricts cognizance to complaints by the Board (it excludes other CrPC/BNSS cognizance routes),
but it does not set out a special pre-cognizance procedure that displaces BNSS Section 223.
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Section 26-A SEBI Act establishes/designates Special Courts for speedy trial and prescribes that the judge must be a
Sessions/Additional Sessions Judge. It does not address pre-cognizance hearing.
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Section 26-D SEBI Act expressly applies CrPC (now BNSS) to Special Court proceedings (“save as otherwise provided”),
and deems the Special Court a Court of Session for Code purposes. The Court read this as incorporation of Code procedure,
not as an implied exclusion of Section 223.
iv) Legislative technique: absence of a “non obstante” override mattered
The Court noted that where Parliament intended SEBI provisions to override CrPC, it used express
non obstante clauses (e.g., composition and other specified areas). In contrast, Section 26-D does not begin with a
“notwithstanding” clause; it begins with a saving formula (“save as otherwise provided”).
From this, the Court inferred that the SEBI Act does not intend to oust BNSS Section 223’s mandatory hearing.
The Court invoked the interpretive principle “Expressio Unius Est Exclusio Alterius” to support this inference.
v) Pari materia reasoning with PMLA (and why NI Act cases were distinguishable)
The petitioner’s key comparative argument—accepted by the Court—was that the SEBI Act’s Special Court framework is materially similar
to the PMLA framework in the relevant respect: both rely on a complaint mechanism and both apply CrPC/BNSS procedures save where excluded.
Since the Supreme Court has already applied BNSS Section 223’s proviso to PMLA complaints, the Court found no persuasive statutory basis
to treat SEBI complaints differently.
vi) Consequence: cognizance without hearing is unsustainable
Following Parvinder Singh Vs. Directorate of Enforcement, the Court treated the proviso as mandatory and foundational to fairness.
Therefore, the Special Court’s cognizance order—passed without hearing—was liable to be quashed, with the matter remitted for fresh
consideration after complying with the hearing requirement.
C. Impact
i) Immediate procedural rule for SEBI prosecutions
The judgment establishes, for SEBI Act complaints filed post-BNSS commencement, a clear procedural prerequisite:
SEBI Special Courts must grant a pre-cognizance hearing under BNSS Section 223(1) proviso.
Any cognizance/process issued without it risks being set aside as procedurally invalid.
ii) Litigation strategy and docket effects
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Accused persons will likely raise early objections (jurisdictional/legal bars, limitation-type objections, or threshold defects)
at the pre-cognizance hearing stage, potentially reducing unwarranted prosecutions but also adding an additional procedural step.
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Special Courts will need to institutionalize a “Section 223 proviso” stage (notice/hearing) before cognizance, impacting timelines.
iii) Doctrinal significance: “Special Court = Sessions Court” does not automatically negate complaint safeguards
The decision clarifies that deeming provisions (Special Court “deemed to be a Court of Session”) cannot be used to
impliedly exclude an express, mandatory Code safeguard—especially one treated as substantive and fairness-linked—
unless the special statute clearly overrides it.
4) Complex Concepts Simplified
- Cognizance
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The court’s formal act of taking notice of an alleged offence so that criminal proceedings can begin (often followed by “process”
such as summons).
- Pre-cognizance hearing (BNSS Section 223(1) proviso)
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A mandatory opportunity for the proposed accused to be heard before the court takes cognizance on a complaint.
This is a new BNSS-era safeguard intended to filter weak or unjustified complaint prosecutions at inception.
- Special statute vs. general procedure code
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BNSS is the general procedural law. Special laws (like SEBI Act) may override BNSS only if they provide a different procedure
on the same point. If the special law is silent, BNSS fills the gap.
- Non obstante clause
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A legislative phrase like “notwithstanding anything contained in…” used to give a provision overriding effect over conflicting laws.
Its presence/absence often signals whether Parliament intended to displace the general code.
- Pari materia
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Statutes are “pari materia” when they deal with similar subject matter or have similarly worded provisions; courts may interpret one
using the settled interpretation of the other.
- Void ab initio
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Legally invalid from the outset, not merely an irregularity curable later.
- Moratorium under IBC
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A temporary legal freeze on certain proceedings against a company undergoing insolvency resolution. In this case, it formed part of the
factual background as SEBI proceeded against directors.
5) Conclusion
The Bombay High Court’s ruling crystallizes a procedural precedent for SEBI prosecutions under the BNSS regime:
when cognizance is sought on a SEBI complaint, the SEBI Special Court must first hear the proposed accused under the
first proviso to Section 223(1) BNSS. The Court treated this safeguard as mandatory and not displaced by the SEBI Act’s
Special Court framework, especially in light of Supreme Court authority applying the same proviso in the PMLA context
(Kushal Kumar Agarwal Vs Directorate of Enforcement; Parvinder Singh Vs. Directorate of Enforcement).
The practical takeaway is direct: pre-cognizance hearing is now a jurisdictional checkpoint in SEBI complaint cases,
and cognizance/orders of process passed without it are vulnerable to being quashed, with the matter remitted for fresh consideration.