2023 (4) TMI 1139 - HC - Insolvency and Bankruptcy

Resolution Professional deemed public servant under Prevention of Corruption Act

The court determined that a Resolution Professional appointed by the National Company Law Tribunal qualifies as a public servant under Section 2(c) of the ... Public servant - public duty - Prevention of Corruption Act applicability to insolvency professionals - interaction between Insolvency and Bankruptcy Code and anti-corruption law - appointment by adjudicating authority and committee of creditorsPublic servant - appointment by adjudicating authority and committee of creditors - Resolution Professional falls within the definition of 'public servant' under Section 2(c) of the Prevention of Corruption Act - HELD THAT: - The court examined the mode and scheme of appointment under the I&B Code - appointment as interim Resolution Professional under Section 16 and confirmation/communication under Section 22, with the Adjudicating Authority's role in the process - and applied the expansive, functional definition of 'public servant' in the PC Act. Having regard to the adjudicating authority's involvement in the resolution process and the statutory scheme by which a resolution professional is appointed during proceedings before the Company Law Tribunal, the office of Resolution Professional was held to come within Section 2(c)(v) of the PC Act as a person authorised by a court of justice to perform duties in connection with the administration of justice. [Paras 15, 20, 21]Resolution Professional is a 'public servant' within the meaning of Section 2(c) of the PC Act.Public duty - Prevention of Corruption Act applicability to insolvency professionals - Functions of a Resolution Professional constitute 'public duty' for the purposes of the PC Act - HELD THAT: - The court considered the statutory functions and obligations of insolvency professionals under the I&B Code (Section 208 and other provisions) and found that these duties relate to administration of corporate assets and affect creditors and the investing public. Applying the statutory definition of 'public duty' in Section 2(b) of the PC Act and authorities emphasising function over mode of appointment, the court concluded that the Resolution Professional's functions are public in character and fall within Section 2(c)(viii) of the PC Act. [Paras 22, 23, 26]The functions of a Resolution Professional partake the character of a 'public duty' and thus bring the office within the PC Act.Interaction between Insolvency and Bankruptcy Code and anti-corruption law - The I&B Code does not grant immunity from prosecution under the PC Act for acts of corruption by Resolution Professionals - HELD THAT: - The court noted that although certain officers are deemed public servants under Section 232 of the I&B Code and Section 233 provides protection for acts done in good faith, those provisions do not operate to exclude the PC Act where a Resolution Professional is apprehended accepting bribe or acting corruptly. The protective scheme of the I&B Code for good-faith acts is distinct and limited; it does not immunise criminal conduct such as accepting illegal gratification in the course of duties. [Paras 24, 25]I&B Code does not preclude applicability of the PC Act or provide immunity from prosecution for corrupt acts by Resolution Professionals.Final Conclusion: The petition to quash the FIR under Section 7 of the PC Act was rejected: the court held that a Resolution Professional is a 'public servant' performing 'public duty' within the meaning of the PC Act, and the I&B Code does not bar criminal prosecution for corrupt conduct in the insolvency process. Issues Involved:1. Whether a Resolution Professional is a public servant under Section 2(c) of the Prevention of Corruption Act (PC Act).2. Whether the functions of a Resolution Professional partake the character of a public duty.3. Whether the petition for quashing the FIR against the petitioner is tenable.Summary:Issue 1: Whether a Resolution Professional is a public servant under Section 2(c) of the Prevention of Corruption Act (PC Act).The petitioner, an Insolvency Professional, sought to quash the criminal proceedings, arguing that Section 7 of the PC Act does not apply as he is not a public servant under Section 2(C) of the PC Act or Section 21 of the IPC. The petitioner contended that his appointment by the Committee of Creditors under Section 22 of the I&B Code does not constitute a public duty. However, the court noted that the definition of a public servant under the PC Act is broad and includes those performing duties authorized by a court in connection with the administration of justice. The court cited precedents such as *State of Gujarat v. Mansukhbhai Kanjibhai Shah* and *State v. C.N. Manjunath* to emphasize that the nature of duties performed is the determining factor. The court concluded that the Resolution Professional, appointed by the National Company Law Tribunal (NCLT), performs a public duty and thus qualifies as a public servant under Section 2(c) of the PC Act.Issue 2: Whether the functions of a Resolution Professional partake the character of a public duty.The court examined the functions and obligations of Insolvency Professionals under Section 208 of the I&B Code, which relate to public investments and loans extended by banks. These functions are public in nature, and the Resolution Professional's role in protecting the assets of corporate debtors during the insolvency resolution process is a public duty. The court referred to *State of Gujarat v. Mansukhbhai Kanjibhai Shah*, which emphasized that the focus is on the public duty performed rather than the position held. Therefore, the court held that the functions of a Resolution Professional indeed partake the character of a public duty as per Section 2(c)(viii) of the PC Act.Issue 3: Whether the petition for quashing the FIR against the petitioner is tenable.The petitioner argued that the I&B Code is a self-contained code with specific provisions for redressal of grievances, and Section 233 provides protection from criminal prosecution for acts done in good faith. However, the court noted that this protection does not extend to acts of bribery, and the PC Act is applicable in such cases. The court emphasized that the appointment of the Resolution Professional by the NCLT involves the performance of public duties, making him a public servant under the PC Act. Consequently, the plea that the petitioner was not a public servant and immune from prosecution under the PC Act was rejected. The court concluded that the criminal miscellaneous petition does not meet the parameters for quashing and, accordingly, stands rejected.