2023 (12) TMI 858 - HC - Insolvency and Bankruptcy

Resolution Professionals under IBC not public servants under Section 21 IPC or Prevention of Corruption Act

Delhi HC held that Resolution Professionals/Insolvency Professionals under the Insolvency and Bankruptcy Code are not public servants within the meaning ... Public servant - public duty - public character - deeming of public servants under Section 232 of the Insolvency and Bankruptcy Code - protection for actions in good faith under Section 233 of the Insolvency and Bankruptcy Code - Resolution Professional as facilitator - doctrine of casus omissus - legislative intent and special code (IBC) prevailing over general law - strict construction of penal statutesPublic servant - deeming of public servants under Section 232 of the Insolvency and Bankruptcy Code - public duty - Resolution Professional as facilitator - Section 233 of the Insolvency and Bankruptcy Code - doctrine of casus omissus - Whether an Insolvency Professional (including Interim Resolution Professional / Resolution Professional) is a 'public servant' within the meaning of Section 2(c) of the Prevention of Corruption Act, 1988 (and Section 21 IPC) and thereby amenable to prosecution under the PC Act. - HELD THAT: - The Court analysed Sections 232 and 233 of the IBC in light of the statutory scheme and relevant Supreme Court pronouncements (notably Swiss Ribbons and ArcelorMittal) which characterise the Resolution Professional as a facilitator whose powers are largely administrative and subject to the Committee of Creditors and the adjudicating authority. Section 232 expressly deems specified office holders of the Board to be public servants but omits insolvency professionals; Section 233 separately grants protection for actions taken in good faith by an insolvency professional. Reading the Code as a complete special legislation, the Court concluded that the omission of insolvency professionals from Section 232 was deliberate and not an inadvertent lacuna to be filled by the courts. Applying principles of statutory interpretation, the Court held that duties which may be public in form do not necessarily possess the requisite public character to classify an insolvency professional as a public servant under Section 2(c) PC Act. The Court further observed that it is for the legislature to amend the statute if such inclusion is intended, and that judicially supplying a casus omissus is impermissible absent clear necessity. [Paras 41, 42, 45, 46, 59]An Insolvency Professional (including IRP/RP) is not a 'public servant' within the meaning of Section 2(c) of the Prevention of Corruption Act, 1988, and therefore does not fall within the deeming provision of Section 232 IBC.Strict construction of penal statutes - legislative intent and special code (IBC) prevailing over general law - quashing of FIR - Consequent relief in the present petition: whether the FIR registered against the petitioner under the PC Act and the remand order should be quashed. - HELD THAT: - The factual allegations and the conduct of the investigation were argued on the premise that the petitioner was a public servant. Having held that an Insolvency Professional is not a public servant for the purposes of the PC Act, the Court found no need to enter further factual findings on the investigation or alleged mala fide. On the legal conclusion reached, the criminal proceedings predicated on the petitioner being a public servant could not be sustained. The Court therefore set aside the FIR registered by the CBI and disposed of the petition along with pending applications. [Paras 63, 64, 65]The FIR bearing No. RC-DAI-2020-A-0001 dated 11.01.2020 registered by the CBI is quashed and set aside; the petition is disposed of.Final Conclusion: The High Court held that an Insolvency Professional (including IRP/RP) is not a 'public servant' under Section 2(c) of the Prevention of Corruption Act, 1988, observed that the omission of Insolvency Professionals from the deeming provision in Section 232 IBC is deliberate and cannot be judicially rectified, and accordingly quashed the FIR registered against the petitioner and disposed of the petition. Issues Involved:1. Whether the petitioner, a 'Resolution Professional', is a public servant under the Prevention of Corruption Act, 1988.2. The validity of the FIR registered against the petitioner under the Prevention of Corruption Act, 1988.Summary:Issue 1: Whether the petitioner, a 'Resolution Professional', is a public servant under the Prevention of Corruption Act, 1988.The Court examined the roles and responsibilities of an Insolvency Professional (IP) under the Insolvency and Bankruptcy Code, 2016 (IBC). It was argued that the duties of an IP, including those of an Interim Resolution Professional (IRP) and Resolution Professional (RP), do not qualify as 'public duties' with a 'public character' as required under the Prevention of Corruption Act (PC Act). The Court referred to the Supreme Court judgments in Swiss Ribbons Pvt. Ltd. v. Union of India and ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta, which characterized the role of an RP as merely a 'facilitator' rather than an adjudicator or a person performing public duties.The Court also analyzed Sections 232 and 233 of the IBC. Section 232 explicitly deems certain officers as public servants but deliberately omits IPs. Section 233 provides protection to IPs for actions taken in good faith, indicating a legislative intent not to include IPs as public servants under Section 232. The Court concluded that the omission of IPs from Section 232 was deliberate and not an oversight, thus, IPs do not fall under the definition of a 'public servant' under the PC Act.Issue 2: The validity of the FIR registered against the petitioner under the Prevention of Corruption Act, 1988.Given the conclusion that an IP does not qualify as a public servant under the PC Act, the FIR registered against the petitioner under Sections 7 and 7A of the PC Act, read with Section 120-B of the Indian Penal Code, was deemed invalid. The Court held that the FIR was void ab initio and quashed it.Conclusion:The Court concluded that an Insolvency Professional does not fall within the meaning of 'public servant' as defined in Section 2(c) of the Prevention of Corruption Act, 1988. Consequently, the FIR against the petitioner was quashed.