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

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

Dr. Arun Mohan Versus Central Bureau Of Investigation

Delhi HC held that Resolution Professionals/Insolvency Professionals under the Insolvency and Bankruptcy Code are not public servants within the meaning ... Allegation of Corruption against RP/IRP - whether the petitioner who is a 'Resolution Professional' is a public servant or not and thus, would be liable for the offence punishable under Prevention of Corruption Act? - Registration of impugned FIR in question against the petitioner consequent upon which the impugned remand order has been passed. HELD THAT:- On a general perusal of the IBC, it appears that the IP has been given various roles, responsibilities and duties which would aid and assist the NCLT to either revive a Corporate Debtor by approving a resolution plan or to liquidate it as a last resort. Sections 18, 20 and 25 of the IBC refer to the various duties and functions of the IP which would extend to preserving the CD by stepping into the shoes of the management, appointing agencies if so required for the purposes of proper management of the CD, and managing its affairs. Sections 20 and 25 confer authority to the IP to enter into contracts on behalf of the CD or amend or modify the pending contracts; raise interim finance subject to Section 28 of the Code; issue appropriate instruction as may be necessary to keep the CD as a “going concern” apart from appointing accountants, legal or other professionals as may be necessary. It is also a responsibility of the IP under the IBC to preserve and protect the assets of the CD including the continued business operations of the CD. Section 28 is a relevant provision which restricts, prohibits and curtails certain rights and duties of the IP as enumerated above, subject to the approval of the Committee of Creditors (CoC) - Section 21 of the IBC mandates formation of CoC by the IP, which decides on the ultimate fate of the CD viz., whether to resolve the insolvency or to liquidate the CD. According to Section 23, the IP shall conduct the Corporate Insolvency Resolution Process during the interregnum till a final decision is reached insofar as the fate of the CD is concerned. Issue regarding 'public duty', 'public character' and 'public servant' - HELD THAT:- It is trite that every duty, even if has a colour of “public duty”, may necessarily not be of a character which is “public” in nature. There could be many instances where a role or a responsibility of an individual in a particular statute would assume the nature of “public duty” but sans the “Public Character” - it is not necessary that all duties which are broadly defined as “public duty” would encompass within itself “public character”. Merely because the IP is vested with certain roles, responsibilities and duties which could partake the nature of “public duties”, it is not a necessary conclusion or a definite inference that the same are being discharged in the nature of “public character”. With the ever evolving laws and roles and duties cast upon various individuals under such enactments, the responsibilities of individuals and in some cases, institutions may have overlapping character and may be intertwined with “public duty” but that by itself would not be a legally determined benchmark to categorise all such individuals or institutions, as the case may be, as “public servants” for the purposes of Section 21 IPC or Section 2(c) PC Act, 1988. That too, when the Legislature appears to have deliberately omitted such individual or institution from such ambit. Thus, in the opinion of this Court, the Constitutional Courts would be loath in reaching such drastic conclusion, that too by process of judicial interpretation. Codification of IBC - the need and historical perspective - HELD THAT:- The objective of the IBC was to consolidate or re-organize all such laws including to amend, if required, for the purposes enumerated in it. As such, it is clear that while codifying the IBC, the legislature had before it, the aforesaid Acts and all the relevant material to facilitate such codification - In fact, before such codification, the Government of India had constituted the Bankruptcy Law Reforms Committee, 2015 to study the entire gamut of the insolvency and the bankruptcy laws and make appropriate recommendations. The said recommendations were accepted and codified and promulgated as IBC, 2016. Effect of section 232 and 233 of IBC - HELD THAT:- The omission in Section 232 was not inadvertent but a deliberate omission to not include IP within its ambit. It is trite that Courts would not interfere if the omission is deliberate since that would tantamount to legislating and supplying ‘casus omissus’ which is prohibited and not within the jurisdiction of the Courts - it is manifest, that the IP was not included within the ambit of Section 232 of IBC. As a necessary corollary, it can be safely inferred that the IP, according to the provisions of IBC as it stands today, was not considered to be a “public servant” by the legislature. While examining the present legal issue is the promulgation of Securities and Exchange Board of India (Appointment of Administrator and Procedure for Refunding to the Investors) Regulations, in the year 2018, whereby the Administrator to be appointed ought to be an IRP registered with IBBI and who according to sub regulation (5) of Regulation 5 of the said Regulations, is deemed to be a “Public Servant” within the meaning of Section 21 of the IPC. If the Legislature had intended, at any point of time, even after IBC was codified in the year 2016 to include IP in Section 232 of IBC, the same could have been engrafted or inserted in Section 232 itself or elsewhere, in or about the time when the aforesaid SEBI Regulations were brought into effect in the year 2018. The same has not been done till now. This itself is a strong indicator and a clear pointer towards the fact that the omission to not include the IP within Section 232 is willful and deliberate and therefore, it cannot be a case of casus omissus. Doctrine of Casus Omissus - HELD THAT:- The law in respect of the doctrine of ‘casus omissus’ is fairly well settled. The jurisdiction and authority conferred upon the Constitutional Courts is to interpret the law and not legislate. It is also fairly well settled that if a provision of law is misused and subjected to abuse of the process of law, it is for the legislature to amend, modify or to repeal it, if deemed necessary. The legislative ‘casus omissus’ cannot be supplied by judicial interpretative process - In the present case, as could be seen, Section 232 brooks no ambiguity nor is it repugnant to the aims and objects of the IBC. Applicability or otherwise of section 2(c) of PC Act, 1988 - HELD THAT:- It is clear to this Court that despite having all the previous Acts on the instant subject like The Provincial Insolvency Act, 1909, the Insolvency Act, 1920, SICA 1985, RDDBFI Act 1994 and SARFAESI 2002 which were codified to form IBC and despite being aware of the roles and duties ascribed upon the individuals who were appointed by the Courts or Boards contained therein as Liquidators, Receivers and the like, and having all relevant materials before it, the Legislature, in its wisdom, thought it fit and prudent not to include IP as “public servant” and such non inclusion was, thus, a willful and deliberate omission. It is trite that what is not specified may not be readily inferred, particularly if the same would be penal in nature. In other words, any provision of law entailing penal consequences ought to be strictly construed and nothing specified therein should not be read in or filled up readily. The omission to include IP in section 232 IBC is not inadvertent but a thoughtful, willful and deliberate one by the Legislature, and the Courts of law being empowered to interpret the same, ought not to legislate or supply casus omissus, which in any case is prohibited - Whether the IP is or is not a “public servant” according to IBC or PC Act 1988 or Section 21 IPC, 1860, is purely the domain of the Legislature and if required and necessitated, the legislature may carry out necessary amendments to the legislations. In view of the analysis and the conclusions arrived at by this Court above, the need to make any observations/findings on facts would not arise in as much as the arguments on facts were predicated on the assumption of the Petitioner falling within the ambit and definition of a “Public Servant”, as stipulated in Section 2(c) of the PC Act, 1988 which has been held in the negative - an Insolvency Professional does not fall within the meaning of “public servant” as ascribed in any of the clauses of sub-section (c) of section 2 of the Prevention of Corruption Act, 1988. Petition disposed off. 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.