Resolution Professional Under IBC Will Come Within Meaning Of 'Public Servant' Under Prevention Of Corruption Act: Jharkhand High Court

A bench comprising Justice Gautam Kumar Choudhary passed the above ruling while rejecting the petition praying for quashing of the entire criminal proceeding instituted against him, as well as the FIR registered for the offence under Section 7 (Public servant taking gratification other than legal remuneration in respect of an official act) of the PC Act.

Background

The petitioner is a 'Insolvency Professional' who was appointed by a Committee of Creditors and the NCLT as the Interim Resolution Professional (IRP) for two companies.

The complainant, a Director of one of the companies, alleged that the petitioner demanded a bribe of Rs. 2,00,000/- per month for being lenient in the insolvency resolution process and extending the Corporate Insolvency Resolution Process (CIRP) from 09 months to 02 years.

Additionally, the petitioner also demanded Rs.20,00,000/- for obtaining a favourable forensic audit/valuation report from a specific Forensic Auditor/Valuer and assisting in the repossession of a plant or company.

Following the discreet verification of the complaint, a trap team was formed and a raid was carried out at the company office, resulting in the petitioner being caught red-handed accepting illegal gratification from the complainant in the presence of independent witnesses, after which criminal proceedings were instituted against the petitioner and an FIR was registered under Section 7 of the Prevention of Corruption Act, 1988.

As a result, the petitioner filed a Criminal Miscellaneous petition praying for the quashing of the FIR, on the ground that Section 7 of the Prevention of Corruption Act does not apply to Resolution Professionals because they do not meet the definition of a public servant as defined in Section 2(C) of the Prevention of Corruption Act or Section 21 of the Indian Penal Code (IPC).

Whether a Resolution Professional is a public servant or not?

The central question involved in the petition was whether ‘Resolution Professional’ as defined under Section 22 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) will come within the meaning of ‘Public Servant’ under Section 2 (c) of the PC Act?

Justice Choudhary opined that the resolution professional will come within the meaning of a public servant under Section 2(c) the PC Act for the reason that definition of public servant as given under the PC Act is very wide and expansive.

He further opined that it is not limited to those serving under the Government or its instrumentalities and drawing salary from the public exchequer.

"Apart from the list of the functionaries given in Section 2 (c), the definition also lays down the functional criteria to include within its fold those discharging public duty or any duty authorised by a court of justice, in connection with administration of justice," Justice Choudhary said.

Reliance was placed on State v. C.N. Manjunath, (2017) 11 SCC 361 wherein the question involved was whether the licensed surveyors in Taluks came within the meaning of ‘public servant’ under the PC Act, and the apex court ruled in their favour, stating that they were public servants because they were discharging public duties.

"Considering the fact that the appointment of Resolution Professional is made during the resolution process before the Company Law Tribunal with its approval, he will be a public servant under Section 2(c)(v) of the P.C. Act," Justice Choudhary concluded.

Whether the functions of a Resolution Professional partake the character of a ‘public duty’?

Justice Choudhary noted that the Resolution Professional does not figure among the officers enumerated under Section 232 of I&B Code deemed to be a public servant within the meaning under section 21 of the IPC. Those who are deemed to be a public servant enjoy certain immunities from criminal prosecution for IPC offences under section 197 of Cr.P.C, as the cognizance cannot be taken without the previous sanction of the Central or State Government as the case may be however, this does not refer to, any immunity from criminal prosecution for offences committed under the PC Act.

He further noted that the Insolvency and bankruptcy code is a self-contained code but only with respect to the matter provided therein. It does not cover the matters like the present, where a Resolution Professional takes bribes in order to favour a party for which P.C. Act is squarely applicable. Section 232 does not exclude operation of P.C. Act. Therefore, the plea that the petitioner was not a public servant and was immune from criminal prosecution under PC Act is not tenable.

While rejecting the Criminal Miscellaneous Petition, Justice Choudhary finally held, "Resolution Professional has a key role to play in the insolvency resolution process and to protect the assets of the corporate debtors. From his nature of assignment and duty to be performed his office entails performance of functions which are in the nature of public duty and therefore will come within the meaning of public servant both under sections 2 (c) (v) & (viii) of the PC Act."