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

Action against Resolution Professional - Demand of Bribe for showing leniency in the insolvency resolution process for extending CIRP process from 09 months to 02 years - demand of bribe for obtaining favourable forensic audit/valuation report from his chosen Forensic Auditor/Valuer and for helping in re-possession of plant/company - applicability Section 7 of PC Act to this petitioner (as a Resolution Professional is not a public servant within the meaning of Section 2(C) of the Prevention of Corruption Act or under Section 21of the IPC). Whether Resolution Professional as defined under Section 22 of the I B Code will come within the meaning of Public Servant under Section 2 (c) of the PC Act? HELD THAT - This court is of the view that 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. 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 authorized by a court of justice, in connection with administration of justice. Under Section 16 (1) an interim resolution professional is appointed by the adjudicating authority on the insolvency commencement date. Under section 22 (3)(a), the committee of creditors after taking a decision to continue the interim resolution professional as the resolution professional, is required to communicate its decision to Adjudicating Authority and others - Against this scheme of the I B Code the plea advanced on behalf of the petitioner that Adjudicating Authority had no role in the appointment of Resolution Professional is not sustainable. Thus, 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. Whether the functions of a Resolution Professional partake the character of a public duty ? - HELD THAT - The appointment of resolution professional is made by the National Company Law Tribunal, which is the Adjudicating Authority for the insolvency resolution process of the companies under the I B Code, 2016. 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 - the plea that the Petitioner was not a Public Servant within the meaning of the PC Act is rejected. Petition dismissed.

Summary

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.