Delhi HC: Insolvency Resolution Professionals Not Considered ‘Public Servants’ under Prevention of Corruption Act

LI Network

Published on: December 19, 2023 at 15:41 IST

The Delhi High Court has clarified that individuals serving as Insolvency Resolution Professionals (IRPs) do not fall within the definition of “public servant” under Section 2(c) of the Prevention of Corruption Act, 1988.

Justice Tushar Rao Gedela emphasized that merely possessing roles that may be broadly categorized as “public duties” does not automatically imbue them with a “public character.”

The court asserted that the IRP is not explicitly included in Section 232 of the Insolvency and Bankruptcy Code, 2016, and hence, the legislature did not consider such professionals as “public servants.”

The court highlighted that an Insolvency Professional is primarily a “facilitator” and takes on different roles during the Corporate Insolvency Resolution Process (CIRP), transforming from an IRP to a Resolution Professional (RP) and potentially a Liquidator.

The ruling came in response to the quashing of an FIR filed by the Central Bureau of Investigation (CBI) against Arun Mohan, appointed as IRP by the NCLT Mumbai, for alleged bribery. The FIR was based on Sections 7 and 7A of the Prevention of Corruption Act, 1988, along with Section 120B of the Indian Penal Code, 1860.

Justice Gedela stated that an Insolvency Professional, as per the considered opinion of the court, does not fit the definition of “public servant” under the relevant sections of the Prevention of Corruption Act, 1988. Consequently, the court quashed the FIR registered by the CBI.

Additionally, the court addressed Mohan’s request to quash a trial court order that remanded him to judicial custody for two months. While acknowledging that IRP duties might border on “public duties,” the court emphasized that these roles do not inherently adopt a “public character.”

The Court also stressed that courts tend to favor the constitutionality of enactments and refrain from drawing conclusions against them without substantial and relevant material.

It concluded that the omission of the term “Insolvency Professional” in Section 232 of the IBC was a deliberate choice by the legislature, and courts should not attempt to fill gaps that were intentionally left blank.


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