Insolvency Resolution Professional Is Public Servant, Sanction Needed To Prosecute Him Under Prevention Of Corruption Act: Madras High Court

The Madras High Court has recently directed the Insolvency and Bankruptcy Board of India to consider granting sanction for prosecuting a Resolution Professional for allegedly mismanaging funds of a company during a resolution process. Justice Bharatha Chakravarthy noted that the resolution professional performed duties in connection with the administration of justice, was a person from whom a report was called for by the court of justice, and was performing a public duty. Thus, the court noted that the Resolution Professional would come within the definition of public servant as provided under Section 2(c)(v), 2(c)(vi), and 2(c)(viii) of the Prevention of Corruption Act. As per Section 2(c)(v) of the Act, a public servant includes any person authorised by court of justice to perform any duty in connection with the administration of justice, including a liquidator, receiver or commissioner appointed by the court. As per Section 2(c)(vi) of the Act, a public servant includes an arbitrator or other person to whom any cause or matter had been referred for decision or report by a court of justice or by a competent public authority. As per Section 2(c) (viii) of the Act, a public servant also includes a person who holds an office by virtue of which he was authorised to or required to perform a public duty. “Thus, the judgment leaves one with no doubt whatsoever that the Resolution Professional performs duties in connection with the administration of justice being authorised by a Court of Justice. Secondly, he is a person from whom a report is called for by a Court of Justice / a competent public authority; and thirdly, he performs a public duty. Therefore, Resolution Professional will be a public servant within the meaning of the definition contained in Section 2(c)(v),(vi)and (viii) of the Prevention of Corruption Act, 1988,” the court observed. The court was hearing a petition filed by Anil Kumar Ojha seeking direction to the Inspector of Police (CBI ACB) to investigate a complaint given by him and to file a chargesheet. Ojha was the former Managing Director of a company named M/s. S.L.O Industries Limited. When a petition was filed under Section 7 of the IBC, an Interim Resolution Professional was appointed by the NCLT. Thereafter, the company went into liquidation and a liquidator was appointed. Upon assuming charge, the liquidator found that the accounts listed in the inventory when the Resolution Professional took charge, and the stock position at the time of handing over the documents, were completely depleted and an amount of Rs. 840 could not be reconciled. The NCLT considered the issue and passed an order stating that there was a difference of Rs. 625.25 crore in the inventory. Though a case was registered, since no final report had been filed, Ojha filed the present plea. The Special Public Prosecutor informed the court that the investigation was complete, and the matter was pending before the IBBI for the grant of sanction. The IBBi informed the court that in one of its decisions, the Delhi High Court had observed that the resolution professionals are not public servants, and since an appeal was pending before the Supreme Court, the Board was awaiting the decision before considering the grant of sanction. The Resolution Professional argued that the meaning of a public servant could not be expanded and those categories that do not expressly fall into the definition cannot be brought in by way of interpretation. It was also argued that the Code also protects the actions of the Resolution Professional taken in good faith. Though the court agreed that the issue was pending before the Supreme Court, the court added that there was no interim order prohibiting to issuance of sanctions in cases. The court noted that leaving the matter unresolved merely because an authoritative ruling of the Supreme Court was pending was not justified as the golden time for investigation and prosecution would be lost. Looking into the duties performed by the resolution Profession, the court held that the resolution Professional would come within the definition of Public Servant. Though it was argued that the work of the Resolution Professional was administrative in nature and on the directions of the Committee of Creditors, the court observed that since the work was done in the course of administration of justice, the argument was liable to be rejected. The court thus directed the IBBI to consider the file and grant a sanction as per the Prevention of Corruption Act.Also Read: Resolution Professional Under IBC Will Come Within Meaning Of 'Public Servant' Under Prevention Of Corruption Act: Jharkhand High Court Counsel for Petitioner: Mr. S. Veeraraghavan Counsel for Respondents: Mr. K. Srinivasan, Special Public Prosecutor for CBI Cases, Mr. S. Sathiyanarayanan, Mr. S. M. Vivekanandh Case Title: Anil Kumar Ojha v. The...

Insolvency Resolution Professional Is Public Servant, Sanction Needed To Prosecute Him Under Prevention Of Corruption Act: Madras High Court

Upasana Sajeev

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