Affirmative or Negative: Evaluating Resolution Professional’s role as a Public Servant

[By Rahul Pandey]

The author is a student of West Bengal National University of Juridical Sciences.

 

Introduction

Based on a plain reading of provisions of the IBC, 2016, it would not be wrong to assume that the Resolution Professional (“RP”) is supposed to act as the backbone of the entire insolvency resolution process. He is envisaged as an impartial party that acts in the best interest of all involved and upholds the highest standards of professional and moral integrity. However, in the unfortunate situation wherein he is alleged to indulge in mala-fide practices that threaten the whole regime of trust-building the code is supposed to stand for, his position remains unclear. Should he be treated as a “Public Servant” performing a duty that is public in nature under the Prevention of Corruption Act, 1988 (“PC Act”)? Or would it be a better fit to exclude him from the purview of the strict standards of prosecution of said public servants to ensure that the constant threat of being faced with these provisions does not act as a barrier for him in the performance of his duties? This piece shall aim to address this concern and provide a balanced view in light of conflicting judgments delivered in recent months by the Hon’ble High Courts of Jharkhand and Delhi as the matter lies pending before the Hon’ble Supreme Court of India.  

The PC Act and its expanded Horizon of Public Servants 

Aimed at curbing the evil of corruption across all levels of society, the PC Act provided a wide-ranging definition of the term ‘public servant’ in light of the changing economic order to ensure that its provisions not only apply to those working for the government directly but also those that perform any duty that may be ‘public’ in nature. 

A common misconception that arises is that RPs are covered under the term ‘liquidator’ as given by Section 2 (c)(v) of the PC Act and Section 21 of the IPC that define Public Servants. However, the same would be a fallacious conclusion as the liquidators mentioned in these provisions refer to those appointed under S.502 of the old Companies Act, 1956, who were directly appointed by the High Court and drew their pay directly from the government. On the contrary, RPs under the IBC are appointed by the Committee of Creditors (CoC) in coordination with the NCLT under S.22 of the IBC and draw their fee on the basis of assets realised or as deemed appropriate CoC based on their commercial wisdom.  

Nature of Appointment  

In regard to the nature of appointment of the RP as to bring him within the fold of Section 2 (c)(viii) of the PC Act, conflicting opinions have emerged. The Delhi High Court in its judgement in Arun Mohan v. CBI, 2023 SCC OnLine Del 8080 has emphasised that while only the Interim RP initially is appointed directly by the NCLT, the final Resolution Professional who oversees the CIRP till its conclusion is appointed by the CoC and not the NCLT.  

The Jharkhand High Court, on the other hand, in its judgement in Sanjay Kumar Agarwal v. CBI, 2023 SCC OnLine Jhar 394, has held that while the direct role of the NCLT is limited to the appointment of the Interim RP under S.16, IBC, the appointment of the final RP under S.22, IBC, the decision of the CoC has to be communicated to the NCLT. Even in the case of replacement of the RP by the CoC under S.27 (3) and (4), IBC, the committee of creditors shall forward the name of the insolvency professional proposed by them to the adjudicating authority which will forward it to the Board for its confirmation. In light of all these factors, the court has opined that it would be incorrect to conclude that the adjudicating body doesn’t play an active role in the appointment of the RP. 

The position taken by the Jharkhand HC is in line with previous decisions of the NCLAT wherein the position of the RPs has been held to be equivalent to that of an officer of the court for the purpose of contempt and thus the nature of the appointment of the RP can be said to be completely within the scope of public nature.  

Involvement of Public Duty in role of RP 

As has been held by the Supreme Court, the character of “public duty” as performed is the prime factor in determining if the said office was that of a “Public Servant” for the purpose of the operation of the PC Act. The words “Public Duty” can have a very wide range of interpretation. This is somewhat in line with the vision of the introduction of the PC Act which sought to leave open the scope of bringing within its fold offices that gain public function as the dynamics and the functioning of the state machinery changes.  

In holding that the RP is not a public servant, the Delhi HC has placed reliance on a paragraph in the SC’s judgement in Ramesh Gelli V. CBI where it has been observed that when an office may hold elements of public duty, without the element of ‘public character’, it may not be considered as that of a public servant. To justify this view, the court has gone on to hold that – 

“IP metamorphosizes from an IRP to an RP and thereafter as a Liquidator (as the case may be), and due to such metamorphosis, it would be prudent not to characterize the duties, even if assumed to be “public”, as in the nature of “public character”.” 

However, it is respectfully submitted that the change in nature of duties from IRP to RP and to liquidator is not enough to justify that the office of the RP as a whole does not hold an essential public nature. While it may be true that the judgments in Swiss Ribbons and Arcelor Mittal describe the role of the RP as a mere facilitator, his neutrality, integrity, and professionalism are crucial to the whole CIRP, as can be inferred from a bare reading of the provisions of the IBC. Having been established as an officer of the court and holding a role akin to the liquidator as mentioned in the PC Act, specific standards of responsibility rest upon his shoulders towards the stakeholders in the resolution process, and thus, the argument that the role lacks enough public duty stands as a weak one.   

Doctrine of Casus Omissus 

Proponents of judicial restraint have long advocated the doctrine of ‘casus omissus’, which lays down that legislative omissions cannot be compensated for via judicial decision and reading into statutes. The doctrine works on the assumption that in the event a law is found to be lacking in some aspect, the legislature itself will proceed to bring about the needed changes if it is of adequate public importance. In a similar vein, the Delhi HC has proceeded to state that the RP cannot be read into S.32 of the IBC, which lists offices that may be treated as public servants in matters relating to itself under S.21 of the IPC. 

However, as Justice Gogoi goes on to state in the judgment of Ramesh Gelli V. CBI, a case that has been relied upon by the Delhi HC that the doctrine does have exceptions and – 

“Judges can more frankly step into the shoes of the legislature where an enactment leaves its own intentions in much too nebulous or uncertain a state.” 

The Delhi HC’s decision to exclude RPs from the definition of public servant revolves around how the office has not been placed under S.32, IBC via the process involved in the drafting of the IBC up until now. However, this assumption has not been supplied with a concrete statement, even a vague one discussing the exclusion of the RP from the definition of Public Servant. Hence, it is submitted that with the legislative intent being uncertain at best, the court is definitely empowered to act under exceptions to the Doctrine of Casus Omisus and hold the RP to be a Public Servant irrespective of the exclusion in S.32 so that the public interest may be better served. 

Conclusion 

While the IBC may be a self-contained code for purposes relating to itself, for offenses as serious as bribery, it cannot bar the operation of special statutes that deal with them. This becomes even more relevant when dealing with statutes that deal with offenses that carry larger implications for the nation. With the evolving face of society and economic structures in the era of neoliberalism, where crucial functions held by the state are often delegated to external actors, the traditional notions in regard to public servants covered under anti-corruption legislation have to change. In the interest of maintaining the trust reposed in the CIRP process under the IBC, of which the RP is an integral part, it is desirable for the Supreme Court to uphold the law as laid down by the Jharkhand HC in Sanjay Kumar Agarwal v. CBI to ensure sterner barriers for entry of malpractices into the Resolution process and uphold the values the PC Act stands for.   

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