Introduction
Under the Insolvency and Bankruptcy Code, 2016, Insolvency Professionals play a central role in the Corporate Insolvency Resolution Process (CIRP) and may act as Interim Resolution Professionals or Resolution Professionals. Further, they may even act as Liquidators, if the matter proceeds to liquidation.
A key legal question is whether Insolvency Professionals, particularly Resolution Professionals (RP) while discharging their duties as an RP during the CIRP, qualify as ‘public servants' under the Prevention of Corruption Act, 1988 (PCA). There are divergent views on this topic. While the Delhi High Court has held that an RP is not a ‘public servant' under the PCA, the Jharkhand High Court has held that an RP is indeed a ‘public servant' under the PCA. In this short piece, we will be quickly analysing the Delhi High Court decision and one Jharkhand High Court decision. The decision of the Jharkhand High Court has far-reaching consequences for Resolution Professionals from a liability standpoint under anti-corruption laws.
The Delhi High Court view
In Dr. Arun Mohan v. Central Bureau of Investigation (W.P.(CRL) 544/2020 & CRL.M.A. 4088/2020; Judgment dated 18.12.2023), the Delhi High Court held that an RP does not fall within the definition of a “public servant” under Section 2(c) of the PCA.
The Court emphasized that the IBC is a self-contained code and that Section 232 of the Insolvency and Bankruptcy Code, 2016 (IBC), which deems certain persons as public servants, does not include Insolvency Professionals. Further, Section 233 of the IBC provides protection to Insolvency Professionals for actions taken in good faith. The Court held that this deliberate omission from Section 232, and the protection provided under inclusion in Section 233, indicates a conscious legislative choice not to treat Insolvency Professionals as public servants.
The Court also distinguished between “public duty” and “public character,” holding that even if the duties of an RP may appear to be public in nature, they do not carry the public character necessary to invoke the PCA. Citing Supreme Court decisions in the well-known Swiss Ribbons ((2019) 4 SCC 17) and Arcelor Mittal ((2019) 2 SCC 1) cases, the Court reiterated that an RP is a “facilitator”.
The Court further noted that in other contexts, such as the Securities and Exchange Board of India (Appointment of Administrator and Procedure for Refunding to the Investors) Regulations, 2018, the intent to treat Insolvency Professionals as public servants was visible clearly. However, in the IBC, by the absence of an express provision categorizing Insolvency Professionals as public servants, the legislative intent was clear to exclude Insolvency Professionals from the ambit of the term ‘public servants'.
Further, the Court also analyzed Section 2(c) of the PCA, i.e., the definition of the term of ‘public servant', and held that an RP could not be categorized as someone who falls within the definition of the term ‘public servant' for the purposes of the PCA.
Having taken the view that RPs are not ‘public servant', the Court quashed the prosecution launched under the PCA against the RP.
It is to be noted that this decision has been appealed to the Supreme Court is pending adjudication there.
The Jharkhand High Court view
In Sanjay Kumar Agarwal v. Union of India (Criminal Revision No. 728 of 2023; judgment dated 14.02.2025), the Jharkhand High Court took a diametrically opposite view and held that an RP was a ‘public servant' under Section 2(c)(v) and (viii) of the PCA. The Court noted that a Resolution Professional has a key role to play in the CIRP. His primary functions involve protecting the assets of the corporate debtors and managing funds of creditors. It is from the nature of his functions that the Court concludes that an RP performs a public duty. The Court held that the responsibilities of an RP are closely linked to banks that accept public deposit and it can be said that the RP is carrying out public functions.
The Court also noted that the RP's role, though administrative and not adjudicatory, involves accountability. The Court was of the view that an RP should be treated as a ‘public servant' to the extent of his powers as an administrator of the CIRP. It effectively rejected the argument that absence of express statutory mention excludes RPs from being treated as ‘public servants' under the PCA. Relying instead on a purposive interpretation of the term “public servant, the Court, in fact, went so far to state that there was no need for an express statutory provision stipulating that RPs were ‘public servants'. The Court noted as follows:
This Court is of the view that since the duties performed by RP are public in nature, they are public servants and Sec 2(c) of Prevention of Corruption Act is pretty clear that an individual who performs public duties are public servants for the purpose of the Act and hence, the legislature would have felt that there are no explicit provisions are required. (sic).
The Court distinguished the decision of the Delhi High Court in Arun Mohan and instead relied on its own past decision dated 05.04.2023 in Cr.M.P. No. 1048 of 2021, to arrive at the conclusion that an RP is a ‘public servant'.
As it was held that an RP was a ‘public servant', the Court upheld the prosecution against the RP. In this case the prosecution was under the Prevention of Money Laundering Act, 2002, and the predicate offense therein was that of taking a bribe during the CIRP, which, in the Court's view, was violative of the PCA.
Our thoughts
The Jharkhand High Court's expansive interpretation, treating RPs as public servants, opens the door to criminal liability under the PCA. This interpretation, while rooted in a purposive reading of the RP's public-facing role, imposes a heightened compliance burden on professionals who are already subject to rigorous regulatory oversight by the Insolvency and Bankruptcy Board of India (IBBI).
While the idea behind this interpretation is laudable, i.e., to ensure transparency, propriety in the process and that any wrongdoing or corrupt practice by the RPs is met with an iron hand, it also has the capability of being misused to injure the interests of RPs Any disgruntled stakeholder may launch a frivolous criminal prosecution against the RP under the PCA and harass the RP even though the actions of the RP are taken in good faith. In view of this potential misuse, there may be a chilling effect on the decision making abilities of RPs. They may, out of fear of prosecution, fail to take bold decisions, which may be commercially sound and in the interest of the creditors and the business of the corporate debtor.
In contrast, the Delhi High Court's decision offers a narrower, textually grounded view, emphasizing legislative intent and the structural safeguards already embedded in the IBC. It shields RPs from criminal prosecution under the PCA unless explicitly brought within its scope by Parliament.
Until the Supreme Court resolves this divergence, RPs face a fragmented legal landscape, where their liability may vary depending on the jurisdiction in which they operate. Therefore, the need of the hour is greater clarity so that RPs are fully aware of the scope of their liability, especially when their role is fundamentally administrative and facilitative, and not adjudicatory.
It is hoped that when the matter is finally decided by the Supreme Court, it takes a balanced approach which recognizes (a) the need for the insolvency resolution process to remain untainted by corrupt activity, (b) respects the legislative framework of the IBC as a self-contained code, and (c) avoids over-criminalization of professionals who are already subject to strict regulation by an independent body viz., the IBBI.
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