– Raunaq Bali
The fight against corruption hinges on the cornerstone: the definition of a ‘public servant’. Within the Prevention of Corruption Act, 1988 (hereinafter referred to as “the PC Act”), this seemingly straightforward term holds immense weight, determining who falls under its watchful gaze and who remains beyond its reach. However, this line in the sand has shifted and blurred through the tides of time and the pronouncements of various courts.
What constitutes a ‘public servant’ under the PC Act was comprehensively discussed by the Hon’ble Supreme Court in Central Bureau of Investigation v. Ramesh Gelli wherein Justice Ranjan Gogoi observed that to ascertain the true meaning of who is a public servant, the definitions of ‘public duty’ and ‘public servant’ have to first be read together closely.
Section 2(b) of the PC Act defines ‘public duty’ as a duty in the discharge of which the State, the public or the community at large has an interest.
Section 2(c)(viii) of the PC Act states that any person who holds an office by virtue of which he is authorised or required to perform any public duty would be a Public Servant. The first explanation to section 2 provides that persons falling under any of the twelve sub-clauses are public servants, whether appointed by the Government or not.
Justice Gogoi observed that the broad definition of ‘public duty’ takes into its ambit the discharge of duties in which the State, the public, or the community at large has an interest. The performance of any such duty by a person who holds an office which permits or authorises such person to perform such duty makes them a ‘public servant’.
However, he did not favour the excessive expansion of the scope of ‘public duty’ and held the following:
“The broad definition of ‘public duty’ contained in Section 2(b) would be capable of encompassing any duty attached to any office inasmuch as in the contemporary scenario there is hardly any office whose duties cannot, in the last resort, be traced to having a bearing on public interest or the interest of the community at large. Such a wide understanding of the definition of ‘public servant’ may have the effect of obliterating all distinctions between the holder of a private office or a public office which, in my considered view, ought to be maintained. Therefore, according to me, it would be more reasonable to understand the expression ‘public servant’ by reference to the office and the duties performed in connection therewith to be of a public character.”
Two years later, the Supreme Court in State of Gujarat v. Mansukhbhai Kanjibhai Shah considerably expanded the scope of ‘public duty’. The Court held that the language of Section 2(b) of the PC Act indicates that any duty discharged wherein the State, the public or the community at large has any interest is called a public duty. The First explanation to Section 2 further clarifies that any person who falls in any of the categories stated under Section 2 is a public servant whether or not appointed by the Government. The second explanation broadens the scope to cover anyone who, in practice, performs the duties of a public servant. Such individuals should not be exempt from being classified as public servants due to legal loopholes or technicalities.
With the position of law regarding the nature of the ‘public duty’ under the PC Act being settled, arose a new set of questions and ambiguities from the domain of insolvency law. The question of whether a Resolution Professional is a ‘public servant’ under the PC Act came up before two High Courts in 2023 – Jharkhand and Delhi. Since the Delhi High Court ‘respectfully differed’ with the stance taken by the Jharkhand High Court, the latter will be discussed first to provide proper context to the readers in a chronological manner.
Expansion of the scope and interpretation of ‘Public Duty’ – High Court of Jharkhand
The High Court of Jharkhand in Sanjay Kumar Agarwal v. CBI held that a Resolution Professional will be covered within the meaning of a ‘public servant’ under Section 2(c) of the PC Act, for the reason that the definition of a public servant as given under the PC Act is very wide and expansive. The designation of ‘public servant’ extends beyond individuals employed by the Government or compensated by public funds. According to Section 2(c), there is a range of personnel who fall under this category. Moreover, the term also encompasses those who carry out public responsibilities or those who are authorised by a court of law to perform duties that relate to the administration of justice. The Court further held that since the appointment of the Resolution Professional is made during the resolution process before the National Company Law Tribunal and with its approval, he will be a public servant under Section 2(c)(v) of the PC Act, which provides that any person authorised by a court of justice to perform any duty, in connection with the administration of justice,including a liquidator, receiver or commissioner appointed by such court, would be a public servant.
The next question that the High Court decided was whether the functions of a Resolution Professional partake the character of a ‘public duty’. The Court held that since the functions of a Resolution Professional intimately relates to matters relating to loans extended by the Banks which are deposits made by the public at large, there is public interest and therefore it will come within the meaning of ‘public duty’ as provided under Section 2(c)(viii) of the PC Act.
The Court concluded as follows:
“It is manifest that the appointment of a 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 the 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.”
Public Duty having the nature of Public Character – High Court of Delhi
A few months later, the same question came up for adjudication before the High Court of Delhi in Dr. Arun Mohan v. CBI. The Court began by analysing the role of the Resolution Professional and the nature of the functions performed in the course of the resolution process. The High Court relied on the Supreme Court’s decision in Swiss Ribbons Private Limited v. Union of India wherein it held that the Resolution Professional is given administrative powers as opposed to quasi-judicial powers. The Resolution Professional cannot act in many matters without the approval of the Committee of Creditors under Section 28 of the IBC. Thus, the RP plays the role of a facilitator whose administrative functions are overseen by the Committee ofCreditors and by the adjudicating authority.
The High Court then relied on another decision of the Hon’ble Supreme Court in Arcelor Mittal India Private Limited v. Satish Kumar Gupta wherein it held that the role of a Resolution Professional is only to “examine and confirm” that each resolution plan conforms to the statutory provisions contained in the Code. The role of the Resolution Professional is to verify that the resolution plans submitted by interested parties are complete in all aspects before presenting them to the Committee of Creditors. The Resolution Professional is not responsible for taking any decisions regarding the approval of the submitted plans. The final decision lies with the Committee of Creditors, who may approve or reject the plans as they see fit. After considering the nature of the duties discharged by a Resolution Professional, the High Court of Delhi held that such duties do not assume the nature of ‘public duties’ of a ‘public character’, following the law settled in CBI v. Ramesh Gelli (supra).
The Court observed that:
“It is not necessary that all duties which are broadly defined as ‘public duty’ would encompass within itself ‘public character’. Merely because the IP is vested with certain roles, responsibilities and duties which could partake the nature of “public duties”, it is not a necessary conclusion or a definite inference that the same are being discharged in the nature of ‘public character’. In the present case, having regard to the law laid down by the Hon’ble Supreme Court in Swiss Ribbons (supra) and Arcelor Mittal (supra) defining the role of the RP as a mere “facilitator”, it appears to this Court that even if the roles and duties ascribed to the IP may be bordering or falling within “public duties”, the same would still not assume ‘public character’.”
Differing interpretations of ‘Public Servant’ – a respectful disagreement
The High Court of Delhi expressed that it “respectfully differs” from the decision of the High Court of Jharkhand. One of the major points of difference between the decisions of the High Court of Delhi and the High Court of Jharkhand arose in their interpretations of Sections 2(c)(v) and (viii).
The Delhi High Court, while interpreting Sections 2(c)(v) held that individuals having the power to make decisions in regards to properties and other assets and dispose of the same entailing decisions affecting certain claims etc., could be the ones who are within the ambit of this sub-section. Individuals such as liquidators, receivers or commissioners would fall within this category. However, since no such role or responsibility is conferred upon the ResolutionProfessional, he cannot be stated to fall within this ambit.
To recall, the Jharkhand High Court, on the contrary, had held that because the appointment of the Resolution Professional is made during the resolution process before the Adjudicating Authority and with its approval, he will be a public servant under Section 2(c)(v) of the PC Act.
Further, the Delhi High Court while interpreting Sections 2(c)(viii) held that Insolvency Professional is only a “facilitator” and has different roles to play at different stages of CIRP. The Court found it hard to conclude that the role of an individual as RP is in the nature of ‘public character’. It placed reliance on the view taken by the Hon’ble Supreme Court in Swiss Ribbons and Arcelor Mittal and held that it would be prudent not to characterise the duties, even if assumed to be ‘public’, as being in the nature of ‘public character’.
The Jharkhand High Court, on the other hand, had held that the Resolution Professional has a key role to play in the insolvency resolution process and in protecting the assets of the corporate debtors, who in turn, may have invested the funds deposited by the general public. It concluded that from the RP’s nature of assignment and duty to be performed, his office entailed the performance of functions which had 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.
Reconciling the Conflict
The judgement passed by the High Court of Jharkhand was assailed by the Petitioner therein through a Special Leave Petition to the Supreme Court. The after-notice hearing for admission of the same is scheduled in April and the likelihood of the same getting admitted is high, considering the differing opinion of the Delhi High Court. This is an important question of law which necessitates a comprehensive evaluation and interpretation of the legislative intent as well as the conscious omission of Resolution Professionals from the definition of ‘public servant’ in the PC Act. Even though a conclusive and exhaustive list of designations falling within the ambit of the definition of ‘public servant’ under the Prevention of Corruption Act cannot be laid down by the Supreme Court, the decision on the issue at hand shall settle the position of law and provide clarity on the application of anticorruption laws to the Insolvency Resolution Professionals in India.
Raunaq is a final-year student at the Faculty of Law, University of Delhi. He has a predominant interest in white-collar crimes and anti-corruption investigations.
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