IRP Is A Public Servant, Sanction Needed For Prosecution Under Prevention Of Corruption Act: Madras HC

IRP is a Public Servant, Sanction Needed for Prosecution Under Prevention of Corruption Act: Madras HC

The Madras High Court has held that an Insolvency Resolution Professional (IRP) is a public servant and that sanction is required to prosecute them under the Prevention of Corruption Act, 1988. The Court, in doing so, directed the Insolvency and Bankruptcy Board of India (IBBI) to consider granting sanction for prosecuting a Resolution Professional accused of mismanaging funds during the corporate insolvency resolution process.

Factual Background

The petitioner, Anil Kumar Ojha, former Managing Director of M/s. S.L.O Industries Limited, alleged that the Resolution Professional (RP) mismanaged the company’s funds during the resolution process. When the matter came before the NCLT, it was found that the accounts and stock position showed a serious depletion, and discrepancies amounting to over ₹625 crore were identified.

A complaint was filed, and while investigation was completed, the IBBI took the stand that it was awaiting the Supreme Court’s ruling on a related issue before deciding on sanction.

Procedural Background

Ojha approached the Madras High Court seeking a direction to the CBI (ACB) to investigate his complaint and file a chargesheet. The Court had to decide:

• Whether an IRP falls within the definition of “public servant” under the Prevention of Corruption Act?

• Whether sanction is mandatory to prosecute an IRP under the Act?

Contentions of the Parties

• Petitioner’s Contention: The petitioner argued that the RP was performing duties in connection with the administration of justice, was a person from whom reports were sought by the NCLT, and was thereby a public servant under Section 2(c)(v), 2(c)(vi), and 2(c)(viii) of the Prevention of Corruption Act.

• IRP’s Contention: The RP argued that the definition of “public servant” should not be expansively interpreted to include roles not explicitly mentioned in the statute. It was also argued that actions taken by RPs in good faith were protected under the IBC.

Court’s Reasoning and Analysis

Justice Bharatha Chakravarthy observed that an IRP indeed performs functions connected with the administration of justice, is answerable to the NCLT, and performs public duties. Therefore, an IRP squarely falls within the definition of a “public servant” under Section 2(c)(v), 2(c)(vi), and 2(c)(viii) of the Prevention of Corruption Act.

The Court further noted that merely awaiting the Supreme Court’s decision without granting sanction would lead to loss of “golden time” for investigation and prosecution.

Implications

This ruling has significant implications for insolvency proceedings, as it reinforces that Resolution Professionals are accountable as public servants and cannot escape scrutiny under corruption laws. It also ensures greater transparency and responsibility in handling corporate debt resolution.

Outcome

The Court directed the IBBI to consider the file and grant sanction under the Prevention of Corruption Act. It clarified that the pendency of an appeal before the Supreme Court was no ground to indefinitely delay prosecution.

Representation

In this case the petitioner was represented by Mr. S. Veeraraghavan, Advocate. Meanwhile the respondent was represented by Mr. K. Srinivasan, Special Public Prosecutor for CBI Cases, Mr. S. Sathiyanarayanan and Mr. S. M. Vivekanandh, Advocates.

Case Title: Anil Kumar Ojha v. The State and Others

Citation: 2025 LiveLaw (Mad) 278

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