The Statutory Conflict: Literal vs. Purposive Interpretation of Public Servant Status
The constitutional and statutory environment governing corporate insolvency in India currently faces a fundamental friction regarding the legal status of insolvency professionals. This friction centers on whether individuals who are essentially private practitioners such as chartered accountants and advocates can be categorized as public servants under the Prevention of Corruption Act, 1988 (PCA).
The resolution of this question determines whether these professionals are subject to criminal investigation by the Central Bureau of Investigation (CBI) and whether a prior prosecution sanction is mandatory under Section 19 of the PCA. The conflict persists because the Insolvency and Bankruptcy Code, 2016 (IBC), is a self-contained code that provides specific indemnity under Section 233 but remains silent on the classification of insolvency professionals as public servants in Section 232.
The literalist perspective, championed by the Delhi High Court in Dr. Arun Mohan v. Central Bureau of Investigation (2022), asserts that the legislature made a conscious choice to exclude insolvency professionals from the status of public servants. The court applied the principle of casus omissus, arguing that since Section 232 explicitly names the Chairperson and members of the Insolvency and Bankruptcy Board of India (IBBI) as public servants but omits insolvency professionals, the court cannot supply this gap.
This view posits that the IBC intended to protect the commercial decision-making of resolution professionals from the chilling effect of criminal oversight. Furthermore, the court distinguished between “public duty” and “public character,” suggesting that while an insolvency professional performs a duty with public implications, they do not possess the “public character” inherent in state officials.
Conversely, a functional and purposive interpretation has gained significant ground in the High Courts of Jharkhand and Madras. In Sanjay Kumar Agarwal v. Union of India (2025), the Jharkhand High Court ruled that a resolution professional is a public servant because the nature of the duty performed is of public importance. The court noted that these professionals handle bank loans and assets involving public savings, thereby fulfilling a public function.
The Madras High Court, in the August 2025 ruling of Anil Kumar Ojha v. The State, 2025:MHC:1858 reinforced this by holding that insolvency professionals fall under Section 2(c)(v), (vi), and (viii) of the PCA. The court reasoned that because the professional is authorized by the National Company Law Tribunal (NCLT), a court of justice to perform duties in connection with the administration of justice and submit reports for judicial determination, they satisfy the broad statutory criteria for being a public servant .
Functional Analysis Under the Prevention of Corruption Act, 1988
A detailed examination of Section 2(c) of the PCA reveals the breadth of the “public servant” definition, which the 2018 amendment further expanded. Section 2(c)(v) specifically includes any person authorized by a court of justice to perform any duty in connection with the administration of justice, including liquidators and receivers.
The Madras High Court observed that while the term “resolution professional” was not explicitly used in the PCA, the roles they perform during the resolution and liquidation stages are functionally identical to those of a liquidator. The court argued that the phrase “administration of justice” must be given a broad meaning to encompass the statutory duties that aid the NCLT’s final adjudication.
Furthermore, Section 2(c)(viii) serves as a catch-all provision for any person holding an office by virtue of which they are required to perform a “public duty,” defined as a duty in which the state or the community has an interest. In the Anil Kumar Ojha case, the liquidator discovered massive inventory discrepancies totaling approximately 625.25 crore rupees, highlighting the immense public and financial stakes involved in these proceedings.
The court held that managing such significant discrepancies and protecting the interests of public sector banks constitutes a public duty. This functionalist approach shifts the focus from the identity of the employer to the nature of the statutory power exercised, ensuring that the integrity of the resolution process is protected by anti-corruption laws.
The Facilitative Role vs. Adjudicatory Power: Judicial Clarifications
The Supreme Court’s 2024 ruling in Dilip B. Jiwrajka v. Union of India, 2023 INSC 1018 provided a granular analysis of the insolvency professional’s role, particularly in the context of personal guarantors. The Court clarified that the professional acts as a “facilitator” and does not possess adjudicatory powers. The Court emphasized that under Part III of the IBC, the professional is tasked with gathering information, requesting proof of debt repayment, and submitting reports to the Adjudicating Authority. While this “facilitator” characterization was used by the Delhi High Court to argue against public servant status, the Madras and Jharkhand High Courts have used the same characterization to support the opposite conclusion.
The argument for inclusion suggests that even a facilitative role is a statutory mandate that forms the foundation of the NCLT’s judicial orders. Because the Adjudicating Authority relies on the accuracy and honesty of the professional’s report to pass orders affecting property rights and public debt, the professional is effectively an officer of the court. This connection to the judicial delivery system is the primary benchmark for categorizing them as public servants under the PCA. This debate now awaits a final determination by the Supreme Court, which has clubbed the conflicting appeals from the Delhi and Jharkhand High Courts.
Regulatory Overhaul 2025-2026: Numerical Caps and Oversight Shifts
The regulatory environment in late 2025 and early 2026 has transitioned toward a model of heightened fiduciary accountability. The IBBI (Insolvency Professionals) (Second Amendment) Regulations, 2025, which came into force on November 20, 2025, introduced Regulation 7B to address the concentration of assignments . This regulation imposes an absolute numerical cap, limiting an individual insolvency professional to a maximum of ten concurrent assignments. Within this overall limit, no more than three assignments can involve admitted claims exceeding 1,000 crore rupees each. This amendment is a direct response to concerns that overburdened professionals were unable to maintain the necessary quality and integrity of resolution processes.
Crucially, the 2025 amendments also shifted the power to grant certain approvals from the IBBI to the Adjudicating Authority. By transferring this locus of sanction to the jurisdictional Bench of the NCLT, the regulator has signaled a move toward judicial rather than purely executive oversight of professional conduct. For the period of January to June 2026, the Second Guidelines 2025 for recommending professionals for panels have introduced even stricter filters. To be included in a panel, a professional must have no pending disciplinary proceedings, no criminal convictions in the preceding three years, and must hold a valid Authorization for Assignment (AFA) throughout the panel’s duration.
Integration with Criminal Law and the IBC Amendment Bill 2025
The professional’s role has become increasingly intertwined with the broader criminal law framework, as evidenced by recent IBBI circulars. On November 4, 2025, the IBBI issued a circular regarding cases where assets of a corporate debtor are attached by the Enforcement Directorate under the Prevention of Money Laundering Act, 2002 (PMLA). The circular advises professionals to file for restitution of these assets before Special Courts and mandates a standard undertaking. Furthermore, the professional must submit quarterly status reports to the court regarding the usage and monetization of these restituted assets. This requirement reinforces the status of the insolvency professional as an officer whose duties are deeply embedded in the administration of justice.
Looking ahead to the 2026 budget session, the proposed Insolvency and Bankruptcy Code (Amendment) Bill, 2025, seeks to introduce the single biggest overhaul of the framework since 2016. Key proposed changes include a mandatory 14-day timeline for the NCLT to admit or reject insolvency applications once default is proven, aimed at reducing discretionary delays. The Bill also proposes a new “Creditor-Initiated Insolvency Resolution Process” (CIIRP), which allows for an out-of-court initiation framework for specified financial creditors. These structural shifts, alongside the codification of the “Clean Slate” principle, will further elevate the fiduciary duties of insolvency professionals, making the debate over their public accountability even more critical to the stability of the Indian economy.
Conclusion: The Emergence of a Unified Fiduciary Standard
The evolution of the insolvency professional’s role from a private facilitator to a public fiduciary reflects a maturing legal system that prioritizes transparency over professional immunity. While the Delhi High Court’s strict literal interpretation aimed to protect professionals from vexatious litigation, the growing judicial consensus in Madras and Jharkhand, supported by the Supreme Court’s analysis in Dilip B. Jiwrajka, points toward the necessity of public servant status.
The imposition of numerical caps under Regulation 7B and the transfer of approval powers to the NCLT in 2025 are pragmatic steps that institutionalize this accountability. As the Supreme Court prepares to deliver its final verdict, the insolvency profession stands on the brink of a new era where the private practice of resolution is fully harmonized with the public mission of preserving India’s financial integrity.
The regulatory framework under the Indian Insolvency Liquidation Regulations, 2026 also shapes the statutory duties and accountability standards relevant to assessing the public servant status of insolvency professionals.