Insolvency Professionals as Public Servants: Resolving the Judicial Dilemma

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IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: Insolvency Professionals are often regarded as the backbone of India’s Insolvency regime with wide-ranging powers in running the company, identifying avoidance transactions, monitoring the resolution plan process etc. The Insolvency and Bankruptcy Code provides comprehensive legal and regulatory guidance on the functioning of IPs in the insolvency ecosystem. This study delves into a contentious, yet fundamental legal issue relating to their mandate in India. That is, should IPs be classified as public servants under the purview of the Prevention of Corruption Act? This question, which has sparked judicial debate currently awaits adjudication by the Supreme Court, in light of two conflicting High Court judgments of the Jharkhand and Delhi High Court. The significance of this research stems from the substantial public and economic interests entangled in insolvency proceedings, which are now regarded as proceedings in rem open to the public IPs, as key figures in resolving high-profile corporate insolvencies, wield influence that extends beyond creditor claims, impacting public confidence, market integrity, and economic stability. This paper explores both sides of the debate around including IPs as public servants, evaluating the stakes associated with both positions from a policy perspective.

Date: 2025-05-20
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