The Madras High Court held that an advocate who acted professionally as per the instruction of the Committee of Creditors (COC) to file an application for the removal of the Resolution Professional (RP) under Section 27 of the IBC, 2016, could not be held liable for defamation.
Factual matrix:
The criminal original petitions have been filed to quash the proceedings wherein cognizance for defamation under Sections 500, 192 r/w 34 of IPC has been taken. The respondent was appointed as the Resolution Professional (RP) for the debtor company which is going through Insolvency under the Insolvency and Bankruptcy Code, 2016. Thereafter, the respondent was removed as an RP by a unanimous decision of the Committee of Creditors (COC), who have 87.42% of voting shares in the corporate debtor company. The petitioners, including 4 members of the COC and their legal representative, allegedly defamed the respondent and removed him from the position of an RP with mala fide intention to bring disrepute to him.
Submissions on behalf of the petitioner
The counsel on behalf of the petitioner submitted that the appointment and removal of Resolution Professional is provided under the Insolvency and Bankruptcy Code. An RP cannot act independently and he has to act upon the guidelines of COC and his actions are subject to the approval of COC. The COC unanimously resolved to remove the respondent and appointed another RP. The decision taken by the COC which comprises of 5 financial institutions and as such removal cannot be termed as defamatory.
He also submitted that the COC in the present case comprises of the financial creditors and they are exercising the statutory powers conferred under the provisions of Insolvency and Bankruptcy Code and therefore, the action taken under the IBC would not amount to any offence. Moreover, the COC had acted in the interest of the institutions, in which they represented and safeguard the public funds. Therefore, there is absolutely no iota of material to attract the offence under Section 500 of IPC.
The counsel for the petitioner-legal representative of the COC, further contended that the respondent-RP had published an invitation for expression of interest (EOI) for resolution plan of the CD company without getting approval from the COC member banks which is in violation of amended provision under Section 25(2)(h) of IBC. He also mentioned that the respondent did not ‘minutise’(minutes of the meetings) the serious key issues raised in the COC meeting by CBI, which is against the code of conduct under regulations 7(2)(g) of IBC. It was also highlighted that several unwanted e-mails were sent by the respondent-RP to top executives of the COC member banks containing baseless, misleading allegations in a threatening manner. In fact during the enquiry, the respondent has sent e-mail to the petitioner threatening him that he will take action before the Bar Council of Tamil Nadu for making statement against him. He further submitted that the legal profession always enjoins immunity while arguing the case for his client in the open court which cannot be termed as defamation.
Submissions on behalf of the respondent
The counsel on behalf of the respondent submitted that the respondent, being a neutral Court officer, was entrusted with managing the company as a going concern and during the course of his work, he found that about Rs.320 crores worth of stocks of prawns were returned of as damaged stock and thrown in the sea. Therefore, he moved a resolution to conduct a domestic audit, which was objected by the COC.
It was also submitted that during the 4th COC meeting, the accused-petitioners abused the respondent (who was acting as the Chairman of the meeting) and created ruckus that resulted in media persons waiting outside the conference room becoming inquisitive. Thereafter, the first accused directed COC to file petition before the NCLT, Chennai for removal of the respondent by making defamatory, and false and baseless allegations as against the respondent which could potentially impact the professional reputation and credibility of the respondent among the fraternity.
He further submitted that the second accused-legal representative of the COC started abusing the respondent and made serious unfounded baseless allegations during the first hearing. The counsel submitted that the actions of the petitioner would, therefore, attract the offence under Section 499 of IPC and as such the learned Magistrate rightly taken cognizance for the offence under Section 499 of IPC as against the accused persons.
Observations of the Court
The Court held that the COC had acted within the bounds of their statutory powers conferred under Section 27 of the IBC, 2016 to replace the respondent from the position of the RP and therefore, their decision regarding the same would not attract the offence under Section 499 of the IPC.
The Court then delved into a detailed discussion on the immunity available to the legal professionals, especially during court proceedings. The Court reproduced the extract relied upon by the petitioner from the case of Ayeasha Bi Vs.Peerkhan Sahib,
“....where the accused was charged with defamation because his vakil put a defamatory question to the complainant and the vakil gave evidence that he did so on the instruction of his client, the accused, the instructions of the accused to his vakil were inadmissible under Section 126, Evidence Act and the accused was not guilty of defamation committed as it were by proxy through the mouth of his vakil.
(...) no one could ever be prosecuted for defamation in regard to any instructions which he might have given to his lawyer, because it is the lawyer's business to decide whether he could properly act upon the instructions, and whatever responsibility might ensue from acting upon those instructions would be his and no one else's, is opposed to the entire trend of decisions defining the scope and extent of the privilege conferred upon the lawyer and secondly, it will make a lawyer's position in India hopelessly impossible if he were to be held vicariously responsible for all the instructions given by his client and in fact it would be a case not of the lawyer representing his client but of a lawyer doubling or substituting for his client-accused.”
The Court also referred to several other domestic and English Common Law cases to deliberate upon the reasons behind granting and extent of the ‘absolute privilege’ of the judges, advocates, attorneys, witnesses etc. with regard to words spoken or written during legal proceedings. For the same, the court reproduced the relevant excerpts from the following cases:
Arun Thakur Vs. State of Chhattisgarh and others
“...the immunity of the advocate should be sufficiently large to enable him to perform his duty fearlessly than that some relatively few cases of abuse should be made the subject of a just civil liability. If abuse occurs, as sometimes from inexperience and sometimes from less excusable causes is bound to happen, the remedy lies, I think, not in an alteration of the law relating to the privilege but in fostering high standards of practice, in the censure of the public and in the continuous vigilance of the Courts themselves.”
K. Daniel v. T. Hymavathy Amma
“...the statements made by Judges, Juries, counsel, parties and witnesses in the course of judicial proceedings are not actionable in civil law for defamation as the occasion is absolutely privileged.
(...) The reasons for granting absolute privilege to the statements made in the course of judicial proceedings are laid down in paragraph 11 of the judgment which are as follows:-
They must be able to act uninfluenced by any such fear. Freedom of speech on such occasions has to be totally safeguarded. Hence it is necessary to protect the maker of statements on such occasions. Basis of privilege is not absence of malice or the truth of statement or the intention of the maker but public policy.”
Chunni Lal v. Narsingh Das
The Allahabad High Court has held that defamatory words used in connection with the judicial proceedings are not actionable on the ground of absolute privilege and as such the suit for damages for defamation instituted by the plaintiff was dismissed.
Pradip Kumar Mitra v. Lipi Basu and others
“...the privilege extended to the Judges, Juries, counsel, parties and witnesses are based on the principle of public policy.”
Bennett Coleman & Co. Ltd. and others v. K. Sarat Chandra and others
“Absolute privilege- a statement is said to have absolute privilege when no action lies whether against Judges, Counsel, Jury, Witnesses or Parties, for words spoken in the ordinary course of any proceedings before any Court or Tribunal recognized by law. It is manifest that the administration of justice would be paralyzed if those who were engaged in it were liable to actions of libel or slander upon the imputation that they had acted maliciously and not bona fide. The privilege extends not only to words spoken but also to documents properly used and regularly prepared for in the proceedings.”
P.C. Gupta v. The State
“...doctrine of absolute privilege should not be applied to a criminal proceeding where the party prosecuted should be required to bring his case within exception 9 to Section 499 of the Indian Penal Code.”
Given the same, the Court propounded that an advocate who acted professionally as per the instruction of his or her client cannot be made criminally liable for offence of defamation under Section 500 unless contrary is alleged and established.
The Court also observed that the allegations made in the application filed on behalf of the members of COC filed by the second respondent-legal representative of the COC are not defamatory in nature. In fact, on the application the respondent was removed and the same was also challenged upto National Company Appellate Tribunal, Delhi and confirmed.
In view of the discussion, the Court held that the impugned complaint is a clear abuse of process of court and as such it cannot be sustained as against the petitioners and therefore, the Court quashed the entire proceedings concerning the charges of defamation against the petitioners.
Case Name: M.L.Ganesh v CA V.Venkata Siva Kumar
Dated: 30.09.2020
Coram: Justice G.K. Ilanthiraiyan
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