6172 Complaints Resolved out of 6231 Complaints against service providers under IBC

Stakeholders may lodge a complaint or grievance against service providers under the IBC thanks to the Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) Regulations, 2017. In a written response to a question in the Lok Sabha today, Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh made this claim.

The Minister added that in addition to this, the Prime Minister’s Office, the MCA, and other authorities also submit concerns and grievances to the Insolvency and Bankruptcy Board of India (IBBI, the Regulator). The IBBI has received 6,231 such complaints and grievances as of July 31st, 2022, of which 6,172 had been resolved after the examination.

The Minister stated that pursuant to the rules of the Insolvency and Bankruptcy Code, 2016, the Ministry of Corporate Affairs has no role in the corporate insolvency resolution process (CIRP) of a corporate debtor (CD) (the Code). A resolution plan developed by resolution applicants based on a market-driven mechanism resolves a CD that is undergoing CIRP.

The Minister added that the Adjudicating Authority approves the resolution plan filed by the prospective resolution applicant after the Committee of Creditors (CoC) has evaluated its feasibility and viability in accordance with its commercial acumen (AA). Furthermore, the Minister said, the realisation by creditors through CIRP under the Code is reliant on high-quality assets at the time of its settlement.

The Minister clarified that no such inquiry has been opened because related parties are included on the list of undesirable people listed in Section 29A of the Code, which makes them ineligible to submit a resolution plan during the CIRP. The Resolution Professional (RP) is required by Regulation 36A(8) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, to perform due diligence to ensure that the prospective resolution applicant is not ineligible under Section 29A of the Code. The resolution plan authorized by the CoC is subsequently accepted by AA in accordance with section 31 of the Code, preventing any unfavorable individuals under section 29A from taking control of the CD. The proviso to Section 35(1)(f) prohibits a liquidator from selling immovable or moveable property to anyone who is not qualified to be a resolution applicant during CD’s liquidation proceedings.

The Minister added that according to information currently available, the Directorate of Enforcement has received one complaint against an RP of one CIRP, and the complaint has resulted in the required legal action being taken. Additionally, the Regulator was notified by CBI of a complaint alleging abuse of the legal system in a CIRP case, but after an investigation, the Regulator discovered nothing that could be used as justification for enforcement.