The Insolvency and Bankruptcy Code, 2016 (the IBC) and the Insolvency and Bankruptcy Board of India (Grievances and Complaints under IBC Handling Procedure) Regulations, 2017 (hereon forward known as “the IBBI Grievance and Complaint Handling Procedure Regulations, 2017”) provides for grievance redressal and enforcement framework for the service providers. Having a robust grievance redressal system allows stakeholders to voice concerns about any irregularities or unfair practices.
Regulation 3 of the IBBI Grievance and Complaint Handling Procedure Regulations, 2017
Regulation 3 of the IBBI Grievance and Complaint Handling Procedure Regulations, 2017 establishes the procedure for filing Grievances and Complaints under IBC against service providers such as insolvency professionals, agencies, or entities registered under IBBI. Essentially it provides a mechanism for individuals to formally lodge complaints against service providers under the IBC ensuring transparency and accountability.
Objective:
The main objective of this Regulation is to promote stakeholder confidence in the insolvency ecosystem by addressing grievances in a structured manner. It allows the IBBI to investigate and take appropriate action if necessary.
Who Can File a Grievances and Complaints under IBCRegulation 3?
Regulation 3(1) states that a stakeholder who wishes to file a grievance files it with the IBBI. As per Regulation 2(1)(j) “stakeholder” includes a a debtor, a creditor, a claimant, a service provider, a resolution applicant, and any other person having an interest in the insolvency, liquidation, voluntary liquidation, or bankruptcy transaction under the IBC. Therefore, anyone with evidence of misconduct, malpractice, or non-compliance by registered entities or individuals under IBBI.
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Filing Process for Grievances and Complaints
Section 217 of the IBC read with the IBBI Grievance and Complaint Handling Procedure Regulations, 2017 provides for the procedure for and manner of filing and disposal of Grievances and Complaints under IBC against the service providers, which includes insolvency professionals, Insolvency Professional Agencies, and Information utilities with the IBBI.
Eligibility Criteria:
As per Regulation 2(1)(g), a complainant is a stakeholder who has filed a complaint or a complaint-cum-grievance with the IBBI.
Submission Process:
A stakeholder shall file the complaint or the Grievances and Complaints under IBC with the Insolvency and Bankruptcy Board of India (IBBI) in Form A with a demand for Rs. 2,500 drawn in favour of the IBBI payable at New Delhi or an online acknowledgment of Rs. 2,500 to the credit of the IBBI towards the fee. It should be filed with the IBBI on its dedicated portal www.ibbi.gov.in.
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Required Documents:
In regulation 3(2) the stakeholder should include the following documents:
- details of the identity of the aggrieved;
- (details of the identity of the service provider;
- details of the conduct of the service provider that has caused suffering to the aggrieved;
- details of suffering, whether pecuniary or otherwise, the aggrieved has undergone;
- how the conduct of the service provider has caused the suffering of the aggrieved;
- details of his efforts to get the grievance redressed from the service provider and why the response, if any, of the service provider is not satisfactory; and
- how the grievance may be redressed.
Timeline for Complaint Resolution:
A grievance or complaint should be filed within 45 days of the occurrence of the cause of action for the grievance or complaint. The timeline may be extended for 30 days if there are sufficient reasons justifying the delay as per Regulation 3(4). The IBBI assigns a unique registration number to every grievance or complaint and communicates this number to the aggrieved or complainant within a week of its receipt. The aggrieved or service provider shall submit the information and records within 7 days to the IBBI. The IBBI shall close the grievance or complaint within 30 days of its receipt if it does not require any redress. The IBBI shall direct the service provider to redress the grievance or complaint within 30 days of its receipt if it requires any redress. The IBBI will also periodically disclose summary statistics about the receipt and disposal of Grievances and Complaints under IBC on its website.
Handling of Grievances and Complaints by IBBI
The process by which the IBBI receives, investigates, and resolves Grievances and Complaints under IBC raised by shareholders regarding the conduct of insolvency professionals, insolvency professional agencies, or information utilities involved in insolvency proceedings under the IBC is handled by:
Verification and Processing:
According to the powers and functions of the IBBI under section 196 of the IBC and regulations under IBBI Grievance and Complaint Handling Procedure Regulations, 2017, the IBBI conducts a preliminary assessment of complaints to ensure authenticity and unsubstantiated grievances may be dismissed or sent for additional review.
Role of the Grievance Redressal Committee (GRC):
The GRC has an important role in reviewing and resolving complaints. It also helps to ensure accountability from insolvency professionals and facilitates the process that addresses grievances or complaints under the IBC, rules, and regulations.
Penalties and Actions:
As per the IBC and the IBBI (Grievance and Complaint Handling Procedure) Regulations, 2017, there are legal and financial consequences for entities found guilty of misconduct, such as fines, suspension, or deregistration.
Importance of Regulation 3 in Strengthening the Insolvency Ecosystem
Regulation 3 of the IBBI Grievance and Complaint Handling Procedure Regulations, 2017 is crucial in strengthening the insolvency ecosystem by providing a clear mechanism for stakeholders to file grievances or complaints:
Ensuring Transparency:
This regulation specifies the information that must be included in a complaint, such as the date, and the nature of the alleged misconduct, and ensures that the IBBI has enough details to assess the issue. Therefore, grievance mechanisms foster a culture of trust and accountability.
Enhancing Credibility of Insolvency Professionals:
Ensuring transparency and accountability through a grievance redressal mechanism, enhances the credibility of insolvency professionals.
Legal and Ethical Compliance:
Regulation 3 maintains the high ethical standards of insolvency professionals under insolvency laws. It therefore enforces adherence to the IBC framework and related laws.
Challenges in Implementing Grievance Handling Procedures
Implementing effective grievance handling procedures within an insolvency process presents several challenges, such as:
Lack of Awareness Among Stakeholders:
Stakeholders are unaware of the grievance filing process and their rights. For instance, employees might not be aware of the grievance process, how to file a complaint, or who to contact, leading to underutilization of the system.
Delays in Complaint Resolution:
The filing process has numerous steps and different levels of review. The time-sensitive nature of insolvency proceedings, numerous documents, and information that need to be submitted, with the limited resources for insolvency professionals and Adjudicating Authorities, may delay the process.
Inadequate Documentation by Complainants:
Filing grievances or complaints requires several documents to be submitted within specified timeframes. If these documents are not submitted within time or incomplete, the grievance or complaint may be dismissed or delayed.
Complexity of Cross-Border Insolvency Cases:
The obstacle that arises when dealing with cross-border matters is determining which country’s laws and courts have jurisdiction over the proceedings.
Recommendations for Strengthening the Grievance Handling Process
Increasing Awareness Programs:
It is primarily suggested that the IBBI conduct workshops and online campaigns to educate stakeholders about their rights on
Streamlining Online Complaint Platforms:
it is crucial to establish a centralised platform for user-friendly online systems to ensure ease of access for complainants.
Leveraging Technology:
It is recommended to use artificial intelligence and data analytics to expedite grievance verification and resolution.
Introducing Periodic Audits:
As per section 196(1)(r) of the IBC, the IBBI has the function to conduct periodic studies, research and audit the functioning and performance of to the insolvency professional agencies, insolvency professionals and information utilities at such intervals as may be specified by the IBBI. Such periodic audits can prevent the misconduct of the registered professionals.
Conclusion
It provides a mechanism for stakeholders to raise concerns about potential misconduct or non-compliance by insolvency professionals, ensuring accountability, protecting the interests of creditors, and maintaining the integrity of the insolvency process. Regulation 3 plays a crucial role in maintaining the integrity of India’s insolvency ecosystem. By providing a platform for stakeholders to file complaints against insolvency professionals or other service providers, the IBC can investigate and take appropriate action against those who violate the regulations or act improperly.