IBBI notifies new norms for handling insolvency cases

The Insolvency and Bankruptcy Board of India (IBBI) has notified new regulations for grievance handling under the Insolvency and Bankruptcy Code, which will be applicable to all stakeholders, including creditors, debtors, claimants and service providers

The new regulations, which also provide for refunded of filing fee to the stakeholder in case the complaint is found to be not "frivolous or malicious," comes at a time when lenders are making all efforts to beat the 13 December deadline for resolution of insolvency cases.

The regulations enable a stakeholder, including debtor, creditor, claimant, service provider, resolution applicant or any other person having an interest in an insolvency resolution, liquidation, voluntary liquidation or bankruptcy transaction under the Insolvency and Bankruptcy Code, 2016 (Code), to file a grievance or a complaint against a service provider, namely, insolvency professional agency, insolvency professional, insolvency professional entity or information utility.

The regulations provide for an objective and transparent procedure for disposal of grievances and complaints by the IBBI that does not spare a mischievous service provider, but does not harass an innocent service provider.

Depending on the complaint, the IBBI can order an investigation or issue a show cause notice to the entities concerned.

"The regulations provide for an objective and transparent procedure for disposal of grievances and complaints by the IBBI, that does not spare a mischievous service provider, but does not harass an innocent service provider," the corporate affairs ministry said in a release.

A large number of cases have been filed under the Code, which came into force last year, and there have been certain instances of alleged complaints against entities involved in the insolvency process.

Under the regulatory framework, a complaint can be filed against insolvency professional agency, insolvency professional, insolvency professional entity and information utility.

A stakeholder can file a complaint with 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 how the grievance may be redressed", the release said.

The complaint can be filed in the specified form along with a fee of Rs2,500. "If the complaint is not frivolous or malicious, the fee will be refunded," the release said.

In case the IBBI finds that there is a prima facie case of violation in the matter, then it may order an inspection or an investigation or issue a show-cause notice, as may be warranted and the matter shall be proceeded accordingly.

Meanwhile, bankers are working to speed up the restructuring process for 28 accounts that are part of the Reserve Bank of India's second list of defaulters, as the 13 December deadline for insolvency resolution looms, a report in The Economic Times said.

Accounts that are not restructured until 13 December will have to be referred to the National Company Law Tribunal (NCLT) and according to CNBC-TV18, a majority of the 28 cases may end up in the NCLT despite the bankers attempts to recast debt within the deadline.

Banks will then have to provide for losses of up to 50 per cent of the loan value, which will severely dent their earnings.

These 28 accounts including names like Jaiprakash Associates, Uttam Galva Steel, and Videocon, account for nearly Rs2,00,000 crore worth of loans.