After Synergies Dooray case, complaints against insolvency pros will get a hearing soon

In the wake of the complaint against resolution professional Mamta Binani in the Synergies Dooray Automative insolvency case, Insolvency and Bankruptcy Board of India (IBBI) will come out with a resolution mechanism to handle complaints against all service providers including the insolvency professionals.

"Whatever deficiency that is noticed, will be addressed. The IBBI is coming out in the next 5 to 10 days with a resolution on how to handle complaints against IP, IPA (Insolvency Professionals Agency), IU (information utility)…all service providers," according to a senior official aware of the development.

"We will come out with a regulation which will give a form for filing complaints against the IRP or the service provider, look at how the Board will process and decide to find prima facie merit if it goes for an investigation. It is basically to bring in objectivity in handling complaints,” the official added.

At present, there is a provision under Section 217 that any person aggrieved by the functioning of an insolvency professional agency or insolvency resolution professional (IRP) or an information utility may file a complaint to the IBBI in such form, within such time and in such a manner as may be specified.

According to the official, this new mechanism will operationalise the provision and bring in a procedure to follow up with the complaints so that no one is harassed unnecessarily and no one can get away.

There are about three cases where the resolution outcomes by the IRPs were rejected and formal complaints have been made, said a senior lawyer.

Till date, over 250 cases have been settled under IBC by the Mumbai bench of the National Company Law Tribunal (NCLT) even before admission stage, according to Mukul Shrawat, judicial member, NCLT, Mumbai.

At a recent event, Sahoo said the framework is robust and he is happy with the progress given than more than 350 insolvency transactions are going on at the NCLTs in the country in an attempt to tackle over Rs 8.5 lakh crore worth of bad loans or the non-performing assets (NPAs).

This month, Edelweiss Asset Reconstruction had filed a complaint at the IBBI against resolution professional Mamta Binani in the case of Synergies Dooray Automotive, alleging she conducted herself in a partisan manner and acted without taking approval from the committee of creditors.

This is the first time a case had seen a resolution plan under the Insolvency and Bankruptcy Code (IBC) but has been termed fraudulent by Edelweiss.

According to reports, on November 24, 2016, just a week before the IBC became operational, Synergies Castings, sister concern of Synergies Dooray, assigned a major portion of its debt to third-party Millennium Finance. It sold Rs 750 crore debt to the finance company at a consideration of Rs 40 crore. Synergies Castings sold the debt to Millennium Finance since a related party cannot be a member of the committee of creditors, a team of lenders that decide the fate of the company. With this transaction, Millennium Finance had a voting right of 75 percent, while that of Edelweiss ARC was less than 10 percent. As per the rule if 75 percent of creditors agree to terms of debt recast within 270 days, the deal is approved by NCLT.

Edelweiss ARC has appealed that the assignment of the loan to Millennium Finance is void since this should be seen as a related party transaction.

According to other sources, when somebody gives a complaint, there has to be a due procedure. Hence there would be inspection and investigation, which would be done by the IBBI Chairman, the position held by MS Sahoo at present.

With the new resolution in about 10 days, it is likely that this case would be taken up and Edelweiss may be heard and investigated as per the resolution procedure.