2020 (9) TMI 514 - HC - Insolvency and Bankruptcy

Initiation of disciplinary proceedings against Insolvency professional (IP) - Status of complaint made by the petitioner - Regulation 7(3) of the Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) Regulations, 2017 - HELD THAT - The complainant is being informed about the status of the complaint by way of a cryptic order like in the present case reproduced herein above. In my opinion, this is not in compliance with the Regulations. A reading of Regulation 7 of the Regulations clearly show that the complainant has to be informed as to whether the respondent no.1 has formed a prima facie opinion in favour of the complainant or against it. In case the opinion is against the complainant, the complainant has a right under the Sub- Regulation 5 of Regulation 7 to seek a review on the said decision. Merely informing the petitioner as has been done in the present case that appropriate action is being initiated in the matter, would not, therefore, satisfy the requirements of Regulation 7. The complainant was never informed whether respondent no.1 has formed an opinion in favour of the complainant or against him, on such complaint. As far as the present case is concerned, the respondent no.1 has already formed a prima facie opinion in favour of the complainant and further action thereon in terms of Regulation 7 (7) is under its consideration. The respondent no. 1is directed to expedite the decision under Regulation 7(7) of the Regulations and communicate such decision to the petitioner as well. List for hearing on the issue on 01st December, 2020.

Summary

Issues:
1. Petition for Writ of Mandamus for disciplinary proceedings initiation.
2. Lack of clarity in communication from respondent no.1.
3. Compliance with Regulation 7 of the Grievance and Complaint Handling Procedure Regulations.
4. Right of complainant to participate in proceedings.

Analysis:
1. The petitioners sought a Writ of Mandamus for disciplinary proceedings initiation against respondent no.2. They were aggrieved by a communication from respondent no.1 dated 13.08.2020, lacking clarity on the action taken. The petitioners argued that the respondent no.1 did not indicate if a prima facie case was established against respondent no.2, as required by Regulation 7(3) of the Grievance and Complaint Handling Procedure Regulations.

2. Respondent no.1, in a short affidavit, claimed to have found a prima facie case against respondent no.2. However, the court noted that the communication provided to the complainant did not comply with the Regulations, as it did not specify the formation of a prima facie opinion in favor of or against the complainant. The court emphasized the importance of informing the complainant about the status of their complaint as per Regulation 7.

3. The court highlighted Regulation 7's provisions, emphasizing that the complainant must be informed of the formation of a prima facie opinion by respondent no.1. Merely stating that appropriate action is being initiated without specifying the opinion formed does not meet the regulatory requirements. The court directed respondent no.1 to expedite the decision under Regulation 7(7) and communicate it to the petitioner promptly.

4. Another issue raised was the complainant's right to participate in the proceedings initiated by respondent no.1 based on the complaint. The court scheduled a hearing on this issue for December 1, 2020. Both parties were directed to submit brief synopses of their arguments, along with supporting Regulations and judgments, within specified timelines for further consideration.