The four pillars envisaged under the Insolvency and Bankruptcy Code, 2016, are now in place:
- A regulator, the Insolvency and Bankruptcy Board of India (IBBI);
- Adjudicating authorities (AA), the National Company Law Tribunal (NCLT) and debt recovery tribunals (DRTs);
- Information utilities (IUs); and
- Insolvency professionals (IPs).
These four pillars are required for the resolution and insolvency process under the code.
In order to create the information infrastructure needed to effectively pursue the essence of the code, the NCLT granted registration to National e-Governance Services Limited (NeSL) under section 210 of the code, to render services as an IU, including core services as defined under section 3(9) of the code. NeSL is a step towards providing authentic information to the parties concerned and the AA to ensure sound and time-bound completion of the insolvency and bankruptcy process.
As per section 3 of the code, core services means the services rendered by an IU for: (a) accepting electronic submission of financial information in a specified form and manner; (b) safe and accurate recording of financial information; (c) authenticating and verifying the financial information submitted by a person; and (d) providing access to information stored with the IU to persons as may be specified.
In order to provide early and effective resolution under the code, the AA will require authentic information having evidentiary value in the eyes of law. It is intended under the code that any information provided by an IU will be admitted by the AA as conclusive evidence.
It is important to understand who can submit information to an IU and how the information is authenticated to achieve admissibility as evidence.
The code has established a multi-layered mechanism to achieve this objective including the following:
- The IU will accept financial information electronically in the specified manner only;
- A person will need to register with the IU for submitting and updating information with the IU; and
- Before storing any information in its database the IU will get it authenticated by all concerned parties.
Further, under regulation 13 of the IBBI (Information Utilities) Regulations, 2017, in order to ensure the evidentiary value of the information stored with an IU, the IBBI may lay down technical standards to be complied with by the IU, in relation to submission of information, identification and verification of persons, authentication of information, verification of information, data integrity, etc.
It is pertinent to note from the report of the working group on IUs that before any information is stored with an IU, the evidentiary value of such information should not be diluted. Also, from a joint reading of section 3(9)(c) and section 214(e) of the code it can be observed that all the information stored by the IU will have to be authenticated and verified by all the concerned parties before it is stored in the IU’s database.
The regulations also enable the IU to import information from such registries as may be notified by the IBBI from time to time. The information so imported must be in compliance with the requirements set out in section 3 of the code. The IBBI has not yet notified any such registries or laid down any technical standards.
In order to provide effective and efficient information infrastructure, it can be expected that the IBBI will notify registries for importing information as well as issue technical standards to strengthen the ability of IUs to provide a robust information infrastructure for a time-bound resolution and insolvency process.
As insolvency law is evolving in India, the information infrastructure is also in a transition period and evolving, and its operational procedures are taking shape rapidly. Recently the IBBI has eased the norms for the shareholding and voting structure for the establishment of IUs under the code.
Keeping in mind the size of stressed banking assets in India, and with the significant increase in the number of cases under the code in the recent times, it is expected that more IUs will emerge to provide a competitive and robust information infrastructure for the resolution and insolvency process in India.
SNG & Partners has offices in Delhi, Mumbai, Singapore and Doha. Rahul Sud is an of counsel. Satish Anand Sharma is a senior associate and a qualified insolvency professional.