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๐ˆ๐๐๐ˆ ๐ข๐ฌ๐ฌ๐ฎ๐ž๐ฌ ๐ƒ๐ข๐ฌ๐œ๐ฎ๐ฌ๐ฌ๐ข๐จ๐ง ๐ฉ๐š๐ฉ๐ž๐ซ ๐Ÿ๐จ๐ซ ๐’๐ญ๐ซ๐ž๐ง๐ ๐ญ๐ก๐ž๐ง๐ข๐ง๐  ๐ˆ๐ง๐Ÿ๐จ๐ซ๐ฆ๐š๐ญ๐ข๐จ๐ง ๐”๐ญ๐ข๐ฅ๐ข๐ญ๐ข๐ž๐ฌ

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๐–๐ก๐š๐ญ ๐ข๐ฌ ๐š๐ง ๐ˆ๐ง๐Ÿ๐จ๐ซ๐ฆ๐š๐ญ๐ข๐จ๐ง ๐”๐ญ๐ข๐ฅ๐ข๐ญ๐ฒ?

An Information Utility (IU), colloquially recognised as a key pillar of the insolvency and bankruptcy ecosystem of India is purposed with storing financial information about debtors in an electronic database to eliminate information asymmetry and cut down on delays and disputes in insolvency proceedings. An IU undertakes several functions including (a) to provide undisputed information for initiation of insolvency process; (b) to serve as a credit and contract Repository; (c) to accept financial information from financial or operational creditors or debtors to be authenticated and used as evidence in legal proceedings.

๐–๐ก๐จ ๐ข๐ฌ ๐š๐ง ๐ˆ๐ง๐Ÿ๐จ๐ซ๐ฆ๐š๐ญ๐ข๐จ๐ง ๐”๐ญ๐ข๐ฅ๐ข๐ญ๐ฒ?

National E-Governance Services Limited (NeSL) is the first and only IU registered with the Insolvency & Bankruptcy Board of India (IBBI) in 2017. In fact, Regstreet Law Advisors was one of the few firms who acted in the matter and was advising NeSL.

๐‘๐ž๐œ๐ž๐ง๐ญ ๐ˆ๐๐๐ˆ ๐ƒ๐ข๐ฌ๐œ๐ฎ๐ฌ๐ฌ๐ข๐จ๐ง ๐๐š๐ฉ๐ž๐ซ

The IBBI discussion paper proposes several reforms to strengthen the process of issuance of Record of Default (RoD) by the IU some of which are as under:

1. To avoid frivolous disputes by the debtors regarding information in IU, the paper proposes the following reforms:

a. In case of a dispute the debtor shall be mandated to upload proof of such dispute.

b. If the financial creditors are banks (under Schedule II of the RBI Act, 1934,) when debtor disputes the information but documents showing latest acknowledgment of debt by the debtor are available, then IU will record the status of authentication in authenticated category and issue the โ€˜record of defaultโ€™ under authenticated category.

c. If the debtor disputes a part of the default, then IU shall record the status for undisputed part of debt/default under authenticated category and issue the โ€˜record of defaultโ€™ for the undisputed amount under authenticated category.

2. It is imperative that IU exercises proper due diligence before issuance of RoD. Hence, it shall be a pre-requisite for an IU to verify key details such as proof of debt/security, latest acknowledgment of debt and proof of default before issuance of RoD etc.

3. It envisages that the creditors must mandatorily submit proof of debt, default and latest acknowledgement of debt to IU along with declaration establishing the authenticity of proofs.

A copy of the Discussion Paper is enclosed herewith.

Readers are welcome to send their views to Regstreet Law Advisors at info@regstreetlaw.com.

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