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INSOLVENCY AND BANKRUPTCY NEWS

Committee. The technical standards ensure reliability, paper based and reliability was questionable, requiring extensive
condentiality, and security of nancial information to be stored by enquiry by the Adjudicating Authority (AA), thus leading to delays
the IUs. Based on the recommendations of the Technical in initiation of the insolvency process. If, on the other hand, the
Committee, the IBBI laid down technical standards on December record of the liability and the instance of default is readily
13, 2017. These standards relate to terms of service; registration accessible from an IU then the time taken for admission can be
of users; unique identier for each record and each user; reduced.
submission of information; identication and verication of
persons; authentication of information; verication of Enhancing effectiveness of IU
information; data integrity; consent framework for providing
access to information to third parties; security of the system; nd 3
security of information; risk management framework; The Standing Committee on Finance in its 32 Report noted that
one of the main reasons for delay in the insolvency resolution
preservation of information; and purging of information.
process is delay in admission of applications by the AA. The delay
in admission of application causes asset erosion. Asset erosion can
The RBI amended the Credit Information Companies Regulations,
2006 on August 11, 2017 to include the IU and a Resolution lower the perceived value of the business, as it lowers the book
value of the assets associated with the company which is
Professional appointed under IBC, as a “specied user” (earlier
limited to banks and nancial institutions) and allowed them access detrimental to the interests of the stakeholders. It also impacts the
investors’ interest thereby increasing the possibility of pushing a
to the databases of existing CICs. Regulation 26 of the IU
Regulations, enables the IU to import information from such viable entity into liquidation. As per IBC, the admission process
should ordinarily be completed within fourteen days from the date
registries as may be notied by IBBI. It is expected that the
business models and cost structures of IU and CICs permit of ling application. However, there are large delays in admission
of applications While there are several factors leading to such
seamless and cost-efcient ow of information between the two,
so that a debt-default may be determined clearly and delays such as litigations by the creditors on account of existence
of disputes, technical faults in the applications, jurisdictions of AA
expeditiously in insolvency matters. The Code emphasises the
need for readily available, reliable information in the hands of the or lack of adequate capacity at AA, an avoidable factor is the
information a symmetry in the entire process which can be
creditor and debtor. Section 215 of the Code requires nancial
creditors to submit nancial information to IUs. It also mandates mitigated by enhancing the effectiveness of IU.
that the information submitted is co-veried with all the
concerned parties. As on March 31, 2022, 692 nancial creditors To address the issue of delays in admission of insolvency petitions,
the IBBI solicited views of stakeholders on suggestions to enhance
and 779 operational creditors have submitted information for
around 95 lakh debtors with NeSL. 1.42 crore loan records have effectiveness of IU, through discussion paper released on April 8,
2022. The paper proposes to streamline the format of information
been on-boarded so far and defaults in around 3 lakh loans have
been authenticated by the debtors. of debt/default, record of default and to facilitate submission of
additional information by creditors with the IBBI at the time of
Time is of essence in the insolvency resolution process and delays ling the insolvency application. The proposals are expected to
in establishing the existence of debt and default amount needs to reduce the information asymmetry for creditors at the ling stage
be reduced. In order to trigger a case of insolvency against an thereby helping to speed up admission and also aid in swifter
entity, the creditor has to prove that (a) the debtor has a liability to verication of claims by the insolvency professional. The existing
the creditor and (b) its failure to meet such liability. The Code framework along with the proposed changes will further enable
states that creditors have to submit such information alongwith seamless information exchange between stakeholders and
modernise IU operations and functioning. This would create an
the application for initiation of insolvency resolution. Without this
evidence, the adjudicator will refuse to register the insolvency information-rich environment that will signicantly reduce
practical frictions that has, and would otherwise, bedevil the
case, or defer the matter until the same can be proved.
Traditionally, the process of establishing debt and default was resolution of insolvency and bankruptcy in India.
(Ravi Mital)

1
https://ibbi.gov.in/BLRCReportVol1_04112015.pdf
2
https://www.ibbi.gov.in/wg-04report.pdf - Working Group on Information Utilities
3
https://www.ibbi.gov.in/uploads/resources/fc8fd95f0816acc5b6ab9e64c0a892ac.pdf

3