On August 13, 2024, the Insolvency and Bankruptcy Board of India (IBBI), in exercise of the powers conferred by section 196, 213, 214, 215 read with section 240 of the Insolvency and Bankruptcy Code, 2016 (IBC), amended the Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017 (IU Regulations). Pertinently, the said Regulations were initially established to ensure that accurate and reliable information regarding defaults, debts, and insolvency proceedings is available to all stakeholders, thereby facilitating smoother and more transparent insolvency processes.
The recent amendments, inter alia, include fixing of the time for information utilities (IUs) to deliver the information of default to the debtor seeking confirmation of the same, within a period of seven (7) days, against ‘the time specified in the Technical Standards’ as stated earlier. Moreover, the amendment also extends the time for allowing the debtor to respond to the three (3) reminders issued by IUs regarding confirmation of information of default from a period of three (3) days each time provided earlier to seven (7) days. This change aims to provide more flexibility and time for stakeholders to comply with regulatory requirements.
An important aspect of the amendment involves insertion of a new Regulation 21A which mandates IUs to verify the key details of the debtor, such as the e-mail address of the debtor, document showing proof of debt, latest acknowledgment of debt by the debtor and proof of default, before issuing a record of default. This step is crucial in ensuring that the information recorded is accurate and reliable.
By way of the amendments, certain revisions were also made to the forms used for submitting information, ensuring they are more comprehensive and aligned with current requirements.
These amendments, which partially become effective from October 1, 2024, and on December 1, 2024, aim to improve the accuracy and reliability of information provided by IUs, thereby strengthening the insolvency resolution process in India.
These changes will also bring about substantial practical benefits. The emphasis on verifying debtor details and proof of debt before issuing a default record will ensure that the information is accurate and reliable, which is crucial for maintaining trust in the insolvency process. With the primary function of IUs being authentication and verification of financial information submitted by the creditors and providing access to information stored with it, it is important that IUs provides high-quality authenticated information about debts and defaults. This is possible only when IUs carry out due diligence in verifying the key financial information of the debtor before issuance of the record of default.
It is pertinent to mention that the amendments follow the IBBI’s recent discussion paper on “Strengthening the process of issuance of record of default by Information Utility”, released earlier in May 2024. The said discussion paper clearly highlights the issues that the IBBI proposes to address.
Overall, these amendments are a positive step towards enhancing the accuracy, efficiency, and transparency of the insolvency process. They will benefit both creditors and debtors alike by providing clearer and more reliable information, facilitating better decision-making, and ultimately contributing to a more effective insolvency framework in India.