IBBI streamlines rules on information utilities to expedite bankruptcy resolution

The bankruptcy regulator on Wednesday amended technical standards guidelines for key services extended by information utilities (IUs), which typically store financial information about stressed firms in electronic databases, to streamline their operations and help speed up insolvency resolution.

As per the latest Insolvency and Bankruptcy Board of India (IBBI) rules, an IU will use demographic authentication from the Unique Identification Authority of India (UIDAI) database to establish the identity of users, including creditors, during their registration with the utility.

For this purpose, the IU will have to obtain the so-called "sub-authentication user agency license" from the UIDAI.


Earlier, there was no requirement of demographic authentication, said Daizy Chawla, managing partner at S&A Law Offices.

Similarly, to verify the identity of users during their registrations, an IU will use the Permanent Account Number (PAN) card or any other officially valid documents for which the verification facility is allowed to it by the respective ID issuing authority.

As per the new guidelines, creditors must file the information of default with the IU before filing applications to initiate corporate insolvency resolution process under section 7 or 9 of the bankruptcy law, Chawla said.

The IU will then process the information to issue a record of default. However, uploading any document as proof of default, along with the information of default, isn’t made mandatory yet.

Further, the default amount submitted by the creditors will be deemed as authenticated if the debtor doesn’t respond even after three reminders.

These are among the set of changes that the regulator has made to eliminate information asymmetry and cut down on delays and disputes in insolvency proceedings, experts said.

The corporate insolvency resolution process is supposed to be completed within 180 days and a 90-day extension is granted, subject to the NCLT approval. But, typically, the process stretches on, thanks to litigation and delay in admission. Even a 330-day deadline, which includes time spent on legal proceedings, is hardly maintained.

About 68% of the cases where resolution is in progress, the 270-day time frame has been breached, as per the IBBI data.