Since 2010, the Global Law Experts annual awards have been celebrating excellence, innovation and performance across the legal communities from around the world.
posted 2 years ago
‘Information utilities’ (IU) established under the Insolvency and Bankruptcy Code provide authenticated information about debt and default, which an adjudicating authority can rely on as evidence of money owed by the company facing insolvency.
The intention is that the adjudicating authority should rely solely on the IU, and not the documents and records of the parties, in establishing facts like credit given and/or default. As per recent amendments to IBBI (Information Utilities) Regulations, 2017, creditors should submit the details of default to the adjudicating authority.
The Insolvency and Bankruptcy Board of India (IBBI) and the Ministry of Corporate Affairs have independently noted the delay in initiating the Corporate Insolvency Resolution Process (CIRP), leading to the erosion and devaluation of assets of the corporate debtor.
The IBBI felt that information of debt or default should be streamlined, the current process of authenticating information should be improved, the information asymmetry among creditors should be reduced, and the record of default should be submitted by both financial and operational creditors.
The ministry, in its May 2022 ‘Report of the Insolvency Law Committee’, recommended that financial creditors should be mandated to submit IU records with the CIRP application; the adjudicating authority should not ask for any other information to prove default.
The amendments to IU regulations in June 2022 mandate that, before filing a CIRP application, creditors should file information of default with the IU, which would process it to issue a record of default. The IU is required to provide information of default to the corporate debtor for authentication. If the corporate debtor does not confirm the default beyond three reminders (sent at three-day intervals), the information is deemed to be authenticated.
Next, the IU should record the authentication of information of default and pass it to the creditors. For financial creditors, the information can be recorded under two heads — authenticated or disputed. For other creditors, the information can be authenticated, disputed, or deemed to be authenticated.
The requirement to submit a record of default held by IU is surely a step in the right direction. It will ensure that applications to initiate CIRP are either admitted or rejected in a time-bound manner.
Creditors should take note of the changes before initiating CIRP. The aspect to be considered is that the debtors have the option to dispute the information and, given this, the adjudicating authority will have to rely on the documents and records available with the parties, leading to the authority adjudicating disputes over the default itself, which was never the intention.
This article was originally published in The Hindu Business Line on 25 September 2022 Co-written by: Veena Sivaramakrishnan, Partner; Sumant Prashant, Counsel.
Disclaimer
This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.
posted 8 hours ago
posted 16 hours ago
posted 16 hours ago
posted 20 hours ago
posted 2 days ago
posted 3 days ago
posted 3 days ago
posted 4 days ago
posted 4 days ago
posted 4 days ago
posted 5 days ago
No results available
ResetFind the right Legal Expert for your business
Sign up for the latest legal briefings and news within Global Law Experts’ community, as well as a whole host of features, editorial and conference updates direct to your email inbox.
Naturally you can unsubscribe at any time.
Global Law Experts is dedicated to providing exceptional legal services to clients around the world. With a vast network of highly skilled and experienced lawyers, we are committed to delivering innovative and tailored solutions to meet the diverse needs of our clients in various jurisdictions.