New Guidelines for Information Utilities in Insolvency

January 30, 2025

The Insolvency and Bankruptcy Board of India (IBBI) has introduced new guidelines to enhance the functioning of Information Utilities (IUs) within the Insolvency and Bankruptcy Code (IBC). These changes aim to improve identity verification, streamline processes, and ensure data integrity in insolvency cases. The amendments respond to the need for a more structured and legally robust system for managing financial defaults.

Role of Information Utilities

Information Utilities are entities that maintain financial information records crucial for insolvency proceedings.
They record details such as debts, liabilities, assets with security interests, and any defaults.
By providing a central repository of financial data, IUs facilitate transparency and efficiency in the insolvency process.

Key Amendments Introduced

The recent guidelines include changes to the technical standards governing IUs.
Identity verification now mandates the use of Permanent Account Number (PAN) cards or Aadhaar-based authentication.
This ensures that the identity of users is accurately verified against official records, thereby enhancing the integrity of the data.

Deemed Authentication of Defaults

A notable amendment is the introduction of ‘deemed authentication’ for defaults.
If a debtor fails to respond after three reminders, the default will be considered authenticated.
This change is designed to prevent unnecessary delays in insolvency proceedings and encourages prompt responses from debtors.

Streamlined Process for Submitting Defaults

Creditors must now submit default information to an IU before initiating insolvency proceedings. The guidelines clarify the steps for recording and verifying defaults. Additionally, supporting documents can be submitted at any time, with IUs providing digital stamps for security.

Enhanced Data Integrity Measures

The new guidelines implement a colour-coded system to track the status of debt authentication. This visual aid simplifies the monitoring process for creditors and debtors alike. Furthermore, demographic authentication is now required through the UIDAI database, ensuring that the details provided by users are accurate and verifiable.

Implications for Debtors

Debtors must be aware of the implications of the new guidelines, especially regarding deemed authentication. If they do not dispute defaults, they risk having these defaults accepted as grounds for adjudication by creditors in insolvency applications. Debtors are advised to contest any defaults they do not recognise to protect their interests.

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