NeSL as an Information Utility (IU) maintains a central database of debt obligations and defaults across all entities in the country. IU also receives information about any application filed against a corporate entity under the Corporate Insolvency Resolution Process (CIRP) at any of the NCLTs and whether any public announcement has been made on the admission of CIRP. An occurrence of default, submission of CIRP application or public announcement of the CIRP has implications for any other creditor having receivables from the concerned corporate debtor. NeSL, under the provisions of the IBBI IU Regulations, notifies all the impacted creditors of any such event.
Various alerts sent currently by NeSL IU at different stages are:
- Default Alert: In case a default is reported by any creditor, IU notifies other creditors of a defaulting debtor, having either financial or operational debt exposure. This serves as an early warning system. The notification is sent after giving the requisite opportunity to the defaulting debtor to authenticate the default. In the Indian financial system, it is often not easy for any creditor to know if its debtor has defaulted elsewhere. Even a single instance of default with a creditor may lead to insolvency proceedings against the debtor, thereby impacting the recoverability of otherwise clean debt held by other creditors.
- CIRP Application Alert: When any creditor files a CIRP application in any of the National Company Law Tribunals (NCLT), other creditors’ exposure to such corporate debtor becomes vulnerable, with likely admission of the application in NCLT which results in a moratorium on the debtor under IBC. IU sends out alerts to all creditors, financial or operational, having exposure to the debtor, to help prepare for a likely insolvency proceeding.
- Public Announcement Alert: On admission of CIRP application in NCLT, the resolution professional makes a public announcement in the newspaper to notify all other creditors, asking them to come forward to stake claims within a specified time. IU sends out Public Announcement (PA) alerts to those creditors who have exposure to the defaulting debtor to ensure that even if the public announcement is missed out, such creditors do not miss out on staking their claims in time. Public announcement alerts are also sent for the initiation of the liquidation process, including voluntary liquidation and for the Pre-pack insolvency process as well.
Since a unique identifier mechanism is enforced across all creditors and debtors, IU is able to identify all creditors having exposure to the defaulting debtor and is able to send out targeted notifications only to the impacted creditors. The notification is sent both by email and through a dashboard alert on the IU portal. Any creditor can also download all alerts for any period.
The table below indicates the number of alerts sent by NeSL under various categories till 30th June 2023:
Such alerts from IU are seen to be particularly beneficial given that IU is uniquely positioned to hold information on both financial and operational debt obligations. It is a well-known fact that the majority of CIRP cases at NCLTs are initiated by operational creditors, i.e. suppliers of goods or services to the debtor, who fail to receive operational dues in time. Consequently, the financial creditors are also dragged into insolvency proceedings even if no default is recorded against such financial debts.
-by Debasis Pal
Consultant – Head Business Solutions Group
