India is today one of the fastest growing among the large economies in the world. As on date, the prospects of growth in many parts of the world look bleak, however, the view about the Indian economy largely remains optimistic. This is because the growth in the Indian economy is being driven by the digital infrastructure which has been created over the last few years. The corner stone of this digital infrastructure is of course Aadhaar and the so called “JAM” or “Jan Dhan- Aadhaar-Mobile” trinity. In 2014-15, it was the vision of Hon’ble PM, Shri Narendra Modi ji to have a bank account for every Indian. The campaign to open accounts under “Jan Dhan” was spearheaded by the public sector banks and within a short span of time, more than 500 Mio Jan Dhan accounts were opened. This was made possible because Aadhaar facilitated digital identification of a customer. UPI is another integral part of our digital infrastructure, and this has enabled us to surpass China in the number of digital transactions. UPI is now global; one can now pay in Indian currency even outside India. UPI would not have been possible without a bank account. UPI and the subsequent tax reforms have ensured formalisation of the economy and increased availability of credit, especially to the SME sector. There are other examples where our country’s digital infrastructure has stood us in good stead. The credit for the successful response to the COVID-19 pandemic was as much due to our scientists as to our software professionals who rolled out the COWIN app to monitor and track the progress of vaccination.
The Information Utility (IU), a fully electronic repository can make a difference to outcomes under the Insolvency and Bankruptcy Code (IBC, 2016 or Code). The Insolvency of an airline company made headlines a couple of days back, however even as the application for initiation of Corporate Insolvency Resolution Process (CIRP) was filed with the Adjudicating Authority (NCLT), the information about the same flowed seamlessly from IBBI through an API to NeSL and subsequently, all the bankers of the corporate debtor (CD) received an email in their inbox advising them of the same. This was even before the application was admitted for initiation of insolvency proceedings.
This case made headlines as public interest was involved, but in most cases, creditors may not even come to know when an application for initiation of CIRP is filed by some other creditor. However, if a creditor is registered on the IU, it will get a notification from the IU regarding the same. Such advance intimation would help a creditor take steps to protect its own interests and that of the debtor, as it’s generally accepted that economic and financial stress, if managed at the early stages, has an improved possibility of resolution.
National E-Governance Services Limited (NeSL), is registered with The Insolvency and Bankruptcy Board of India (IBBI) as an IU. While many parts of the Code have their inspiration from insolvency legislation in advanced jurisdiction, the IU as an institution has no parallel anywhere in the world. The user of the services of an IU, which could be an operational or financial creditor, can register to access the information in the IU, but the IU makes it simpler. It gives the user push notification by email on occurrence of some events.
When an information of default is reported to an IU, the IU gets it authenticated by the debtor in the manner provided in the Regulations notified by IBBI. On completion of authentication, the IU makes a default broadcast by email to all the creditors of the debtor. They can then take measures to protect their interests. Initiation of CIRP under the IBC is one option, but not the only one. It is quite likely that, on receipt of notification from the IU and/or on the default broadcast by the IU to all the creditors, the debtor may come to the negotiation table with its creditors. It could request to restructure its debts or bring in additional capital or collateral to give comfort to its creditors. If all efforts fail, if the entity is a corporate entity, the Record of Default (ROD) of the IU would facilitate initiation of CIRP against the CD.
The second type of broadcast is the one I referred to earlier in paragraph 2 about the case of an airline company, on filing of application for initiation of CIRP by any creditor.
There is a third type of broadcast when the CIRP is initiated, and the Insolvency professional (IP) makes public announcement inviting submission of claims. Such a public announcement is made in a newspaper and there is possibility that a creditor may miss out on such an announcement and is not able to submit his claim. There is enough jurisprudence in the master that after approval of resolutions plans such claims cannot be accepted. A creditor who is registered on the IU platform gets an email from the IU stating that public announcement has been made and, as a creditor one can submit one’s claim to the IP within the time provided in the public announcement.
The IU has a lot to offer for IPs in a CIRP or liquidation process. The Code makes it mandatory for a financial creditor to submit information to the IU. The IBBI Regulations provide that a creditor shall update the information as on the last day within the first week of the following month. Information of default has to be updated within 7 days of occurrence of the same of the same. RBI has issued advisories to its regulated entities like banks/NBFCs to submit information to the IU. Debenture trustees also submit information to the IU, and the IU also facilitates submission of dues related to operational credit. The Code gives the authority to the IP to access the access the electronic records of CD from IU. The IBBI Regulations provide that existence of debt due to Financial Creditors, operational Creditors and others may be proved on the basis of records available with IU. This information available in the IU, can be used for verification of claims received, consequent to the public announcement. Moreover, an IP can reach out to any creditor if it has submitted information to the IU but has not submitted his claims to the IP. This will ensure against unnecessary litigation later from creditors who have not submitted their claims. He can also substantiate the claims based on records with the IU, any substantial variance could be subjected to usual due diligence.
The IP’s role is quite challenging, the timelines under the Code do not provide for weekend or holidays. During the recent pandemic, many IPs could not access their offices when lock down was imposed by the government. NeSL provides an end-to-end CIRP case management system where every activity of CIRP can be carried out in a web-based portal. It ensures that the IP can step out and access the records from anywhere in a secure manner. He can also authorise or delegate authority and at the same time be in overall control. It facilitates time bound resolution and compliance with the provisions of the Code. Finally, it also enables storage “on the go”. The IP does not have to worry about data getting corrupted and lost, or unauthorised access to data. Data, which is confidential in nature like valuation reports, resolution plans can be uploaded directly in the platform, without the need of any email service provider with its attendant risks.
NeSL also provides a facility of Digital Document Execution or DDE. The IU Regulations provide for submission of data and documents. When NeSL started operations, it was realised that, while financial information can flow seamlessly to the IU through SFTP mode, there was a challenge in submission of documents. This was because the documents were voluminous, and the authenticity of scanned documents could not be established. NeSL therefore provided a facility of execution of documents on its platform. The documents would be authenticated by all parties thereby complying with the provisions of the Code and then stored in the IU in a secure manner. When insolvency proceedings commence against the CD, the documents evidencing debt, duly authenticated by all parties, and the Record of Default could flow seamlessly from the IU to the AA. This would provide all the documents to the Adjudicating Authority (AA) needs to decide on the application for initiation of CIRP.
The e-BG or electronic bank guarantee has been launched by NeSL in association with the Indian Banks’ Association. E-BG addresses all the challenges in the existing physical process of BGs, it provides for a quick turnaround in all BG processes like issuance, cancellation, invocation etc and easy validation. As on date, 12 banks are already using this platform to issue e-BGs and more than 600 e-BGs have been issued. As this becomes popular, the IP can ascertain the e-BGs issued in favor or on behalf of the CD and validate claims related to the contingent liabilities of the CD. Even otherwise, there has been a need among stakeholders for a central repository of BGs and NeSL as an entity which is regulated by the IBBI could perform this function.
