Information Utility under IBC

The Insolvency and Bankruptcy Code, 2016 (IBC) was enacted to provide a consolidated and time-bound framework for insolvency resolution and liquidation in India. Before its enactment, there were multiple overlapping laws, which led to delays, inconsistent outcomes, and uncertainty in the credit system. 

A key challenge in insolvency resolution has always been the availability of reliable and complete financial information. Without such data, it becomes difficult to verify debts, identify claimants, and decide on revival or liquidation of the debtor.

To address this problem, the Code introduced the concept of Information Utilities (IUs). These are specialised institutions that collect, collate, authenticate, and disseminate financial information related to debtors. They provide a centralised database of verified information, thereby ensuring transparency, reducing disputes, and facilitating swift decision-making in insolvency proceedings.

Insolvency and Liquidation – A Background

Before understanding the role of information utilities, it is important to appreciate the concepts of insolvency and liquidation:

• Insolvency refers to the inability of a debtor to repay its debts. The insolvency resolution process allows lenders, government authorities, and investors to work together to revive the debtor through a resolution plan. If successful, the debtor may continue business operations.
• Liquidation is the process of winding up when revival is not possible. Assets are distributed among creditors, and the company ceases to exist.

The Code provides mechanisms for both revival and winding up, but the success of either depends heavily on the availability of accurate financial information. This is where information utilities play a vital role.

Definition of Information Utility

Section 3(21) of the IBC defines an information utility as a person registered with the Board as an information utility under Section 210. In simple terms, it is a professional organisation that maintains a reliable and centralised repository of financial information related to debtors.

While insolvency professionals handle the resolution proceedings, information utilities ensure that all stakeholders have access to verified data. This reduces the scope for disputes and improves the speed of decision-making.

Functions of an Information Utility

The primary role of an information utility is to collect, collate, authenticate, and disseminate financial information. This includes:

• Records of debts and liabilities of a solvent entity.
• Evidence of defaults committed by the debtor.
• Information about assets pledged as security.
• Balance sheet and cash flow data.

Such information is stored electronically in a standardised and universally accessible format. Authentication by all concerned parties ensures accuracy and reduces disputes during insolvency resolution.

Legal Framework Governing Information Utilities

The functioning of IUs is governed by:

1. The Insolvency and Bankruptcy Code, 2016 (particularly Sections 3(21), 210, 214, 215).
2. IBBI (Information Utilities) Regulations, 2017, framed by the Insolvency and Bankruptcy Board of India, which are amended from time to time.

The IBBI is the regulatory body that registers and supervises information utilities, monitors compliance, and ensures accountability.

Obligations of Information Utilities (Section 214)

Under Section 214 of the Code, every registered information utility is required to:

• Create and store financial information in a universally accessible format to ensure consistency.
• Accept electronic submissions of financial information from financial creditors who are obliged under Section 215.
• Allow voluntary submissions of information from other parties in the prescribed form.
• Meet minimum service quality standards as specified by regulations.
• Authenticate information received from various persons with all concerned parties before storing.
• Provide access to financial information to anyone who intends to use it, as per regulations.
• Publish statistical information related to debts and defaults, if required.
• Ensure interoperability with other information utilities for seamless exchange of data.

These obligations highlight that an IU is not just a storage entity but an active participant in ensuring that financial information is accurate, accessible, and reliable.

Who Can Submit Information?

Section 215(2) of the Code makes it mandatory for financial creditors (such as banks and financial institutions) to submit financial information and details of security interests created.

Section 215(3) allows operational creditors (suppliers of goods or services) to submit financial information.

Additionally, insolvency professionals can also submit relevant data relating to insolvency, liquidation, or bankruptcy proceedings under Regulation 38(1) of the IBBI (Information Utilities) Regulations, 2017.

This ensures that information flows into the system from multiple stakeholders, making the database comprehensive.

Procedure for Submission of Information

The process of submitting information to an IU is prescribed under the IBBI (Information Utilities) Regulations, 2017:

1. Information is submitted in Form C electronically.
2. On receiving the data, the IU forwards it to the counter-party for authentication.
3. Each piece of information is assigned a unique identifier by the IU.
4. The user is notified about the requirement to authenticate or dispute the information within a fixed time.
5. Authentication requires a digital signature or Aadhaar-based e-sign for verification.
6. Once authenticated, the information is stored securely and becomes accessible to authorised users.

This process ensures that only verified and authenticated information enters the system.

Categories of Information Maintained

Information utilities maintain various categories of data, including:

• Records of liabilities of solvent entities.
• Evidence of default by debtors.
• Details of assets pledged under secured contracts.
• Balance sheet and cash flow information.

The data is stored in a standardised and universally acceptable format. This ensures uniformity, making it easier for creditors, professionals, and adjudicating authorities to use it.

Adjudicatory Authorities and Use of IU Data

During insolvency proceedings, adjudicatory authorities rely heavily on the information stored in IUs.

• For corporate insolvency and liquidation, the National Company Law Tribunal (NCLT) is the adjudicating authority. Appeals lie with the NCLAT and thereafter with the Supreme Court.
• For individuals and partnerships, the Debt Recovery Tribunal (DRT) acts as the adjudicatory authority. Appeals lie with the DRAT and further with the Supreme Court.

Since IU data is authenticated, it serves as conclusive evidence of default, reducing litigation and speeding up the process.

National e-Governance Services Limited (NeSL)

The National e-Governance Services Limited (NeSL) is the first and, till date, the only registered information utility in India. It is a Union Government company with authorised paid-up capital of ₹30 crore, owned by leading public financial institutions.

NeSL provides a digital platform for submission, authentication, and storage of financial information. By centralising this data, NeSL strengthens the infrastructure for insolvency resolution in India.

Importance of Information Utilities

The introduction of information utilities has significantly strengthened the insolvency framework. Their importance lies in:

• Transparency – A central database eliminates disputes about debts and defaults.
• Efficiency – Swift access to authenticated information saves time during resolution.
• Certainty – Creditors can rely on IU data as verified evidence in proceedings.
• Reduced litigation – Since data is authenticated by all parties, there is less room for prolonged disputes.
• Investor confidence – A transparent and efficient insolvency system improves the overall business environment.

Challenges Faced by Information Utilities

Despite their significance, IUs face certain challenges:

• Reluctance in submission of data – Some creditors and debtors may resist sharing information due to commercial concerns.
• Authentication delays – Timely authentication by all concerned parties can be difficult.
• Data security risks – Since data is stored digitally, there is always a risk of cyber threats, data theft, or piracy.
• Awareness issues – Many operational creditors, particularly small suppliers, are not fully aware of the role and benefits of IUs.

To address these issues, robust data protection systems, awareness programmes, and strict regulatory oversight are essential.

Conclusion

The creation of information utilities under the IBC represents a major reform in India’s insolvency framework. By providing a centralised, authenticated, and universally accessible repository of financial information, IUs enhance the transparency and efficiency of insolvency proceedings.

Institutions like NeSL have already demonstrated their utility by providing reliable information infrastructure. While challenges such as data security and reluctance to share information remain, the benefits of IUs far outweigh these concerns.