Certain Key Details to be Verified before Record of Default is Issued

The amendments recently notified to the Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017, require the information utility to verify key details such as the e-mail address of the debtor, the document showing proof of debt, etc. before issuance of record of default.

The delay in the admission of applications for the initiation of the corporate insolvency resolution process has been attributed to the lack of availability of credible and reliable information about debt and default. Strengthening the process of issuance of record of default by the information utility is seen as a way to reduce the delays and fast-track the admission process. A discussion paper in this regard was released in May of this year.

It was considered prudent to provide adequate opportunity for the debtor to respond to the financial information submitted concerning them. It was also noted that debtors actually authenticated the information of default only in a limited number of cases; this was attributed to the strict timeline to respond to the delivery of information of default.

The amendments to Regulations 21(2)(a) and 21(2)(b) now grant debtors seven days to respond after delivery of information of default. The information utility will also continue to remind the debtor at least three times for confirmation of information of default. If the debtor does not respond, the debtor will be given seven days each time instead of three days to respond.

To ensure that the information utility provides high-quality authenticated information about debts and defaults, it was considered necessary for it to carry out due diligence verifying certain financial information. Regulation 21A(1) now requires the information utility to verify key details such as the e-mail address of the debtor, the document showing proof of debt, the latest acknowledgement of the debt by the debtor and proof of default before issuance of record of default. Regulation 21A(2) also requires debtors disputing the default amount to provide reasons and evidence for their dispute to reduce frivolous disputes.