New guidelines enhance identity verification, introduce ‘deemed authentication’ for defaults, and improve data integrity in insolvency cases
The Insolvency and Bankruptcy Board of India (IBBI) has issued new guidelines to amend the technical standards for Information Utilities (IUs), aiming to make the system more structured and legally robust.
The changes seek to eliminate gaps, enhance data integrity, and ensure that the IU database is legally tenable before adjudicating authorities.
IUs are a key component of the Insolvency and Bankruptcy Code (IBC).They provide financial information records that help with insolvency proceedings.
IUs provide records of a person’s debt; records of a person’s liabilities when they are solvent ; records of a person’s assets that have security interest and records of any defaults.
The latest changes to be enforced through guidelines are aimed at improve transparency and efficiency in handling financial defaults.
It has now mandated Identity verification using PAN cards or Aadhaar-based authentication.
Jyoti Prakash Gadia, Managing Director at Resurgent India said that the original guidelines issued few years back were quite elaborate by way of a 45 page document. The amendments were, however, now necessary to streamline the process and to remove ambiguity.
“Since the entire sharing of information and verification and authentication thereof is stipulated to be done through electronic mode by various agencies like UIDAI and stakeholders involved, the IBBI circular has been issued to make the mechanism more systematic and well defined to remove any gaps for making the entire database legally tenable before the adjudicating authorities”, he said.
Now the PAN Card as a document has been included at par with other officially valid documents (OVD). This is in line with the relevance of PAN card in the context of the underlying importance it carries with all regulators and official agencies, he said.
New amendments
As per the new amendments, the steps involved in the information of default, record of default, and its verification and authentication by various sets of creditors/defaulters have been brought out with greater clarity at each point of status, Gadia added.
Before starting an insolvency case, creditors must first submit default information to an Information Utility (IU), which will officially record it.
If a debtor does not respond after three reminders, the debt will be considered “Deemed to be Authenticated.”
Gadia said that the provision for the clause of ‘deemed authentication’ after three reminders is a welcome amendment to facilitate any undue prolonging of the matter.
Also now Supporting documents can now be submitted anytime and Information Utility( IUs) will also digitally stamp them for added security. A new color-coded system to help track the status of debt authentication is also being introduced.
Daizy Chawla – Managing Partner – S&A Law Offices, said that there are many significant changes introduced by way of amendment in the Guidelines which includes that for verification of Identity of User, PAN/or any other identity document which can be verified by respective issuing ID Issuing authority.
“This will help in ensuring that correct details are being included as now the details can only be used if verification with issuing authority is successful. Earlier, there was no requirement of demographic authentication which now needs to be done through UIDAI database for which IU shall be required to obtain sub-authentication user agency license from UIDAI”, she said.
As per the amended guidelines before filing the application under Section 8, Section 9 or Section 10, the Submitter is now mandatorily required to file the information of default with IU as the language in the amendment is “shall” and the IU shall issue Record of Default under Regulation 21. Though w.r.t uploading any document as proof of default along with information of default is still discretionary and not mandatory, she added.
Deemed authentication
The other major amendment is on deemed authentication of default. Earlier where no response has been made by debtor w.r.t any debt despite giving required reminders, the status was changed to “deemed to be authenticated”. Now this has been removed. However, w.r.t debts which have been reported as defaulted if there is no response from debtor after giving three reminders in terms of Regulation 21 of the Information Utility Regulations it will be deemed to be authenticated.
“This specific insertion is important to be kept in mind by the debtors and to avoid any kind of deemed acceptance qua defaulted debt, it is advisable that they dispute the same as deemed authentication can very well be taken as ground during the adjudication of the applications before Ld. NCLT by Creditors and if disputed this can be taken as defence by Debtor especially in case of Operational Creditor Application”, Chawla added.
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