Role of Information Utility and NeSL in safeguarding Insolvency Process

Status as on- 21/12/2019

The National E-Governance Services Limited (NeSL) was the first Information Utility service registered under the BBI (Information Utilities) Regulations, 2017 it is one of the three pillars of the Insolvency and Bankruptcy system the other two being the Adjudicating Authority and the insolvency professional.

WHAT IS THE PURPOSE?

The NeSL is a legal evidence repository for information regarding all financial contracts; the landings and borrowings of financial institutions. It stores financial information from which defaults can be easily established, verified and expeditiously processed under the insolvency mechanism. It authenticates the following information for the Adjudicating Authority;

Balance sheet and cash flow statement
Assets over which security is created

Liabilities of a solvent corporation/person

Instances of default on debt
Debts

NeSL is owned and promoted by leading public institutions like State Bank of India, Life Insurance Corporation, Canara Bank, Bank of Baroda, ICICI Bank, CDSL, HDFC, Axis Bank, Union Bank of India and NABARD among others.

REGISTRATION OF INFORMATION UTILITY

An entity which intends to carry the sole business of Information Utility needs to obtain a certificate from the IBBI. It is only for the public companies with a minimum net worth of INR 50 Crore. Further, conditions for eligibility include that the Information Utility should not be under the control of a person outside India and not more that 49% of its total voting power or its paid-up equity share capital is to be held, directly or indirectly, by person who is residing outside India. The certificate of registration issued to an Information Utility is of 05 years. Further, the Information Utility is required to pay a fee of INR 50 Lakhs every year after the grant of registration.

WHAT SERVICES ARE PROVIDED BY THE NeSL/ INFORMATION UTILITY?

The core service of the Information Utility like the NeSL are;

Create and store financial information;
Accept electronic submission of financial information from various entities ;
Meet minimum service quality standards i.e. to authenticate information received by various parties like Banks, Financial/Operation Creditors, Corporate Debtors, Corporate persons before storing them in a universally accessible form;
To facilitate inter-operability with other Information Utilities’
Publish statistical information and so forth

BENEFITS TO STAKEHOLDERS; FINANCIAL CREDITORS, DEBTORS, INVESTORS

Any person may submit financial information or access financial information stored with an Information Utility like the NeSL after the submission of a fee. After the verification of identity and deposit of fee by a person registered once with an Information Utility shall not register itself with any information utility again. However, registered persons can access financial information stored in any other Information Utility with whom they might not have registered.

Information Utility like the NeSL provide a single view access to citizens to various assets like Financial (bank deposits, insurance policies, etc); Real (Vehicles, Property) of entities with which they may engage in any business transaction, investment purpose etc.

As of September 2019, Information Utility has been allowed access to the data of MCA-21 database and CERSAI portals of Debtors to speed up the process of debtor default authentication. Such Deemed Authentication shall provide a smooth passage for admission of cases in the NCLT within the prescribed time period of 14 days.

Information Utility/NeSL serve as a power full tool to give teeth to the insolvency proceedings against borrowers as it provides a full audit trail of financial information of various commercial entities which shall enable individual and small stakeholders to make informed decisions in a secure financial environment. Information Utility provide an authentic source of evidence under various sections of the IBC which ensure an expedient insolvency process.

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