India: Information Utilities- A New Saviour For Creditors

Last Updated: 17 October 2017
Article by Malavika Menon

The Insolvency and Bankruptcy Code, 2016 (the "Code") was passed by the Parliament on May 5, 2016 and received the assent of the President of India on May 28, 2016. The Code superseded the earlier statutes on insolvency, bankruptcy and revival viz., The Provincial Insolvency Act, 1920 and The Presidency Towns Insolvency Act, 1909 which both dealt with the insolvency of individuals and The Sick Industrial Companies (Special Provisions) Act, 1985 dealing with detection of sick industrial companies and the remedial measures to be taken in respect thereto. However, the procedures prescribed under the aforementioned statutes proved to be lengthy and cumbersome, thus defeating the very objective of bankruptcy or revival. This deficient insolvency regime did nothing to bolster the confidence of creditors, many of whom were already saddled with defaulting debtors.

It was evident that substantial statutory amendments were the need of the hour to aid creditors in the speedy recovery of their dues and to attract investment from various corners of the world to boost economic growth. The long overdue revamp of insolvency laws finally saw the light of day in 2016 with the coming into force of the Code. The Code offered time bound resolution of insolvency proceedings as well as offered an opportunity to unsecured creditors to initiate such proceedings. In one of the most significant additions, the Code has formally introduced the concept of Information Utilities. The term "Information Utility" has been defined under Section 3(21) of the Code as under:

"Information Utility" means a person who is registered with the Board as an information utility under Section 210".

In essence, an Information Utility is an entity storing detailed credit information about debtors. This article seeks to highlight the functions to be performed by the Information Utilities and the role to be assumed by them in insolvency proceedings.

At this juncture, it would be pertinent to highlight the inherent differences between an Information Utility (as envisaged under the Code) and the central registry constituted under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI").


The Central Registry of Securitization Asset Reconstruction and Security Interest of India ("CERSAI") was constituted with the primary intention of preventing mortgage frauds wherein multiple mortgages would be created in favour of multiple lenders over the same property by use of fraudulent title deeds. Initially, only the details of mortgage by deposit of title deeds i.e., equitable mortgages were required to be filed with CERSAI. However, pursuant to an amendment to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Central Registry) Rules, 2011 ("SARFAESI Rules"), now particulars of creation, modification or satisfaction of security interest by any type of mortgage, hypothecation of plant and machinery, stocks, debt, receivables, intangible assets, knowhow, patent, copyright, trade mark, licence and franchise also require registration with CERSAI.

Despite the above amendment, there are no provisions in SARFAESI or the SARFAESI Rules which necessitate the utilization of the information available with CERSAI. In stark contrast, the Code clearly stipulates that the records of an Information Utility may be accessed by the liquidator and interim insolvency professional in furtherance of their functions under the Code. There is a great degree of importance accorded to the information stored with an Information Utility under the Code, which is discussed below. Further, the scope of the Code is much wider than that of SARFEASI. The provisions of SARFAESI are applicable only to banks and certain financial information whereas an action under the Code may be initiated by any creditor which includes within its scope any person to whom a debt is owed. The provisions relating to Information Utilities as enumerated under the Code are briefly discussed below.

The Code stipulates that the services rendered by an Information Utility shall be considered as "core services" if the same entail inter alia acceptance of financial information, authentication of the information received and provision of access to the information available with it. The term "financial information" has been defined under Section 3 (13) of the Code inter alia as information of a person relating to its debts, liabilities, defaults committed and balance sheets and cash flow statements.

One will find references to "financial creditors" and "operational creditors" throughout the Code. A financial creditor is one to whom a financial debt (i.e. money borrowed, bonds, debentures etc.) is owed and an operational creditor is one to whom an operational debt (i.e. claim in respect of provision of goods and services) is owed.

On the other hand, the same is not mandatory for operational creditors.


Whilst initiating the corporate insolvency resolution process, the records of default available with an Information Utility may be submitted by the financial creditor along with the application for the same. The submission of such records is a prerequisite to initiating the process of fast track corporate insolvency resolution process.

The benefit of submitting information to the Information Utility is further highlighted in the fact that failure on the part of a financial creditor to submit information to the Information Utility regarding a claim made to the liquidator, would deprive the financial creditor of the advantage offered to it viz., non-submission of documents supporting the claim, thus requiring the financial creditor to follow the procedure to be adhered to by an operational creditor.

This is definitive in establishing the position accorded to Information Utilities in due recognition of the crucial role to be assumed by such organizations in insolvency proceedings.


The Report of the Working Group on Information Utilities, Ministry of Corporate Affairs ("Report") throws light on one of the significant reasons for establishing Information Utilities. Establishment of indebtedness is the crux of any proceeding for recovery. Ascertaining the same would be time consuming and would potentially delay the procedure for assessing the viability of the debtor. Having a system in place where the information of each and every debtor is stored, along with the history of defaults committed thereto, would greatly aid and reduce the already overburdened judiciary in taking swift action and providing relief to creditors

It is not mandatory to submit details of defaults committed by the debtors to CIBIL, however in the event such details are communicated, the only consequence of the same is a drop in the credit score of such individual/entity.

Another point highlighted in the Report is that since the information to be filed with the Information Utility is required to be authenticated by all the parties to that transaction, the parties would be stopped from denying the same at a later stage. This theory finds place in the Code wherein it is stipulated that where an application filed by a creditor for a debt has been registered with an Information Utility, the same cannot be denied by the debtor at a later stage.

The manner of registration of an Information Utility, submission of information and access to the same are more particularly detailed in the Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017 ("Regulations").

The Regulations lay down the criteria to be met with by an entity seeking registration as an information utility under the Code. One of the most pertinent requirements is that only a public company (meeting the conditions laid down under Rule 3 of the Regulations) may be registered as an Information Utility. The first step is to be obtain the in-principle approval of the Insolvency and Bankruptcy Board of India (the "Board"), which may be granted up to a maximum period of 1 (One) year. During the validity of the in-principle approval, the entity may make an application for the certificate of registration, which may be granted subject to compliance with the Regulations. The maximum period for which the registration is valid is 5 (Five) years.


The Regulations also prescribe certain minimum standards to be met with and procedures to be adhered to by Information Utilities relating to the manner in which information is accepted, stored and accessed by registered users. The Regulations mandate that access to the records of an Information Utility are limited to inter alia(i) registered users who have been granted a unique identification number by the Information Utility who have submitted information, (ii) all parties to a particular debt transaction, (iii) the insolvency professional, (iv) the NCLT, and (v) the Board. Further, upon receipt of information of a default, the Information Utility is bound to authenticate the same and communicate such default to the creditors of the defaulting debtor and any other parties/sureties in respect of the debt.

This is important in ensuring that the information may not be misused or tampered with. Further, by placing an obligation on Information Utilities to communicate instances of default, the chances of swift action to be taken by a creditor have greatly increased.

The Regulations also lay various compliances to be observed by Information utilities including but not limited to submission of annual reports to the Board containing details of registered users, debts and defaults, among other details. Information Utilities are bound to have adequate risk management systems in place to ensure that none of the information stored with them is lost or damaged.


It is pertinent to note that in the proforma of the form (containing the details of financial/ operational debt) being Form C under the Schedule to the Regulations, under the section containing details of the security interest created, copies of the certificate of registration of charge (issued by the Registrar of Companies) and the proof of registration with CERSAI are also to be submitted.

This would be extremely useful whilst initiating recovery or insolvency proceedings enabling the adjudicating authority to simply rely on the information available with the Information Utility instead of spending time ascertaining whether the necessary registrations have been made under applicable law.

Sections 209 – 216 under Chapter V of Part IV of the Code deal with Information Utilities. Save and except Section 216 which allows for modification of the financial information submitted to an Information Utility in terms of Section 215, the remaining sections dealing with Information Utilities are in force.

We understand that NeSL is in the process of formally launching their operations shortly. We would recommend that pursuant to the same, all financial and operational creditors should comply with the filing obligations under the Code, in the manner as set out in detail in the Regulations.

In conclusion, one may state that the Code read with the Regulations contain comprehensive provisions on the functioning and obligations of Information Utilities.

The success of NeSL would be a strong indicator of the role such organizations would play in insolvency proceedings going forward.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions