National E-Governance Services Ltd. receives final nod from IBBI
The Insolvency and Bankruptcy Board of India (“IBBI”) has granted the final approval to National e-Governance Services Ltd. (NeSL), allowing it to become the first information utility (“IU”) under the Insolvency and Bankruptcy Code, 2016 (“the Code”). Earlier in June, 2017, IBBI had granted an in-principle approval to NeSL to establish the IU.
What is an Information Utility?
An information utility is an entity which is registered so under Section 210 of the Code, is authorized to carry on the business of IU and is governed and regulated by IBBI as per the provisions of IBBI subject to conditions specifically provided under the Code. A Certificate of Registration (“CoR”) is a prerequisite to establish an IU.
Regulation 3 of IBBI (Information Utility) Regulations, 2017 provide the following:
No person shall be eligible to be registered as an information utility unless it is a public company and –
(a) its sole object is to provide core services and other services under these Regulations, and discharge such functions as may be necessary for providing these services;
(b) its shareholding and governance is in accordance with Chapter III;
(c) its bye-laws are in accordance with Chapter IV;
(d) it has a minimum net worth of fifty crore rupees;
(e) it is not under the control of person(s) resident outside India;
(f) not more than 49% of its total voting power or its paid-up equity share capital is held, directly or indirectly, by persons resident outside India;
(g) the person itself, its promoters, its directors, its key managerial personnel, and persons holding more than 5%, directly or indirectly, of its paid-up equity share capital or its total voting power, are fit and proper persons:
Section 213 read with Regulation 3 of IBBI (Information Utility) Regulations, 2017 provides that an IU shall provide core services and other services as provided under the Regulations.
‘Core services’ means services rendered by an information utility for—
(a) accepting electronic submission of financial information in such form and manner as may be specified;
(b) safe and accurate recording of financial information;
(c) authenticating and verifying the financial information submitted by a person; and
(d) providing access to information stored with the information utility to persons as may be specified;
Submission of Financial Information
A Financial Creditor shall compulsorily submit the aforementioned information to NeSL. However, no specific timeline has been provided either in the Code or in the Regulations. Therefore, it will be preferable if the same is completed in a reasonable amount of time.
NeSL as an Information Utility
NeSL was incorporated on 24th June, 2016 as a Union Government Company with an authorized paid-up capital of Rs. 30 Crores with majority of its shareholding being with Banks and Public Sector Undertakings. The entity is promoted by large financial institutions such as, State Bank of India, Life Insurance Company, ICICI Bank and HDFC, Canara Bank, NABARD to name few.
NeSL, being the first and the only IU in the Country till date, is expected to fulfill the need for account aggregation by providing a reliable storage and source of information. Reportedly, the entity shall be fully operational by next year and hope to fill the information gap, making the process of resolution smoother and less time-consuming. Information of default, security interest, etc. shall be easy accessed from the entity. All the information shall be stored in a Central server located in India which shall be subject to Indian rules and regulations.
A simultaneous effective working of both the NeSL and the quasi-judiciary will consequently result in effective working mechanism, while the Code is still in its initial phase of implementation.
Other Relevant Provisions for IU
> The IU shall have a Governing Board consisting of majority of Independent Directors;
> The IU shall have a Compliance Officer, appointed by the Governing Board by means of a resolution passed;
> The IU shall have a Grievance Redressal Policy in place, providing for dealing with grievances received from users and other specified persons and formation of Grievance Redressal Committee;
> AN external auditor shall be appointed by the IU to audit its framework, interface and systems. However, no specific qualifications have been provided by the law;
> Registration obtained by the IU shall be surrendered or cancelled as per the provisions under Chapter VIII of the Regulations;
(Author is associated with Vinod Kothari & Company and can be contacted at: firstname.lastname@example.org)