In a recent judgment passed in Steel Konnect (India) Private Limited versus M/s Hero Fincorp Limited, the NCLAT has clarified and reiterated its stand that a ‘financial creditor’ is not obligated to enclose ‘record of default with the information utility’ in terms of Form – 1, read with Rule 4 of the Adjudicating Authority Rules and sub-section (3) of Section 7 of the ‘I & B Code’. Taking note of one of its decisions in Neelkanth Township and Construction Pvt. Limited. Vs. Urban Infrastructure Trustees Limited, wherein the Appellate Tribunal held that although the Board is free to prescribe additional records in support of default of debt, i.e. records of default with the information utility or such other record or evidence of default in addition to the records as mentioned in Part V of Form-I, however, filing of such additional records by a ‘financial creditor’ cannot be made mandatory. With a pre-emptive clarification to avoid any confusion that may arise in future, the Appellate Tribunal limited the scope and power of the Board to frame any such regulations thereby making the filing of such additional documents mandatory. The Appellate Tribunal quoted the position laid down in Neelkanth Township, (Supra) as follows:
the ‘Regulations framed by the Board’ being subject to the provisions of I & B Code’ and rules framed by the Central Government under Section 239, ‘Part V of Form – 1’ of Adjudicating Authority Rules, 2016 framed by Central Government relating to ‘documents’, ‘record’ and ‘evidence of default’, will override the regulations, if framed by the Board and if inconsistent with the Rule.
However, the possibility of heavy reliance by ‘financial creditors’ on such ‘Information Utilities’ in near future cannot be ruled out, given the Government’s thrust towards a ‘Digital India’ and an aim to strengthen the Banks and FIs, all of which, in my opinion, is likely to carve the way for a working web of such organizations providing easy access to financial information for Government and ‘FIs’, as also obligated under Section 214 (a) of the IB Code. It would then be interesting to observe the tilt in the jurisprudence once this wondrous piece of legislation/Code brews over the years.