by Adam Feibelman and Renuka Sane.
Under the new Insolvency and Bankruptcy Code, the Insolvency and Bankruptcy Board of India (IBBI) has a statutory responsibility to collect, maintain, and disseminate data about the new insolvency and bankruptcy system. The Board has taken a number of preliminary steps to perform this responsibility. It has developed a user-friendly web site where it posts regulatory materials, orders issued by tribunals and courts, and directories of insolvency professionals and insolvency professional agencies. It has also begun reporting various aggregate and case-level data about the system in its quarterly newsletter. These efforts are an important start and reflect that the Board values data, but they represent only a portion of the relevant and useful data that is, or might be, generated by the system and that could be made available to the public.
In a recent paper, A Maximalist Approach to Data from India's New Insolvency and Bankruptcy System we propose that the Board, along with the Tribunals, that are adjudicating authorities under the Code, take a maximalist approach to data about the new insolvency and bankruptcy system. Gathering and disseminating data about the system may seem like a regulatory function of secondary importance. Yet the availability of comprehensive, reliable, and standardised data about the new system is essential for many purposes and very useful for many others. As others have noted, implementation and reform of the insolvency and bankruptcy is very much a work in progress. Without useful data, regulators and public observers cannot reasonably assess how the system is performing or determine what effect it may be having on its stakeholders and on the broader society. Such data can also provide a uniquely illuminating window into the economy, highlighting economic, financial, and social trends and potential micro and macro vulnerabilities.
Our paper emphasises the institutional responsibility the Board and the Tribunals have to gather and disseminate data about India's new insolvency and bankruptcy system. It also underscores the great opportunity these institutions have to provide a model for transparency about the functioning of the Indian legal system and to gather extremely useful information about the financial vulnerabilities of citizens, households, retail and commercial lenders, and the broader economy.
The American experience
To help frame some of the issues that the IBBI and the Tribunals will face in crafting policies about data collection and dissemination, our paper summarises the evolution of approaches that policymakers in the United States have taken with regard to bankruptcy data and describes some of the research utilising this data.
For most of the history of bankruptcy law in the U.S., bankruptcy petitions and supporting documents have been public documents; as of 2001, those documents and case docket information have been available electronically over the internet for a fee, with limited exceptions for personal information. For many decades, the Administrative Office of the U.S. Courts was charged with reporting very basic aggregate data about bankruptcy cases. Debates over bankruptcy policy and major reforms in 1978 revealed, however, that available information about the system was insufficient to shed meaningful light on key questions of policy and practice.
Over the last two decades of the Twentieth Century, scholars and other commentators who were engaged in empirical study of the U.S. bankruptcy system began drawing attention to the need for more and better bankruptcy data and statistics. In 2005, as part of the Bankruptcy Abuse Prevention and Consumer Protection Act, a major reform to the personal bankruptcy laws, the U.S. Congress significantly augmented the responsibilities of the Administrative Office of the U.S. Courts for gathering and reporting data about bankruptcy cases as well as the data collection function of bankruptcy trustees. The aggregate statistics collected and reported by the Administrative Office of the U.S. Courts now provide an essential baseline set of information about the broad scope and trends of the operation of the U.S. bankruptcy system.
However, researchers continue to have concerns about the reliability of this aggregate data. Furthermore, the aggregate statistics provide rough and imperfect information about the determinants of financial distress, details of the operation of the bankruptcy system, or the impact of that system on debtors, creditors, and other stakeholders. The most useful bankruptcy data still appear to be the case-level public documents, especially the petitions and supporting schedules that debtors themselves submit, and qualitative data derived from interviews, surveys, and questionnaires. Studies utilising such approaches have explored the determinants of household, and corporate financial distress, outcomes of corporate reorganisations, the role of hedge funds, and the function of bankruptcy for entrepreneurs.
Research involving these types of data is inevitably costly and time consuming, and it can be difficult to replicate and evaluate. The American experience thus illustrates the value of relevant and reliable aggregate data and the essential need for useful case level data, but it also reflects how efforts to gather such data and make it available raise complicated issues of policy and practicality.
Thinking about data collection in the IBC
Turning to the IBC, the paper suggests that the initial challenge in this regard is identifying precisely what types of information about the new system would be useful for policymakers, stakeholders, and researchers, who should be collecting the data, the need for assuring reliability and uniformity of the data that is collected, and finally access to the data.
What data to collect?
We distinguish between three kinds of useful data about the IBC:
- Basic procedural data about cases brought under the Code provides an essential core of information about how the system operates. This data certainly includes the number of applications filed under each chapter of the Code in each jurisdiction, as well as more specific information about procedural events through the life-cycle of the case.
- Data about the primary stakeholders in the system
includes information on the type of debtors in the system, the nature of their debts and assets, and the characteristics of their various creditors. It also includes information about which parties initiate cases under the Code.
- Data about the institutions and repeat professional actors within the system. Chief among these are the tribunals and their judicial officers, as well as the functioning of other pillars of the institutional machinery such as the insolvency professionals, the information utilities, and the Board itself.
Who should collect the data?
The Tribunals are well-positioned to gather and disseminate comprehensive aggregate statistics or case-level data about the cases they handle. Yet they have not traditionally performed that role. The Board can also gather and disseminate aggregate or case level information without cooperation from the tribunals, but it must rely on information provided to it by insolvency professionals and insolvency professional agencies. This may be a more cumbersome process in general, but the Board is likely in a better position to gather data about many aspects of cases that are conducted or managed by the insolvency professionals. Given that they likely have overlapping and complimentary capacities for gathering and disseminating data, it would be ideal for the Tribunals and the Board to cooperate or coordinate their efforts to make data timely, accurate, uniform, and easily accessible and usable.
Functionality of the data
The data gathered by the Board and the Tribunals needs to be reliable and consistent. This requires, among other things, systems for recording and retrieving information about procedural aspects of cases filed under the Code, forms designed to facilitate the extraction of data, and careful definition of terms employed in court documents and proceedings. The Board and the Ministry of Corporate Affairs have promulgated some model forms for use within the system. It is not currently clear how well these forms are generating useful data. It may also be the case that other forms are necessary to capture and generate important data from the system.
Access to the data
Policymakers must decide the scope of access it allows to such data. The most liberal approach would be to make data publicly available on an electronic database similar to the PACER system in the United States. Any policy in this regard must balance concerns about privacy with the benefits of widely available data about India's new insolvency and bankruptcy system.
In conclusion, we propose that the Board conduct or allow a study of cases brought under the Code to assess, among other things, what information the new system generates or might generate; how its model forms are utilised and the quality and uniformity of the data they reflect; whether other areas of practice warrant similar model forms; and how the data generated by the system can be most fruitfully assembled and disseminated.
Adam Feibelman is Sumter Davis Marks Professor at Tulane Law School. Renuka Sane is an Associate Professor at the National Institute of Public Finance and Policy.