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Information Utilities and the Epistemic Tension in the IBC Architecture

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India’s Insolvency and Bankruptcy Code rests on an ambitious institutional vision. In addition to its role as a set of legal procedures, it was also conceived as a coordinated ecosystem of epistemic, procedural, and economic institutions that together enable time-bound, market-driven resolution. In this vision, Information Utilities (IUs) occupy a central role, with their design aimed at eliminating knowledge asymmetry, accelerating the fact-establishment phase, and creating a single, authoritative evidentiary base for insolvency decisions.

IUs are statutorily recognised entities under the Insolvency and Bankruptcy Code that collect, authenticate, store, and disseminate financial information relating to debt obligations. Their core function is to receive information from creditors regarding the existence, amount, and default of debt, invite confirmation or dispute from the debtor, and preserve this information in a tamper-resistant digital form. Once authenticated or deemed authenticated, these records are made accessible to insolvency professionals, creditors, and adjudicating authorities. In theory, this design allows insolvency proceedings to commence on the basis of pre-validated financial facts, thereby reducing reliance on adversarial evidentiary submissions and reducing the time taken to establish default.

In practice, however, India’s only operational IU, National E-Governance Services Ltd (NeSL), has not delivered the epistemic transformation the Bankruptcy Law Reforms Committee (BLRC) envisioned (by epistemic transformation, I refer to a structural shift in how insolvency-relevant facts are generated, verified, and relied upon, moving away from fragmented, paper-based, and adversarial fact-finding toward a system where key financial facts are pre-validated, commonly accessible, and procedurally trusted). Adoption has been slow, trust remains low, and courts have repeatedly had to clarify the role of IU evidence (that is, information filed with and authenticated through an IU). Beyond an implementation challenge, this also suggests a deeper epistemic friction resulting from a misalignment between the normative philosophy of the IBC and the institutional design of the IU mechanism.

This blog uses the lens of epistemic coherence, understood here as the degree to which an institutional system produces knowledge that is sufficiently reliable, coherent with its institutional vision, comprehensive, neutral, and procedurally accepted to support collective decision-making, to evaluate the IU system. It argues that although IUs were meant to solve the IBC’s information problem, they currently sit uneasily within the architecture of creditor autonomy, time-bound resolution, and market-based contestation. The result is a system that aspires to streamline knowledge but often reintroduces fragmentation from another source.

I. IUs as Epistemic Infrastructure: The Original Promise

Regulators and regulatory regimes rely on stable infrastructures of knowledge. Insolvency law is no exception. Before any tribunal can decide, before any creditor committee can negotiate, the system must establish a shared domain of agreed upon or reliable facts. This informational substrate is what regulatory theorists describe as an epistemic infrastructure, contextually understood as the ensemble of mechanisms through which a legal or regulatory system produces, stabilises, and circulates knowledge that actors can collectively rely on. For the IBC, this foundational task was especially urgent because earlier insolvency regimes were routinely derailed by missing records, disputed accounts, and asymmetric access to financial information.

The BLRC envisioned IUs as an institutional response to this knowledge asymmetry. Before any insolvency resolution could begin, stakeholders needed clarity on three basic facts: who owes what, to whom, and since when. Paper-based records, bilateral contracts, and inconsistent documentation made this phase the slowest part of the insolvency process. The BLRC therefore proposed a competitive industry of information utilities that would digitise credit information, authenticate it through counter-party verification, and make it available within a day of insolvency initiation.

This logic reflected three epistemic commitments at the heart of the IBC:

  1. Symmetry of information between creditors and debtors.
  2. Procedural certainty, enabling the NCLT to rely on IU-validated facts.
  3. Reduced contestability over basic facts, allowing the CoC to focus on commercial decisions.

The Supreme Court in Innoventive Industries v. ICICI Bank accepted this role, noting that IUs create an evidentiary baseline that the adjudicating authority may rely upon. 

However, this infrastructural design presumes a number of conditions that the insolvency framework has not been able to sustain. It presupposes routine cooperation from creditors and debtors, cross-platform interoperability, behavioural trust, and widespread adoption across India’s diverse credit markets. These background conditions have been uneven at best, producing a gap between the promise of the IU architecture and its lived performance.

II. Epistemic Frictions: What Has Gone Wrong?

If IUs were conceived as the epistemic infrastructure of the IBC, their real-world functioning reveals how fragile that infrastructure has been in practice. The system was built on the assumption that a digital, authenticated repository would create a coherent informational baseline for all actors. Instead, everyday insolvency practice shows a widening gap between what the IU mechanism presupposes and what the ecosystem can actually deliver. We trace the primary root of this gap to an epistemic friction, which can be contextually understood as the resistance that arises when institutional design, user incentives, and knowledge practices fail to align. Over time, such friction accumulates into epistemic incoherence, where the informational architecture no longer fits the behavioural, procedural, and technological realities of insolvency resolution. These frictions manifest as patterns of failures across adoption, trust, and contestation mechanisms. 

1. Slow adoption and persistent knowledge gaps

While early numbers showed slower than expected adoption of the IU ecosystem, given India’s diverse credit market, the adoption story is more complex than the early narrative of slow uptake. 

NeSL’s recent platform statistics show substantial activity, with millions of debt records digitised and authenticated. Yet, this volume does not translate into comprehensive epistemic coverage. The filings are heavily concentrated among larger financial creditors, while entire segments of the credit ecosystem remain underrepresented. MSME exposures, operational dues, and informal credit arrangements rarely make it into the system. The consequence is a data landscape that is numerically dense but structurally incomplete, where only a subset of financial relationships is visible and digitised. This selective visibility reproduces the old asymmetries in a new digital form. Instead of delivering the universal evidentiary baseline that the IU model envisioned, the platform currently captures the cleanest and most formalised credit links, leaving other crucial relationships outside its epistemic frame.

2. Trust deficit and asymmetric perceptions

Assessments of the IU ecosystem have noted that debtors often approach NeSL with hesitation rather than confidence. Much of this stems from how the information flow is structured: creditors initiate filings, while debtors are expected to shoulder the authentication burden. When a debtor does not respond, the system treats silence as deemed authentication, which might be perceived as unfair. Together, these features create a felt asymmetry in which the IU appears less like neutral infrastructure and more like an instrument aligned with creditor interests. This trust deficit reflects a deeper structural tension between the ideal of a credible, neutral fact-establishing institution and a governance design in which creditors occupy the primary position of informational power.

3. Data formalism that excludes the informal

The design of the IU system places data formalism at its heart; credit relationships must be captured in standardised digital forms, timestamped, authenticated, and only then can they be treated as reliable facts. While this standardisation promotes clarity, it also gives rise to blind spots. For example, informal credit arrangements resist codification and so remain invisible in the IU’s schema. Smaller creditors often struggle with the portal’s formats and submission requirements, meaning they fall outside the formal chain. Disputes about part-payments, contextual nuances or informal side-agreements cannot be easily fitted into the rigid templates that the UI system mandates. In consequence, the dataset becomes a monoculture that is rich in formal, easily clean-documented debts (which are also the ones least likely to be contested) but poor in anything messy or contextual. Thus, rather than capturing the full panorama of credit relations, the IU system ends up representing only those relationships that were already easiest to represent in data-form.

4. Contestability that does not resolve disputes

The contestability mechanism looks streamlined in theory. Creditors submit information, debtors are invited to authenticate or dispute it, and any disagreement is flagged in the system, with non-response treated as deemed authentication. However, this architecture cannot resolve disagreements. An IU records disputes but never adjudicates them, which is only logical because it was never designed to decide between competing factual claims. This creates a structural paradox: the IU’s epistemic value peaks only when there is no contest. The moment the parties disagree, the system shifts back into traditional litigation pathways and the informational coherence the IU was meant to provide dissolves into familiar evidentiary fragmentation. This, however, is not a flaw of implementation but a feature of the legal design. IUs are repositories of authenticated data rather than sites of adjudication, and their epistemic limits follow directly from that institutional role.

III. Institutional Design Frictions: Monopoly, Interoperability, and Redundancy​

The epistemic frictions described earlier operate at the level of day-to-day interaction between creditors, debtors, and the IU platform. Yet these operational patterns are inseparable from a deeper architectural tension embedded in the way IUs were originally conceived. The statutory and regulatory design of the IU ecosystem carries its own contradictions by borrowing the logic of a decentralised market intelligence enabled by competing IUs while simultaneously centralising information flows in a single node. Understanding how these structural choices shape the IU’s epistemic limits requires looking beyond user behaviour to the institutional scaffolding itself.

The BLRC imagined a competitive IU industry, believing that competition would drive innovation, keep costs low, and prevent any single institution from monopolising informational power. The actual regulatory landscape that emerged looks very different. NeSL remains the only operational IU, a position reinforced by criteria for new entrants that include stringent net-worth requirements, high compliance costs, and a supervisory regime that leaves little practical room for them. The result is a system that functions as a single, state-adjacent monopoly rather than a competitive information market.

What is more revealing is that even if multiple IUs existed, the architecture would still not enable redundancy, cross-verification, or any other traditionally admired benefits of a decentralised market intelligence. The regulations require each user to be registered with one IU alone, preventing parallel submissions. Redundancy would arise only when creditors happen to use different IUs for different credit contracts. For any given user, however, the information lives exclusively in one repository. This means that competition may influence pricing or service innovation, but it cannot produce epistemic diversity. The design itself forecloses the possibility of multi-IU cross-checking or parallel validation of the same information.

This raises a deeper normative question. If the framework is built to centralise information by design, why gesture toward a competitive market structure at all? The BLRC appears to have drawn on the metaphor of a liberal information market populated by multiple IUs, but the underlying regulatory architecture seems to gravitate toward a single, centralised repository of debt data. The friction here is not merely institutional but epistemic as the regulatory design aspires to market plurality while encoding centralisation at the level of rules. It is this unresolved tension that shapes the IU ecosystem’s structural constraints and limits its ability to function as a robust knowledge infrastructure for the IBC.

IV. The Way Forward: Restoring Epistemic Coherence

A more coherent IU architecture will require changes that go beyond incremental improvements and move toward resolving the structural tensions built into the system. The first step is to clarify the scope of mandatory submission. So long as obligations are imposed unevenly across creditor classes, informational coverage will remain patchy and the evidentiary value of IU records uneven. A straightforward statutory amendment could create uniform responsibilities and reduce the current ambiguity that allows informational heterogeneity to persist.

Building debtor trust is equally essential. The authentication workflow must feel symmetric rather than creditor-driven. This calls for stronger governance neutrality, clearer safeguards on deemed authentication, and procedural features that allow debtors to contest filings without assuming disproportionate burdens. Without a perception of neutrality, the IU will remain a tool that some actors comply with reluctantly rather than an institution they rely on with confidence.

The system must also confront the reality of its market structure. Either the regulatory regime should genuinely allow multiple IUs to operate or it should accept that IUs function as natural monopolies and design a robust regulatory framework suited to that role. The current tension between an imagined competitive market and an effective single-provider environment creates design confusion rather than institutional clarity.

Finally, IU data cannot remain siloed. Integrating it with broader financial information systems, including the RBI’s forthcoming Public Credit Registry, would reduce the epistemic risk of depending on a single node and enable richer, cross-verified datasets for insolvency adjudication. Such integration would strengthen the informational backbone of the IBC rather than isolating it.

These reforms directly address the epistemic misalignment between the IBC’s philosophy of creditor-driven, market-based resolution and the IU system’s centralised, formalistic design. Only when these tensions are addressed can the IU mechanism realise its role as the knowledge infrastructure the Code envisioned.

The IU mechanism is not dysfunctional, but rather under-realized. It represents one of the most philosophically ambitious components of the IBC, but one whose epistemic foundations have not been matched by institutional practice. To unlock its full potential, India must rethink how the IU concept fits within the intellectual and economic philosophy of the Code. Until then, information asymmetry will persist despite the visionary design of the IBC, because its epistemic architecture remains incomplete.

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Anshuman Sahoo
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