The Union government has assigned benches to 21 of the 24-newly appointed judicial and technical members of the National Company Law Tribunal (NCLT), weeks after calls to fast-track the assignment-process were made by the NCLT Bar Association. The Supreme Court too had in a November 2024 ruling expressed disappointment regarding the large vacancies in the NCLT.
The Centre in January had appointed 24 new members to 11 NCLT Benches across the country to fill the vacant positions. There are in total 16 NCLT benches in India, with a sanctioned strength of 63 members (both judicial and technical combined).
Sources say the delay in assigning the benches was mainly because the induction programme was not concluded. The programme is critical to the sensitise the new members with the working of the tribunal. The new members sat through the sessions of NCLT Delhi.
According to the official notification, issued by the Ministry of Corporate Affairs (MCA) on Friday, the 21 new members are requested to join their respective benches “at the earliest”.
Last month, the Bar Association had expressed concerns over non-assignment of benches to the appointed members, saying that it was delaying the insolvency proceedings. An SC bench led by former Chief Justice of India DY Chandrachud emphasised the lack of members and inadequate infrastructure were impeding the insolvency resolution process.
The apex court had highlighted that the tribunal’s limited membership and inadequate support facilities were hindering operations, with many sessions running only a few days a week or for limited hours each day. It had urged the government to act swiftly to fill vacancies and enhance infrastructure.
“Shortage of members has a direct bearing on the resolution of disputes,” said Abhishek Swaroop, partner, Saraf and Partners. “Each of the existing members is overworked with some benches’ cause lists running in excess of 150 matters a day,” he added.
“One major reason for delay in appointment of new members is that there are very few individuals who are qualified for the job,” said an official source.
Data from the Insolvency and Bankruptcy Board of India (IBBI) shows that the average time for a corporate insolvency resolution process (CIRP) to conclude has risen to 716 days in 2023-24, up from 654 days in 2022-23. The Insolvency and Bankruptcy Code (IBC), however, mandates the CIRP to be concluded in 330 days.
According to the IBBI, the recovery rate for creditors stands at 49.2% if the CIRP is concluded within 330 days. It reduces to 36%, if the CIRP process concludes between 330-599 days; and beyond 600 days, the recovery rate stands at mere 26.1%.
“Despite the earnest endeavour of the currently available NCLT Benches to do maximum disposal of matters, the shortage of members has only increased the backlog of cases,” said NPS Chawla, co-founder, Aekom Legal. Chawla suggests the NLCT’s strength needs to be increased to at least 100 to expedite the insolvency process.
FE had reported earlier that the government is planning to nearly double the strength of NCLT members and its benches, to 115 and 31, respectively. “But, so far, no decision has been taken in that regard,” another official said.
In July 2024, Finance Minister Nirmala Sitharaman had said that appropriate changes to the IBC, reforms and strengthening of the tribunal and appellate tribunals will be initiated to speed up insolvency resolution. “Additional tribunals will be established. Out of those, some will be notified to decide cases exclusively under the Companies Act,” she had said.
Sumant Nayak, senior partner, Desai & Diwanji said: “Speeding up the appointment and posting of the members is crucial to mitigate the unwarranted delays. Also, regulated recruitment drives to ensure appointments happen at fixed intervals may reduce the crisis.”