With the current sanctioned strength of the National Company Law Tribunal (NCLT) benches, the target of achieving 1,000 resolutions per year under the Insolvency and Bankruptcy Code (IBC) is not possible, a government source told FE.
“If the target is 1,000 resolutions (per year), the strength of NCLT benches has to increase considerably,” the source said.
Earlier this month, Ministry of Corporate Affairs Secretary Manoj Govil had said that the government needs to build a capacity of resolving at least 1,000 cases per year.
In the current financial year, the Insolvency and Bankruptcy Board of India feels that the total resolutions may touch 300 – the highest so far since the enactment of IBC in 2016.
Between FY18 and FY22, the total number of cases resolved under the IBC was 495–with FY20 being the year when the resolutions were at 141. In FY23, the total resolutions touched 185, higher than 147 achieved in FY22.
Currently, the sanctioned strength of the NCLT is 63, including both judicial and technical members. The NCLT plays a dual role – it hears pleas under the IBC and the Companies Act, 2013.
As of March 2023, there were about 12,963 IBC cases and over 8,424 cases under the Companies Act pending before NCLT.
“Considering the existing work load and complexities involved, the strength of the approved number of members in NCLT should be raised to at least 80 and the positions need to be filled urgently,” said Sudhir Chandi Partner. Resurgent Resolution Professional LLP.
“Amendments in the Code need to be brought in to make the mechanism more simplified, with specific time deadlines at each stage of the process to be strictly adhered to,” Chandi said.
As per an IBBI paper, more than 74% cases pending before NCLT take more than 90 days for admission under IBC. A lot of petitions filed with the NCLT have been stalled at the admission stage for up to two years.
Moreover, the entire Corporate Insolvency Resolution Process (CIRP), which is mandated to be completed within 330 days from the insolvency commencement date, roughly takes two years for completion. As a result, the number of cases resolved under the IBC remains low.
“Considering the significant number of pending cases before the NCLTs, timebound nature of proceedings under the IBC and significant stakes involved, it is most critical that NCLTs are functioning at full strength without any shortfall in members,” said Kumar Saurabh Singh, Partner at Khaitan & Co.
“The appointment of additional members should be timed in a way so as to ensure every retiring member is immediately replaced so that there is continuity in adjudication of cases,” Singh said.
Divyam Agarwal, Partner, JSA said, “speedy disposal of these cases is imperative for improving India’s Ease of Doing Business ranking. Not only do vacancies need filling, but the sanctioned strength of benches needs to be increased along with a proportionate increase in judicial and technical members.”