A day in the life of NCLT: Cases under code on fast track

We are trying our best to handle these cases with existing resources, said NCLT official

It’s 10 past 10 on a Tuesday. Lawyers and their assistants with large bags containing case documents begin strolling into court room no 1. The principal bench of the National Company Law Tribunal (NCLT) comprising its president Mahesh Mittal Kumar, and S K Mohapatra, member (technical) will assemble in a few minutes in the brightly lit, largish rectangular hall, with a seating capacity of about 50.   

A retired chief justice of the Jammu & Kashmir High Court, Kumar took charge of the erstwhile Company Law Board in 2015. When the board metamorphosed into the tribunal, he became its first president, ensuring continuity. Mohapatra, a retired law ministry official, served several tribunals before coming to NCLT last June. 

The cause list shows company law cases have taken a back seat to proceedings under the Insolvency and Bankruptcy Code (IBC). The first six of 21 items listed before the principal bench relate to the IBC. Mohapatra is also scheduled to sit on the New Delhi bench in court no 2 on the seventh floor, along with Ina Malhotra, a judicial member. Even on this bench, the first lot of cases are of IBC. But, litigants have to wait for the principal bench to rise. 

The tribunal, which now has become a hub of activity, as it sits on several high-profile insolvency cases, occupies the sixth, seventh and eighth floors in a building inside the Central Government Offices (CGO) complex in the capital. All the three floors have a court room each and are centrally air-conditioned, though lawyers complain about the cooling in the middle-floor corridors. The sixth floor is the busiest  with key administrative officials sitting here. It also has facilities such as a bar room and a well-appointed library. A small provision for a pantry is there, but it is yet to be operational.     

The Delhi facility is among the better ones of the 10 such locations in  the country. But, if you are a first timer, it may not be easy to locate it inside the CGO.  Without any proper signboard or helpful people to guide, it would take a few wrong turns and lift rides before getting to the right place. The main entrance of Block 3, which has a huge blue and white board shouting the tribunal’s name in bold, is on the less used side of the building. 

The lift from the main entrance, where a guard maintains an entry register, lands just in front of the president’s office on the sixth floor. The more frequently used entrance on the other side of the block bears the board of the Ministry of New and Renewable Energy, a red herring. A canteen selling samosas and chai operates next to this. A large blue plastic drum has turned dustbin and is brimming with used tea cups.  Lawyers feel there is scope for improvement. Sumant Batra, managing partner at Kesar Dass B & Associates, said, “NCLT needs more members and major infrastructural support. Most NCLTs are functioning on shoestring resources and many operate out of shabby buildings.” Batra heads the recently formed Insolvency Practitioners Bar Association.  A senior NCLT official told Business Standard, “We are trying our best to handle these cases with existing resources. We have managed well so far without any major difficulty.” 

As Kumar and Mohapatra  assemble around 10.40, a senior advocate mentions a matter where directors of a 50:50 joint venture between government and private players have been disqualified under the government’s drive against shell companies. Kumar reminds the rule, recently emphasised by the Supreme Court, that advocates on record should mention matters and not seniors. 

The first case on the list is between Vertex Chemicals and Mahaan Proteins. The resolution professional complained against the company supplying power. Supply was discontinued, but charges continued. The bench says status quo has to be maintained. “If you charge, there will be contempt,” warned Mohapatra. 

Then an ICICI Bank executive in semi-formal attire brings the report of continuation of interim resolution professional Anil Puri as the regular resolution professional in the SR Foils and Tissues matter. The bench takes the report on record, but Kumar takes exception to the dress of the executive, “You are a senior officer. You must know how to appear before the court of law.” 

None appears in the third matter and the bench takes the report filed on record. The next matter is adjourned to October 10, after the counsel seeks time to a file rejoinder.  My Mind Vacations wanted to invoke the Code against its client Iyogi Technical for default on a sum of Rs 23 lakh. The bench diligently goes through the documents on record to decide whether there is a default and notices have been served in the correct addresses. The appellant informs that the notice could not be delivered at the registered address as the mail was returned with the remark “Left India.” But, a proof of delivery at an alternative address is submitted. Convinced, the tribunal issues a show-cause notice asking why the petition should not be admitted. 

The last IBC matter before the bench deals with the issue of corporate guarantor. Srei Infrastructure had invoked the code against Avantha Holdings for alleged default by one of its group companies, for which it had stood guarantee. Kumar observes that the financial creditor should invoke the principal debtor also as otherwise it would not be possible to verify the default. In just about an hour of assembling, the bench has disposed of all the IBC cases on the list. 

But, with several company law cases lined up, the day is far from over.

Flash points: Cases that tested the new law

Chitra Sharma vs Union of India 

The Supreme Court initially stayed the NCLT order but later modified it taking into account concerns raised by homebuyers at Jaypee Infratech. It asked the promoter to deposit Rs 2,000 crore and the IRP for a resolution plan in abridged 45-day timeline

Edelweiss ARC vs Synergies Dooray 

It is the first and only successfully completed resolution process till date. But, Edelweiss ARC has raised the issue of related parties taking control of the company and has complained against the resolution professional 

Innoventive Industries vs ICICI Bank 

NCLAT concluded that prior notice should be given to corporate debtor in case of application by a financial creditor (FC). Provisions of Maharashtra Relief Undertaking (Special Provisions) Act (MRU Act) will not prevail over IBC. Consent of JLF members is not required by FC before filing an application under Section 7 of the code. The Supreme Court has also passed the order in the matter and the resolution process is currently on

Nikhil Mehta and Sons vs AMR Infrastructure 

Committed return plan in a real estate transaction should be considered as financial debt and the applicant should be considered as financial creditor,  NCLAT held

Industrial & Commercial Bank of China vs Alok Industries

It was held NCLT was under no obligation to give notice to other FCs before admitting a case. Pendency of winding up proceedings before the High Court (before its admission) is no bar for initiation of proceedings under section 7 of the Code