Headless NCLT awaits reforms to speed up resolution of pending cases

Over 20K cases pending and more than half linked to insolvency, bankruptcy

January 5, 2020, was the last time the National Company Law Tribunal (NCLT) had a full time president. Since then there have been five acting presidents - four of them in the last month alone - as the post had to be filled by the most senior person in line. One of them had only one-day tenure left while another some three days at the time of their top posting. 

While the government is concerned that both NCLT and appellate tribunal - NCLAT - are without president and chairman for more than a year, over 20,000 cases have piled up at the adjudicating authority. Of these, more than half - 13,000 cases are insolvency and bankruptcy cases. 

“There is a need for reforms for tribunals. The idea behind creating the tribunal was to fast track matters. They have to have a framework separate from the courts, otherwise it would be tough to  speed up things,” a government official said. 

Experts said NCLT had a sanctioned strength of 63 members just to deal with the Company Law matters. At present, there are 12 judicial and 17 technical members - to deal with matters relating to the IBC, mergers & acquisitions and operation and management matters as well. 

As for numbers, since its inception in 2016, the tribunal has managed to dispose of more than 56,000 cases.  

With IBC coming in, there’s an additional burden of timelines, which NCLT has not been able to adhere to - from timely admission of cases to approving resolution plans. “The scope has been widened much more than they have the capacity,” a legal expert said. 

Strength of manpower aside, lawyers and government officials believe NCLT members often do not have the subject expertise to deal with financial matters. According to a person in the know, one of the NCLT benches while hearing a high profile IBC case asked the lawyers to explain the basic creditor-debtor and debt equity concepts. 

“NCLT requires domain experts. Even bureaucrats who have not handled any company law related matters become technical members. Judicial appointments are driven by seniority and not merit,” a senior official said. 

An IBC lawyer said that secured and unsecured lenders were not equal but the appellate tribunal did not think so. “What is the expertise we are talking about then? No one respected as a Company Law expert and with long experience in that subject is getting appointed,” the IBC lawyer said. 

The final appointments have to be decided by the Appointments Committee of the Cabinet. For members, the recommendations come from a two- judge Supreme Court bench. The matter goes to the chief justice next, followed by the law ministry, corporate affairs ministry and then the Prime Minister’s Office. 

“There is no leader (at NCLT) and for a long time. It affects the productivity and answerability of the members. You need someone at the top,” a former NCLT member said. 

According to tribunal members and legal experts, bureaucratic control over NCLT is a conflict of interest and can influence decision making.  

While experts say this is true of most tribunals which fall under a specific ministry, NCLT especially attracts attention because of the money and high profile cases involved.

Among the many suggestions for reforms, tribunal service agency is gaining traction. According to a paper by consulting firm Alvarez and Marsal, outsourcing of administration function to a specialised agency is critical, in order to allow the judges to focus on the core judicial function only. 

Pratik Dutta, researcher with the National Institute of Public Finance and Policy also said that since 1997, the Supreme Court has time and again recommended creation of an independent agency for administration of all tribunals in India. “There is a growing realisation that tribunals themselves are bogged down by the same problems that they were originally meant to solve,” Dutta said.

With the pandemic slowing things down, the tribunal finds itself overstretched. According to an NCLT official, each bench holds two courts a day and hears around 50 matters, at a time when the focus is on ensuring Covid appropriate behaviour more than anything else.