Centre says taking all steps to strengthen National Company Law Tribunal

The government on Monday said it is taking all steps to strengthen the National Company Law Tribunal (NCLT) to reduce delays in disposal of cases under the insolvency law.

In a written reply to a query in the Lok Sabha, Union minister Rao Inderjit Singh said that up to March 31 this year, in 252 of the 348 cases resolved under the Insolvency and Bankruptcy Code (IBC), "creditors have accepted realisation of 50 per cent or less of their admitted claims".

IBC provides a framework for market-linked and time-bound resolution of stressed assets.

Citing data available with the Insolvency and Bankruptcy Board of India (IBBI), the minister said that during the period from April 2018 to March 2021, 348 corporate insolvency resolution processes ended with resolution plans. "The realisable value for creditors in these cases was 36.31 per cent of their admitted claims".

As per the data, 45.86 per cent of insolvency proceedings were not resolved within the stipulated timeline of 330 days in 2020-21. The figure stood at 20.92 per cent in 2019-20 and at 16.41 per cent in 2018-19.

"The government is taking all steps to strengthen the NCLT, in order to reduce the delays in disposal of cases," the minister said, adding that 19 new members have been appointed at the tribunal recently," Singh, who is the Minister of State for Corporate Affairs, said.

He also said vacant posts of members at NCLT are being filled up regularly.

Five new benches of NCLT were announced during year 2018 and 2019 at Jaipur, Cuttack, Kochi, Indore and Amaravati.

Among others, e-court project is being implemented by National Informatics Centre (NIC) for all the benches of NCLT.

"To enable value maximisation, IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, were amended to enable the resolution professional to use a challenge mechanism to enable resolution applicants to improve their resolution plans.

"Further, to monitor delayed insolvency resolution processes, the IBBI (the regulator) has introduced a form to be filed by the resolution professionals on monthly basis," Singh said.

Further, the minister noted that the insolvency resolution process is market driven and the outcome depends on market forces.

"In addition to this the time taken for resolution and actual realisations depends on several factors, including the nature of business, business cycles, market sentiments, and marketing effort. It, however, critically depends on at what stage of stress, the company enters the IBC process," he said.

If the company has been sick for years and the assets have depleted significantly, Singh said then the IBC process may yield low realisations for creditors or may result in even liquidation.