Govt defers plan to set up special NCLT benches for insolvency cases

The government has deferred its plan to set up special Benches of the National Company Law Tribunal (NCLT) for insolvency cases as vacancies in the existing Benches are yet to be filled. The Ministry of Corporate Affairs had earlier said the special benches would be constituted by early November. 

“We are yet to recruit members for the existing Benches. That will happen only by January. Before that, we cannot look at the proposed additional Benches,” a senior ministry official said. Interviews for more members in the existing Kolkata and Hyderabad Benches will be held in the coming weeks.

“At present, we have 28 members against the requirement of 36 to deal with the existing cases. There are 6,000 company law cases and close to 4,000 insolvency cases pending with various benches of the tribunal,” the official cited above said. 

He said cases under the Companies Act were as important as those related to insolvency. “We need to pay equal attention to company law cases.” 

Infrastructure Leasing & Financial Services (IL&FS) is a classic example of a company law case. 

The government, meanwhile, brought in an Ordinance to declog the NCLT.

Eight courts were to be set up to exclusively deal with insolvency cases — three in Mumbai, two in New Delhi, and one each in Chennai, Kolkata and Hyderabad. Once these start functioning, there will be seven NCLT courts in Mumbai, six in New Delhi, and three each in the other three cities.

When the Reserve Bank of India (RBI) came up with its first list of non-performing accounts to be referred to the NCLT last year, experts had said the tribunals would feel the burden. 

Of the first 12 cases referred to the NCLT, two have been resolved so far.

The NCLT deals with company law cases and mergers and acquisitions, apart from those related to insolvency and bankruptcy.

The government is also working towards a cross-border insolvency framework that will require the upgrade of infrastructure at the NCLT. E-courts will be set up so that in the jurisdictions that sign an understanding with the Indian government, cross-border insolvency proceedings can take place. A committee had discussed the contours of the cross-border insolvency provisions.

Globally, the UNCITRAL (United Nations Commission on International Trade Law) Model Law on Cross-Border Insolvency, 1997, has emerged as the most widely accepted legal framework to deal with the cross-border insolvency issues.