Govt moves SC to make NCLT judges stick to deadline for resolving cases

The government has sought the Supreme Court’s (SC’s) approval to frame rules for making judges of the National Company Law Tribunal (NCLT) accountable in ensuring corporate insolvency cases are disposed of in time.

In the latest amendments to the Insolvency and Bankruptcy Code (IBC), the government has made it mandatory for all corporate insolvency procedures, including litigation, to be wrapped up in 330 days. 

The Bill, passed in both Houses of Parliament, has put the onus on the NCLT Benches to increase their productivity.

“It is out of despair that the government has taken this action. We had to set a time limit and draw a line somewhere. The delays have a huge cost and time is of essence when it comes to the IBC,” a senior government official said.

Justice G S Singhvi, a retired judge of the SC, said such a deadline for courts had never been imposed before. However, he said it was important to understand why there was delay. “You have one person doing the job of four. Everyone wants the judge to apply his mind, and give a reasoned order. But you need to build capacity as well,” said Justice Singhvi.

The government is concerned about the cost that the delay in the resolution process is causing. A set of rules in this regard has been proposed by the Ministry of Corporate Affairs to the SC, it is learnt. The government, if it finds anything untoward in a preliminary enquiry, will approach the Chief Justice of India to appoint an SC judge to initiate a larger enquiry in accordance with the proposed rules.

In fixing accountability, Justice Singhvi said: “Those dishonest should be held liable and there are many instances where the SC has taken action against judges and allowed enquiries... Procedures may be different for tribunals because there are retired judges there.”

Capacity building

The ministry is planning to build a more democratic system for the NCLT and part with some control by creating five posts of regional vice-president across the country. They will take over most of the administrative duties, giving the Benches more time for their judicial work, the senior official said.

Countries such as the UK, the US, Canada, and Australia have created dedicated organisations to support the judiciary.

The government wants the NCLT to keep the process time-bound and avoid ‘frivolous litigation’.  Another senior government official said, “The NCLT can reject a plan if there is something highly objectionable, but it should not get into commercial issues.”

However, a retired judge who was on an NCLT Bench said while the committee of creditors was within its rights to apply commercial wisdom, the tribunal was not a rubber-stamp.

“Maximising asset value is one of the main objectives and we question when that does not happen, such as when banks opt for liquidation when they can get more through a resolution plan,” he said.

There are 16 Benches of the NCLT, a quasi-judicial body, in the country. As of June this year, 335 corporate insolvency cases have gone on for more than 330 days and have to be completed in the next three months.

Former judge M M Kumar, president, NCLT, said while the constitutional validity of the 330-day deadline could be decided only by the SC, “it is not difficult to achieve it if we have the full strength, infrastructure, and tribunal staff”.

A discussion paper by the National Institute of Public Finance and Policy has said the problem of judicial delay cannot be solved by just increasing the number of judges. Instead, the productivity of judges should be improved, it has said.

Justice S J Mukhopadhyay, chairman, National Company Law Appellate Tribunal, stressed the need to understand the IBC. “It is not litigation, it is adjudication.” 

“A law passed in Parliament is binding on us... We can explain the law. It is on the basis of our judgments that the amendments have been made.”