With over 10,000 cases, manpower shortage, NCLT struggles with workload

With over 10,000 cases and only half the manpower it should have, the National Company Law Tribunal (NCLT) is buckling under the weight of its workload.  Inundated with all kinds of disparate cases ranging from the simple to the seriously complicated — the tribunal handles bankruptcy and other company law cases as well as insolvency — it has struggled to cope with the insolvency cases that account for 40 per cent of its work.

While the sanctioned strength is 62 members, NCLTs across the country have only 28 members to hear all cases. Earlier this year, the government decided to increase the number of courts and fill the vacant posts so that the 28 members can be increased to 36 by next month. Interviews to hire members for the Hyderabad and Kolkata courts are underway.

With the government not being able to fill vacant posts, the plan to have special benches to handle insolvency cases has taken a back seat. The government has already set up two such benches at Cuttack and Kochi. It wanted to set up eight more: three in Mumbai, two in New Delhi and one each in Chennai, Kolkata and Hyderabad.  Now the effort to set up these special benches for insolvency cases will begin only when all the vacant posts have been filled. 

“Once the benches in Kochi and Cuttack become operational, the load on the existing benches in Kolkata and Chennai will come down. The government has taken the right step in setting up new benches in the right places,” said insolvency professional Mamta Binani. She added that it was also important to hire members, stenographers, and the support staff who handle the NCLT’s administrative work. 

The Insolvency and Bankruptcy Code mandates that the NCLT dispose of petitions within 14 days of being filed. Experts say that around 70 per cent of cases are disposed of within this time. The only cases that are not resolved within the stipulated time period are the ones with bigger legal complications.

Insolvency expert Pavan Vijay said that the problem lies with the fact that all cases of company law that involve only administrative work are also sent to the main court for a hearing. “In merger and acquisition cases where the administrative work can be done by just the registrar or the ministry, it should be kept out of the court. Also, the government should find a way to avoid sending director disqualification to the NCLT. Instead, importance should be given to more important cases. Where the ministry can itself handle appeals, pressure should not be put on the judicial system,” said Vijay.

For example, in the last one year, many companies that were deregistered and their directors disqualified approached the NCLT for restoration. While experts want the NCLT to be de-clogged so that insolvency cases get precedence over others, the government appears to think it is doing enough. It feels that the current ordinance amending the Companies Act 2013 to allow cases that are administrative and less complicated to be heard by regional directors and company registrars will help to relieve the pressure on the NCLT. 

BIG REASONS FOR DELAY

Vacancies galore

• Sanctioned strength is 62 members, but NCLTs have only 28 members to hear all cases
• Govt planned to raise number of courts and fill the vacant posts so that the 28 members can be increased to 36 by next month

Special benches plan takes backseat

• The government has set up 2 such benches in Cuttack and Kochi. It wanted to set up 3 in Mumbai, 2 in New Delhi and 1 each in Chennai, Kolkata and Hyderabad
• Now the effort to set up these benches will begin only when vacant posts have been filled