NEW DELHI: In a major setback for government’s flagship reform initiative on insolvency, almost a third of the posts of members in the National Company Law Tribunal (NCLT) – which means 19 out of the 63 sanctioned strength, including the president – are lying vacant. While there were eight vacancies, 11 members retired at the end of Sept.
Overall, only 13 of the 30 courts are functioning for full day, while 12 are functioning on half-day basis due to non-availability of members.
Things have reached a stage where due to the non-availability of members, courts in Cuttack and Guwahati are now sitting only twice a week, and that too for half-a-day. Similarly, courts in Jaipur and Indore sit on three days on half-day basis.
In NCLT’s bench in Delhi, one court does not have a court hall since 2019, resulting in it working on half-day basis for five years now. As a result, Court 5 and Court 6 of New Delhi bench have been working on half-day basis.
And, if this was not enough, one court is sanctioned but still non-functional due to lack of infrastructure, data posted on NCLT website showed. The absence of members and the lack of infrastructure are likely to delay the resolution process for a host of companies and impact recovery for banks.
The average time for insolvency resolution had shot up to 716 days at the end of the 2023-24 fiscal year, over two-and-a-half times the extendable deadline of 270 days, which could further delay the resolution process. According to data available with the Insolvency & Bankruptcy Board of India (IBBI), 68% of the cases have exceeded 270 days.
It is not the first time that NCLT functioning has been impacted due to the lack of members, but the scale of the problem is said to be bigger than in the past, sources told TOI, adding that the setback comes at a time when the process was stabilising.
Govt was hoping to see another record year of insolvency resolutions but the chances now appear grim, a source told TOI. During the last fiscal year, despite the delays, a record 269 corporate insolvency resolutions took place, a 42% jump over 2022-23.
What has come as a surprise is the delay in the appointments given that the retirement dates of members were known well in advance. Govt has often cited Insolvency & Bankruptcy Code and GST as top economic reforms piloted by it in the last 10 years.
