Corporate Distress And Compassion: Integrating Humanitarian Values Into NCLT's Decisions

However, in the process of achieving these goals, the IBC may have certain unforeseen effects on the Corporate Debtor and its employees, creditors, suppliers, and consumers. The unfortunate demise of Nitin Desai, a famous Art Director, allegedly due to financial distress and creditors harassment, has underscored the importance of the NCLT adopting a more humane and empathetic approach in handling Insolvency and Bankruptcy cases. It raises several questions about the role and responsibility of the NCLT in ensuring that the Insolvency proceedings are conducted in a fair, transparent, and humane manner. The NCLT has the power to admit or reject an application for CIRP under the IBC, 2016 based on three criteria i.e., the existence of debt, occurrence of default, and ceiling amount of Rupees one crore and above. However, only these criteria are not sufficient to capture the complexity and diversity of insolvency cases. The NCLT may admit insolvency cases after going through the facts of the case and examining the operational status and viability of the Corporate Debtor. The NCLT may also consider the nature and purpose of the debt and the product or service that the Corporate Debtor provides.

For example, if the Corporate Debtor is a vaccine manufacturer that is supplying vaccines to the government or the public, the NCLT may not admit an insolvency case against it without assessing the consequences. The NCLT may also take into account the fact that admitting an Insolvency case against a vaccine manufacturer may disrupt the supply chain of vaccines, endanger the lives and health of millions of people, affect the national and global efforts to combat the pandemic and cause irreparable damage to the society and the economy. The NCLT may also consider the fact that a vaccine manufacturer may have a high potential for revival and recovery, as there is a huge demand and need for vaccines in the market.

The NCLT may adopt a similar approach for other Corporate Debtors that are engaged in essential or strategic sectors such as Healthcare, Education, Energy, Defense, Agriculture, Infrastructure, etc. The NCLT may also evaluate the operational status and viability of Corporate Debtors before admitting insolvency cases against them. The NCLT may also consider their Social and Economic contribution, their potential for revival and recovery, and their impact on the stakeholders and the environment. The NCLT shall not act as a mere rubber stamp for admitting Insolvency applications without examining the merits and demerits of each case & also using its discretion and judicial wisdom to admit or reject insolvency cases based on the facts of each case. The NCLT may not mechanically rely only on the three criteria of debt, default, and threshold amount of Rs. One Crore, but also look at the status of the Corporate Debtor, such as its Turnover, Profitability, Cash Flow, and Employment Generation. The NCLT may avoid stereotype admitting Insolvency cases against Corporate Debtors that are profitable, have a positive cash flow, or employ a large number of workers, as it would affect their families as well.

As a Technical Member of NCLT, Mumbai, I witnessed the plight of many operational creditors who demanded their dues from corporate debtors. They filed cases for amounts ranging from 1 to 1.5 crore, hoping to recover their money before it was too late. But I also saw the other side of the story: the struggling companies that were trying to survive in a tough market, the promoters and directors who had invested their time and resources, and the workers and their families who depended on their jobs. I felt that these cases deserved more time and attention than just applying the three criteria of Debt, Default, and threshold amount of One Crore. I felt that admitting them to insolvency proceedings would be a harsh and unjust outcome for both parties. I tried to give them some breathing space, some opportunity to negotiate and settle their disputes amicably. But I was bound by the rules and regulations that governed the NCLT. I had to follow the law, even if it meant ignoring the human factor. I think that the NCLT has more flexibility and discretion in dealing with such cases. I think that the facts of each case shall be carefully examined, as there could be instances of malpractice or unfairness by the creditors, such as imposing exorbitant interest rates or coercing the debtors. This is relevant to the tragic case of Nitin Desai, who allegedly committed suicide after being harassed by his creditors or moneylenders.

Moneylending in India is an ancient practice. Moneylenders, also known as Soodkhors, Mahajans, Sahukars, or Desi Bankers were informal sources of credit that provided loans to people who needed money for various purposes, such as Agriculture, Trade, Marriage, etc. However, moneylenders often charged high-interest rates and used various methods to exploit and oppress their borrowers, such as seizing their land, crops, cattle, or other assets. The situation of moneylending changed with the advent of British rule in India, which introduced a more structured and anglicised form of lending i.e., banking. The British also imposed heavy taxes on the peasants and farmers, who had to borrow money from the moneylenders to pay them. This created a vicious cycle of debt and poverty for the rural population. The plight of the Indian peasants under the moneylending system is vividly portrayed in the Novel Godaan by Munshi Premchand. The main character of the Novel is Hori, a poor farmer who dreams of owning a cow and donating it to a Brahmin before his death. However, he is constantly exploited by a moneylender, who charges him exorbitant interest rates and takes away his land and cattle. He dies before fulfilling his dream of godaan (cow donation).

The case of Nitin Desai is a wake-up call for the NCLT to revisit its approach and attitude toward insolvency cases. The NCLT may not act as a mere facilitator of insolvency proceedings but also as a guardian of justice and humanity. The NCLT may not allow the creditors to exploit and oppress the Corporate Debtor. The tragic death of Nitin Desai can be seen as a modern example of how moneylending can ruin lives and careers. Nitin Desai was a renowned Art Director who worked for many Bollywood films such as Lagaan, Jodhaa Akbar, Devdas, etc. His case shows how moneylending can still be a source of exploitation and injustice in India. The NCLT may need to act as a protector and promoter of the Corporate Debtor, its employees and also help them to overcome their financial difficulties and revive their business. The NCLT may act as a catalyst and facilitator of economic growth and ease of corporate stress in India

Rajesh Sharma is a Former Technical Member of NCLT, Mumbai Bench and views expressed herein are his personal views.