Is The Purpose Of NCLTs Being Defeated?

The NCLT was constituted on June 1, 2016, with 10 benches and one principal bench. It consolidates the corporate jurisdiction of the Company Law Board, Board for Industrial and Financial Reconstruction (BIFR), Appellate Authority for Industrial and Financial Reconstruction (AAIFR) and powers related to the winding up or restructuring of a company and other provisions, earlier vested in high courts.

The Mumbai bench of National Company Law Tribunal (NCLT) is a few minutes' walk from the Bombay High Court. Apart from the State of Maharashtra, the bench has territorial jurisdiction over the State of Chhattisgarh and the State of Goa.

There are three courts at Mumbai bench, out which two have a divisional bench, while the third court has one member and no technical member.

The same bench, which hears matters relating to resolution under the Insolvency and Bankruptcy Code (IBC), also hears cases that were transferred from the Company Law Board and corporate recovery cases before debt recovery tribunals. Winding up petitions that were inherent jurisdiction of high courts also stand transferred to the NCLT.

This has led to a lot of pressure on members of the NCLT as a time-bound disposal of matters is the essence of the need for a National Company Law Tribunal in the first place.

As far as liquidation proceedings go, on an average about 23-24 cases are listed daily, out of which only 2-3 cases are heard.

Abhay Itagi, principal associate at MV Kini Law Firm, appears before the Mumbai bench on a daily basis. Speaking to Livelaw, Itagi said: "Firstly, the number of courts is not adequate. The rate at which cases are being heard on a daily basis is effectively slower than the Company Law Board. The disposal rate is more identical to the high court which earlier had inherent jurisdiction over liquidation proceedings."

So, what was the point of transferring cases from the Company Law Board, High Court?

Itagi referred to Thursday's causelist and said: "There are about 78 matters listed in one courtroom, practically this is impossible. Out of which, 27 are under IBC, which effectively is a time-bound liquidation process, but there is no timeline prescribed before admission. Although the NCLT is supposed to dispose of matters in 60 days, it doesn't reach - let alone be heard."

Once an application under insolvency code is admitted, the insolvency resolution professional (IRP) has to commence his work and submit his findings within 180 days. If he is unable to do so, a further time of three months is given, after which the company goes for liquidation.

But the issue of pendency arises because cases fail to reach due to the sheer number of cases being heard.

Mentioning

On the condition of anonymity, a young lawyer who often appears at NCLT, Mumbai, said:"One of the aspects that we face here is that NCLT Mumbai is at walking distance from the high court, and the session commences earlier (than HC), what happens is that seniors make an appearance here, take a mention, get over the matter and go back to the HC. I have nothing against senior counsel, but as a result of this, we are unable to get a hearing."

Although the advocate did mention that NCLT is quite welcoming towards juniors mentioning matters, but the point still remains that the junior advocate has to wait for his turn, which comes, as per convention, after the senior counsel concludes.

He further stated that in three of his cases, final hearing was concluded months ago and an order is yet to be passed.

"In one of the matters, I finished arguing in March. There have been instances where months have gone by without an order and we are told to re-submit our final submissions!"

These are clear indications of a judicial body bursting at the seams due to lack of adequate members to hear such a backlog of cases. As is the law of nature, backlog will only multiply with time, so what is needed is a more systematic allocation of cases and many more members to handle these cases.