Behind India's slow-moving IBC regime, an NCLT hamstrung by too many vacancies

NEW DELHI: The National Company Law Tribunal (NCLT) faces significant operational challenges due to vacant positions, a ToI report highlighted on October 15. Out of the 63 sanctioned seats, including the president, 19 are vacant. At the end of September, 11 members retired, adding to the existing eight vacancies, the report (by Sidhartha) said.

Currently, only 13 out of 30 courts are operational full-day while 12 function for half-day because of the shortage of members. Courts in Cuttack and Guwahati now sit only twice a week for half a day, and courts in Jaipur and Indore sit three days a week for half a day.

In Delhi, one court has been operating on a half-day basis for five years due to the lack of a court hall. This has also affected Court 5 and Court 6 of the New Delhi bench. Additionally, another court remains non-functional due to insufficient infrastructure, as shown on the NCLT website.

These issues are expected to slow down the resolution process for companies and hinder banks’ recovery efforts. The average time for insolvency resolution has increased to 716 days by the end of the 2023-24 fiscal year, well beyond the 270-day extendable deadline. “68% of the cases have exceeded 270 days,” according to data from the Insolvency & Bankruptcy Board of India (IBBI).

This is not the first time NCLT has faced such issues, but the scale is reported to be larger this time. “The setback comes at a time when the process was stabilising,” ToI reported citing sources.

The government had aimed for another record year in insolvency resolutions, but the chances now seem unlikely. Last fiscal year, despite delays, there were 269 corporate insolvency resolutions—a 42% increase over 2022-23.The delay in appointments, despite knowing the retirement dates in advance, has surprised many. The government frequently cites the Insolvency & Bankruptcy Code and GST as major economic reforms from the past decade.