Standing Committee on Finance for Proposes Key Recommendations on NCLT and IBC to Address Delays [Read Report]

The Standing Committee on Finance has proposed recommendations to address procedural delays, manpower shortages, and infrastructure constraints affecting the National Company Law Tribunal ( NCLT ) and its functioning under Insolvency and Bankruptcy Code ( IBC ).

With regards to NCLT, the recommendations are as follows:

1. Expedite the filling of all revived and sanctioned posts within the current financial year. Proactive steps are needed to streamline the recruitment process for additional posts to ensure adequate staffing levels.
2. Procedural rules tailored to NCLT’s role under the Insolvency and Bankruptcy Code (IBC) should be finalized and implemented swiftly. Training programs and regular colloquiums for tribunal members can further reduce procedural delays and improve case management.
3. The Ministry should prioritize the development of the integrated IT platform and address physical infrastructure gaps. These upgrades are vital for improving case processing times and ensuring transparency in tribunal operations.

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1. Allocated funds must be fully utilized, with emphasis on recruitment, infrastructure development, and technology integration. The reduction in BE for 2024-25 should not impede these critical objectives.
2. The Ministry should establish a performance monitoring mechanism to track pendency and disposal rates, enabling timely interventions to clear backlogs and improve resolution timelines. The Ministry should also maintain data with respect to average time taken for the resolution process.
3. The Committee recommended adopting a mechanism under NCLT to count additional applications within the same case separately to avoid inflating the number of pending cases, ensuring a more accurate reflection of the case backlog.

The Committee points out that delays in resolving insolvency cases, especially during the initial admission and decision-making stages at the NCLT, are a major problem.

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Although the Insolvency and Bankruptcy Code (IBC) aims for quick resolutions, the time taken to settle cases has been increasing. These delays hurt creditors by lowering recovery amounts and weaken trust in the insolvency system's efficiency, noted the committee in its report.

To resolve these issues, the Committee weighs the need to fix procedural inefficiencies and improve capacity at the NCLT to ensure faster and straightforward resolutions.

The Committee has made the following recommendations to address these challenges:

1. Establish fast track tribunals with strict timelines for high priority cases.
2. The Ministry should consider adopting an urgent list system for insolvency cases, similar to the UK, to prioritize time-sensitive matters. Additionally, allowing the appointment of resolution professionals outside of courts can help reduce delays and streamline the process for quicker resolutions.

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1. The Committee recommended introducing a provision under the IBC, similar to Article 226(3) of the Constitution, to mandate the processing of applications within 14 days.
2. Enhance RPs standards with rigorous certification, specialized training, and independent performance reviews, particularly for high- stakes cases. A dual oversight system involving IBBI and external experts can improve RP regulation.
3. Explore PPP models to improve judicial processes, drawing on the success of privatized Seva Kendras.
4. Ensure NCLT members and adjudicating bodies possess specialized knowledge, as highlighted in the Supreme Court’s Finolex Industries case, for better decision-making in complex insolvency cases.
5. Provide clearer guidelines on the treatment of government dues, especially taxes and penalties, ensuring equitable and transparent resolution of government claims.

By addressing delays, competency gaps, and stakeholder engagement, while leveraging technology and expertise, the IBC can enhance its impact on India’s economy.

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The Committee believes that implementing these recommendations will enable the NCLT to deliver corporate dispute resolution fastly, increasing investor’s trust, enriching economic growth, and improving ease of doing business.

To Read the full text of the Report CLICK HERE

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