A total of 19,771 cases were pending with various benches of the National Company Law Tribunal (NCLT) as of September 30, 2019, Minister of State for Finance and Corporate Affairs Anurag Singh Thakur told the Rajya Sabha Tuesday. In his written reply to a question, Thakur said that according to data provided by NCLT, of the 19,771 cases, 10,860 cases had been filed under the Insolvency and Bankruptcy Code (IBC), 2016.
Apart from insolvency cases, NCLT is also the adjudicating authority for cases filed under various company laws. The data from the government highlights the lack of functional benches of NCLT across the country. The government had, in July, announced setting up of 25 additional single and division benches of NCLT at various places including Delhi, Jaipur, Kochi, Chandigarh, and Amravati. Most benches remain non-operational or partly operational on account of lack of proper infrastructure or adequate support staff.
In his written reply to the same question, Thakur also said that the government was not planning to set up any more benches of NCLT “in the next two to three months”.
Data from sector regulator the Insolvency and Bankruptcy Board of India (IBBI) corroborates the numbers presented by the government. As per the IBBI, nearly 2,542 corporate insolvency cases have been admitted by various benches of NCLT until September 30, 2019. Of these, only about 56 have ended in approval of resolution plans — a mere 15 per cent, according to latest data released by the IBBI.
Lack of support & administrative staff a concern
The lack of functional benches of NCLT has been a cause of concern as the number of cases pending with the adjudicating authority is on the rise. Though the government has set up set up five new benches during 2018-2019 at Jaipur, Cuttack, Kochi, Indore and Amaravati, the lack of administrative and support staff has rendered most of them non-operational or only partially functional.
In the current fiscal, about 1,037 cases of corporate insolvency have been admitted by various benches of National Company Law Tribunal (NCLT) across India until September 30 — an increase of 51.6 per cent over the year-ago period.
However, a meagre 76 resolution plans have been approved in the current fiscal, while the number of companies which have either been liquidated or are headed at liquidation stands at 351 — which is one-third of the total number of insolvency cases filed until September 30.
In the past three years, the number of companies which have been sent for liquidation — either due to lack of feasible resolution plans or absence of any resolution plans whatsoever — stand at 587. These include big ticket names such as Adhunik Metaliks, Khaitan Electricals, and Orchid Health Care Private, among others, according to the IBBI data. The IBBI had, however, defended the number in its latest data newsletter and said that nearly 427 of the companies which underwent liquidation were earlier with the Board for Industrial and Financial Reconstruction (BIFR) and or defunct. “The economic value in most of these CDs (corporate debtors) had already eroded before they were admitted into CIRP,” the IBBI had said.
As of September 2019, 535 firms have spent over 270 days waiting to get resolved. In August, the Centre introduced an amendment to increase the deadline to 330 days, but said the CIRP shall mandatorily be completed within this time. “This will include extension of time and any exclusion of time on account of legal proceedings,” the government had said.
The Supreme Court, however, while delivering the judgment in the Essar Steel insolvency case, relaxed the criteria of “mandatorily” resolving the CIRP within 330 day, allowing the possibility of extending it beyond that if required.