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Govt mulls substantially expanding NCLAT strength to speed up insolvency, M&A appeals

The government is considering a crucial proposal to significantly expand the member strength of the National Company Law Appellate Tribunal (NCLAT) to 20 (including the chairman) from the currently-sanctioned 12, a person aware of details told ET. The idea is to expedite the disposal of appeals against adjudicating authorities in cases ranging from insolvency, mergers and acquisitions to antitrust matters at a time when the economy is expanding at a fast pace, highlighting the indispensability of a much robust dispute resolution system, he said.

The proposal comes on top of another plan to bolster the number of members at the National Company Law Tribunal (NCLT) to 163 (including its president) from the sanctioned 63, aimed at faster clearances of such cases, he added.

“A final decision on these proposals will be taken by the Cabinet. A Cabinet note for this purpose has been floated by the ministry of corporate affairs (MCA),” said the person quoted above.

At present, apart from chairman Ashok Bhushan, the NCLAT has two judicial members and six technical ones, according to its website. In October, another judicial member Rakesh Kumar quit, following adverse Supreme Court observations against him.

NCLAT was set up under Section 410 of the Companies Act, 2013, for hearing appeals against the NCLT (for matters relating to the company and insolvency laws) and orders passed by regulators, such as the Insolvency and Bankruptcy Board of India (IBBI), the Competition Commission of India (CCI) and the National Financial Reporting Authority.

However, expanding the strength of both NCLAT and NCLT is easier said than done and will require the cooperation of judiciary as well, said a Delhi-based expert involved in the shaping of the insolvency law.“Choosing the right person for the job after thorough background checks, etc. and convincing good people to become NCLT or NCLAT judges are difficult tasks,” he said.The government should introduce something like the National Judicial Services, he said. It should then allow successful candidates under this service to explore careers at NCLT and NCLAT once they complete a certain number of years in judiciary, he added. “Through such a system, the government can ensure a steady stream of experienced people coming into NCLT and NCLAT,” he said.

According to the IBBI data, 67% of the insolvency cases, where resolution process was on until September 2023, have exceeded the 270-day time-frame. Resolutions in another 13% of the cases went beyond 180 days but were still under 270 days. Another set of IBBI data showed the 611 bankruptcy cases resolved under the Insolvency and Bankruptcy Code (IBC) until December 2022 took, on an average, 482 days, barring the time excluded by the NCLT.

As for the NCLT, analysts had flagged delays in clearances of company law matters, including M&A deals, by the adjudicating authority, as its members were more focussed on handling the massive number of insolvency cases where a time-frame of 270 days is stipulated for resolution.

Moreover, given the widescale litigation, even key cases under the IBC have been facing delays.

The Parliamentary Standing Committee on Finance had, in a report in August 2021, flagged the bottlenecks at the NCLT, mainly the acute shortage of members, as the biggest hindrance to speedy resolution of insolvency cases.

However, as a senior official had told ET on September 26, the government had added as many as 34 members to the NCLT in less than a year, taking the total strength to 57 (including its president), much closer to the sanctioned strength of 63. The government is also planning to fill in the remaining vacancies soon, he had said. Now, it aims to further expand the NCLT strength dramatically.


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