NCLT ADMISSION BENCHES SOON TO EXPEDITE CASES

The government is likely to add “admission benches” in the National Company Law Tribunal (NCLT) in a bid to expedite insolvency resolution process, which is currently facing delays with respect to the mandated time-line under the Insolvency and Bankruptcy Code (IBC).

As per a government source, “the government will amend the law and add admission benches in the NCLT, so that the process of either accepting or rejecting the application for the initiation of the Corporate Insolvency Resolution Process (CIRP) against the debtor is completed within 14-days.”

The admission bench’s responsibility will be to admit/reject the application within 14 days of receiving it, and prioritise the ones that should be heard first. “The government is in touch with NCLT for the same,” the source added.

As per the IBC, in all cases where an application to initiate a CIRP is filed, the Adjudicating Authority (AA), or NCLT, should admit it within 14 days of receiving the application.

The AA can reject such an application by a financial creditor, an operational creditor, or a corporate applicant if it is incomplete. However, before rejecting it for this reason, the applicant is to be given seven days (from the receipt of notice from the AA) to rectify the application.

Even though the law prescribes a 14-day period to admit the application; in reality, the time taken for the admission is significantly long. This is largely due to low strength of benches in the NCLT, which delays the process.

Currently, the NCLT has a strength of 63 members, which experts say are inadequate to complete CIRP in the mandated 330 days. According to IBBI data, as on March 31, the average time taken for the completion of the resolution process was 612 days.

Saloni Kothari, Group General Counsel, BDO India, said, “separate admission benches at NCLT will aid tribunal members of such benches to have sole focus on admission matters ensuring on-time commencement of the IBC processes, as envisaged under IBC but currently not being implemented due to paucity of time.”

“The added benefits of timely admission is that lesser depreciation of assets takes place between the initiation and admission (of the resolution plan). It’s also a deterrent to errant borrowers that count on court delays and overall timeliness in the IBC ecosystem,” she said.

Abhishek Rastogi, founder, Rastogi Chambers, said, “expediting litigation at the stage where formation of these additional benches will only help all stakeholders involved in the process – financial creditors, operational creditors, etcetera.
 

Source: Financial Express