India tribunal faces staff shortages and delays

The National Company Law Tribunal (NCLT), India’s body for handling corporate insolvency cases, is facing a crisis due to staff shortages and inadequate infrastructure. The NCLT deals with company disputes and insolvency cases, and resolving these can take days, sometimes even years.

Despite the Insolvency and Bankruptcy Code (IBC) stating that such cases should be resolved within 330 days, including a grace period, long waits and case adjournments are common at the NCLT. Delays range from 48 days to 738 days, leaving the Supreme Court frustrated.

A recent plea from the NCLT Bar Association, a body representing lawyers who practice before the NCLT and NCLAT, highlighted the tribunal’s struggles. The lawyer fighting the Association’s case told the court that the NCLT was “in shambles” due to a lack of members. Currently, 18 NCLT benches are working only half a day since last month, as there aren’t enough members.

NCLT’s Staffing Issues

The NCLT is supposed to have 63 members, but only 50 are currently in place. Another 18 are due to retire by the end of next year, according to the source. Furthermore, the Supreme Court had approved 246 permanent administrative staff posts for the tribunal, but none have been made permanent. More than 95% of the NCLT’s workforce is still working on a contractual basis or on deputation.

The NCLT’s workload grew massively after its creation in 2016, but its size didn’t. The IBC gave it the additional responsibility of handling corporate insolvency cases, which were previously handled by different bodies under different laws. As a result, the NCLT suddenly had a lot more work on its plate, but its sanctioned strength has remained frozen at 63 members.

Filling vacancies at the NCLT can take a long time. The process involves the Ministry of Corporate Affairs advertising the vacancy, a judge-led committee screening candidates, and the government formally appointing them. However, vacancies are usually advertised only after someone has already left, so the NCLT is often playing catch-up.

Reform Efforts

The Tribunal Reforms Act of 2021 aimed to simplify the way tribunals work across the country. India had dozens of tribunals created under different laws, each with its own rules for appointing members, their tenure and qualifications. So, the government tried to streamline the system by abolishing some smaller tribunals and moving their work to existing courts. It also created a common set of rules for the remaining tribunals, including the NCLT and NCLAT.

The NCLT also suffers from a lack of permanent buildings and proper infrastructure at several of its benches, leading to people or companies sometimes having to travel long distances to have their cases heard. For instance, someone from Telangana or Andhra Pradesh may have to travel to Kolkata because their local bench doesn’t have enough members to hear the case.

The new law has taken years to arrive, with earlier versions being challenged in court. The government would introduce rules, some of which gave it more control over appointments or tenure, the Supreme Court would strike some of them down, and the process would repeat.

The National Company Law Tribunal was established to provide a framework for resolving corporate insolvency cases, but its current state raises concerns about its ability to fulfill this role. With the new law in place, it remains to be seen whether the NCLT can overcome its challenges and provide timely resolutions for companies and individuals.

The NCLT’s sanctioned strength of 63 members has remained unchanged since its inception, despite a significant increase in its workload. This has resulted in a substantial backlog of cases, with many pending for extended periods. The tribunal’s inability to fill vacancies promptly has exacerbated the issue, leading to a shortage of members to hear cases.

The NCLT’s current state has led to a situation where 18 of its benches are operating with reduced capacity, hearing cases only half a day since last month. This has resulted in significant delays, with some cases being adjourned for extended periods. The tribunal’s struggles have not gone unnoticed, with the Supreme Court expressing frustration over the situation.