‘Fake’ order brings crisis of NCLT vacancies under lens

MUMBAI: It was a day of drama for legal professionals and parties involved with the National Company Law Tribunal (NCLT). The quasi-judicial authority that deals with corporate matters has been under pressure because of empty benches following bunching up of retirements last month. On Tuesday morning, a notification dated August 8 — purportedly issued by the tribunal’s registrar — caused a tumult in legal circles.
The order said, “There is a shortage of honourable members in National Company Law Tribunal benches that is amplified further with honourable members seeking leave on account of health and personal reasons. The situation is currently being met by honourable members taking up multiple benches through VC (video conference).”

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It went on to add that only urgent matters would be taken up through VC with effect from August 10 at all NCLT benches until further orders. It also said that the order was issued with the approval of the NCLT president. The purported circular was doing the rounds of social media & online, and legal firms were quoting it in communications to their clients.
However, later in the afternoon, the NCLT uploaded a clarification on its website, quoting the “so-called” circular of August 8 and stating that it is “not authentic”. “The so-called notification has not been approved by NCLT president. The said notification to be ignored as not valid. It has not been uploaded on the NCLT website,” said the clarification.
Notwithstanding the brouhaha caused by the “not authentic” circular, lawyers said that the absence of members was causing a near crisis. As 23 NCLT members were appointed in 2019 for three years, their retirements got bunched up in July 2022. However, the government has not yet finalised their replacements. On January 15 this year, in the wake of the Omicron wave, NCLT-Mumbai had said that it would hear only urgent matters until January 31, 2022. Lawyers said that decision to prioritise some cases would give rise to challenges.
“In the aftermath of Covid, when there is a significant pendency of cases, there is a need for more people on the bench. This is an important tribunal, not just for domestic but global investors as well. The IBC (Insolvency & Bankruptcy Code) was intended to be an efficient law that would resolve defaults within 180 days. The objective of time-bound resolution is defeated if cases are not heard,” said Dheeraj Nair, a partner at leading law firm JSA.
According to current data, 1,852 cases under IBC are pending at various NCLTs. Further, banks’ recovery from IBC went down to 20.2% in FY21 from 46.3% in FY20. “Filling up vacancies at the NCLT at the earliest will improve the timelines and recovery,” said Hari Hara Mishra, director of asset reconstruction firm UV ARC.
The Supreme Court had criticised the government for not making appointments to the tribunals. According to bankers, despite the law having fixed timelines for resolution, the tribunals are taking the same time as regular courts in disposing of applications where default needs to be established.