Eshita Gain | October 4, 2024
Shortage of judges in the National Company Law Tribunal (NCLT) has increased pendency of cases and resolution time resulting in low debt recovery by lenders of defaulting companies.
The bankruptcy and insolvency court’s current member strength is 47, which is 75% of the required strength of 63 members, according to the NCLT website.
The member count is low because it is hard to find skilled judges who fit the strict eligibility criteria of NCLT, said Sandeep Bajaj, the additional advocate general of Punjab, who has also been an advocate for NCLT since 2017.
“The minimum age requirement for a judge is 50 years for a tenure of 5 years. Nobody wants to give up their established career as a lawyer who is earning almost double or triple than what they would earn as an NCLT judge,” said Bajaj.
The shortage of judges has led to a rise in the pendency of cases in NCLT. NCLT has over 19,000 pending cases with the average resolution time climbing to 756 days in FY2024, a 102 day rise from the year before, according to data submitted by the Ministry of Corporate Affairs in Rajya Sabha.
The stipulated resolution time for a case is 330 days, according to Insolvency and Bankruptcy Code (IBC).
“There are days when a few NCLT judges preside over multiple benches which leads to inadequate time to hear all the cases listed on that day,” said Sowmya Saikumar, partner at Gaurishankar Saikumar and Co who has also been an advocate for NCLT since 2016. She said that the Government needs to be more proactive and make more appointments for judges to reduce the increasing workload of hearing cases.
As the resolution process is delayed, the value of the assets of a company erodes because the business takes a hit, said an advocate of Khaitan & Co. on the condition of anonymity.
The resolution applicant who wants to take over the bankrupt company offers a lesser price to lenders to reduce its own cost, thus leading to a low recovery rate by the lenders, said the person cited above.
Debt recovery rate of the court is 27% of a total of 1,003 admitted claims of defaults in fiscal 2024, according to data released by the Insolvency and Bankruptcy Board of India (IBBI).
Emails sent to NCLT and IBBI did not elicit a response.