The Supreme Court of India has initiated a suo motu (on its own motion) proceeding to address the “extremely grim and dismal” state of the National Company Law Tribunal (NCLT). A Bench comprising Justices JB Pardiwala and KV Viswanathan warned that the persistent backlog of cases threatens to frustrate the core purpose of the Insolvency and Bankruptcy Code (IBC): swift asset resolution.
The Magnitude of the Backlog
Based on a report from the NCLT Registrar, the Court highlighted a massive bottleneck in clearing corporate insolvency resolution plans:
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Total Pending Applications: 383 plans are currently awaiting approval.
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Duration of Delays: Delays range from 48 days to 738 days, with some cases languishing for nearly four years.
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The Bottleneck: Even after the Committee of Creditors (CoC) clears a plan, applications often sit for two or more years before the NCLT grants final approval.
Core Challenges Identified
The Court identified a “perfect storm” of administrative and structural issues causing these delays:
1. Acute Manpower Shortage
The tribunal is operating significantly below its sanctioned capacity:
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Sanctioned Strength: 63 members.
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Current Vacancies: Only 28 judicial and 26 technical members are currently in position across India.
2. Infrastructure & Administrative Hurdles
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“Unheard Of” Appointments: The Court flagged that critical positions, like the Registrar, are being filled on a contractual basis.
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Operational Instability: Frequent changes in Bench compositions and temporary staff contracts have led to “half-day sittings” and delayed salaries/allowances.
3. Procedural Friction
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A significant surge in stakeholder objections against resolution plans.
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Limited use of interim orders to prevent proceedings from stalling.
Next Steps
The Bench has referred the matter to Chief Justice Surya Kant for further orders, emphasizing that the issue must be handled on a “war footing” to protect the public interest. Senior advocates Gopal Jain and Navin Pahwa have been appointed as amici curiae to assist the Court with comprehensive data collection.
Why this matters: The IBC was designed to prevent the erosion of asset value. When a resolution plan is stuck in litigation for years, the distressed company’s value often plummets, leaving creditors with far less than they would have received under a timely resolution.
