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RBI norms add to NCLT burden

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RBI norms add to NCLT burden
The National Company Law Tribunal, already burdened with about 2,000 bankruptcy cases pending, may see a flurry of fresh cases that may affect time-bound resolution after the banking regulator revamped the way loan defaults are to be handled, lawyers and bankers said.
Right now, only some of the large cases are being tried, but there are several cases in the SME (small and medium enterprise) and mid-cap space where we have done restructuring and it has failed. If we send so many of these cases to NCLT, I don’t know how the logistics will work,” said a banker.
The RBI on Monday scrapped all debt restructuring schemes and made resolution of bad loans time bound with the Insolvency & Bankruptcy Code becoming the main tool to deal with defaulters. RBI said accounts with aggregate debt of more than Rs 2,000 crore will have to be taken to NCLT within 15 days if a resolution plan does not bear fruit in 180 days.
“NCLT is already under stress because they don’t have as many members and they have been struggling to cope with the pressure.My recommendation has been that we need to have more members to not only the NCLT, but also the NCLAT (National Company Law Appellate Tribunal). NCLAT should have branches across the country, at least three more,” said Sumant Batra, managing partner at Kesar Dass, a law firm specialising in bankruptcies. About 5,000 cases have been referred so far to NCLT, which was set up in June 2016, and more than 500 cases are at various stages of hearing where insolvency resolution has been initiated. While the tribunal has disposed of 2,750 cases, there are 1,988 cases pending and 35 companies have been put under liquidation after their creditors did not agree to the resolution plan.
Currently, India has one NCLAT and 11 NCLT benches. NCLT has 22 members – 16 judicial members and six technical members. Experts said each NCLT should have at least four members. The government may set up three more NCLT benches as the number of companies referred to bankruptcy court rises, ET reported last month.
The new benches are expected to come up in Bhubaneswar, Jaipur and Kochi. Currently, NCLT has one principal bench in Delhi and 10 benches in Delhi, Ahmadabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai. “For large cases, we are able to find buyers but for small cases, unless there are good resolution professionals and investment bankers, a lot of cases would end up in liquidation.  It’s important to see what’s done with smaller cases belowRs 2,000 crore – some of these cases are not marketed properly and may not get the desired valuations and buyers in NCLT,” said another banker.
The Economic Times, New Delhi, 15th February  2018

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