Corporate Affairs Ministry (MCA) on Sunday underscored the need for a significant ramp up in the processing capacity of insolvency cases under the Insolvency Bankruptcy Code (IBC), noting that a “large gap” still exists between the demand on the system and the current NCLT processing capacity. 

This is even as the pace of resolutions approved by the NCLT under the IBC has shown “steady improvement” in the recent years, Manoj Govil, Secretary, MCA said at the Seventh Annual Day event of the Insolvency and Bankruptcy Board of India (IBBI) in the capital. 

From an average run rate of approving 100 resolutions in a fiscal year, the NCLT is all set to approve a record 300 resolutions this fiscal year. 

Govil noted about 5000 new cases are filed with NCLT every financial year. Even if one were to factor in about one third of cases getting withdrawn on pre admission stage and other reasons, there is need for capacity to handle of 1500 cases. “We should have a capacity to process atleast 1000 cases. There is still large gap and need to see if current capacity is sufficient enough?”, Govil noted. 

He felt that capacity building is needed in the NCLT system to take care of situation of handling 1000 cases in the days to come as against the current level of around 300 in a fiscal year.

Indications are that the Government will soon make the next round of NCLT member appointments so as to make it work with 100 percent capacity utilisation. Currently NCLT has 57 working members out of the sanctioned limit of 63 including the NCLT President. However, there are no immediate plans to increase the number of NCLT Benches.

MCA Secretary also said that the Government stands willing to take a proposal to Parliament to make the IBC process speedier and smoother. The upcoming winter session of parliament may see the government moving a comprehensive amendment Bill.

Meanwhile, speaking on the occasion, IBBI Chairman Ravi Mital highlighted that IBC has in its seven year journey been quite successful, resulting in direct recovery of over ₹3 lakh crore to creditors (mostly banks). IBC has changed debtor-creditor relationship and this law has been one of the key factors in bringing down banks’ NPA  as percentage of advances to 3.9 percent as of March 2023. “I am told that in the next one year this number should come down further to 3.5 percent”, Mital said. 

Commenting on criticism in certain quarters that IBC system is riddled with delays, Mital noted that “glass is half full or half empty”.

He highlighted that NCLT had approved 185 resolutions last fiscal  —which is commendable—involving direct recovery of ₹51,000 crore. 

Till end August this fiscal , NCLT had already approved 135 resolutions and is on its way to end the fiscal with record 300 resolutions as against 100 resolutions two years back, Mital noted. 

IBBI Chairman urged Insolvency Professionals (IPs) to increase their speed of work as the Adjudicating Authority (AA) has already ramped up its speed in clearing more resolutions.  IPs should work faster so that atleast 300 cases go to NCLT and a situation does not arise where the Adjudicating Authority ends up without any work, Mital noted. 

Mital also said that the Insolvency and Bankruptcy Board of India (IBBI) will this week come up with three more discussion papers as part of its overall effort to reduce delays in the IBC process. 

Ashok Bhushan, Chairman, National Company Law Appellate Tribunal (NCLAT) said there was a need to enhance the NCLT infrastructure to cope with the increasing case load. 

Bhushan also stressed the need for a cross border insolvency framework on the pattern of UNCITRAL model. Besides the need for group insolvency framework under IBC, there is also a need for periodic review of IBC provisions, he added

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