“War Footing Needed”: Supreme Court Slams Dismal State of NCLTs, Warns IBC Goals May Fail

New Delhi | Legal Desk: The Supreme Court of India has expressed strong displeasure over the deteriorating state of affairs at the National Company Law Tribunals (NCLT) across the nation. Describing the current situation as “grim and dismal,” a bench of Justices JB Pardiwala and KV Viswanathan observed that systemic failures are severely obstructing the corporate resolution process.

The “Grim” Reality: Over 700 Days of Delay

The court’s observations followed a report from the NCLT Principal Bench in New Delhi, which highlighted staggering delays in the approval of resolution plans:

• There are currently 383 applications pending across India awaiting final approval.
• Delays in these approvals range significantly, with some cases pending for 48 days to as long as 738 days.
• In extreme instances, the wait for resolution plan approvals has extended up to four years.

Critical Manpower & Infrastructure Gaps

The bench took a stern view of the severe resource crunch hampering the tribunals:

• Staffing Shortage: Against a sanctioned strength of 63 members, only 54 are currently operational (28 judicial and 26 technical).
• Contractual Appointments: The court criticized the appointment of the NCLT registrar on a contractual basis, calling the practice “unheard of” for such an adjudicatory body.
• Unpaid Salaries: Supporting staff members, also hired on contracts, have reportedly not been paid their salaries and allowances regularly.
• Limited Operation: Due to infrastructure constraints, many tribunals are forced to operate for only half a day.

A Threat to the Insolvency & Bankruptcy Code (IBC)

The Supreme Court warned that if these issues are not addressed on a “war footing,” the primary objective of the Insolvency and Bankruptcy Code (IBC)—time-bound resolution—will be frustrated. The court questioned how an adjudicatory body is expected to handle high-stakes corporate cases under such substandard conditions.

Suo Motu Cognizance and Next Steps

Taking suo motu cognizance of the matter in the larger public interest, the bench has directed the case to be placed before Chief Justice of India (CJI) Surya Kant. The CJI will assign the matter to an appropriate bench to ensure the government takes immediate corrective action.

Chief Editor’s Perspective:

The NCLT was designed to be the backbone of India’s “Ease of Doing Business” initiative. If the judiciary itself flags these institutions as failing, it sends a worrying signal to global investors. Mission Ki Awaaz believes that judicial reform is no longer a luxury but a necessity for economic stability.