The time being taken is much higher than the IBC-prescribed period for admission and resolution of cases
With the delay in admission of cases to the National Company Law Tribunal (NCLT), banks are opting for one-time settlements for small and mid-sized companies, the Business Standard reported. As per the report, only two out of the 33 cases referred to the NCLT by the United Bank of India (UBI) have been admitted so far.
Although the Insolvency & Bankruptcy Code (IBC) lays down a period of 14 days for admission of a case and 180 days for its resolution (with a possible extension of 90 days), the present picture is different.
Admission time for cases is being dragged to four or five months, a situation that has prompted banks to resort to compromise in case of small and mid-sized accounts. The slowed pace is reflected in the numbers.
As indicated by data from the Insolvency & Bankruptcy Board of India (IBBI), between January 2017 and March 2019, 1,858 cases for corporate insolvency had been admitted, of which 152 were closed and 91 were withdrawn under Section 12A. (Section 12A of the IBC allows corporate debtors to withdraw from the NCLT with the consent of 90 percent of lenders. This section was inserted by an amendment to the IBC in 2018)
In some cases, resolution professionals said the delay in admission of cases to NCLT stretches up to 11 months. Possibility of such scenarios is pushing banks to look for alternatives and restructuring under Section 230 of the Companies Act is one such option. Under this, creditors can make arrangements with the members of the company to restructure debts, thereby eliminating delays and offering possibilities of better value.
Few experts cited other reasons like the inadequate machinery to manage the process, shortage of NCLT benches and holidays for the delayed admission of cases. There are 14 NCLT benches at present.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.