The move may result in the resolution of lesser economic offences being dealt with in-house, which will in turn bring down the number of routine cases pending with the NCLT
A 14-member expert committee instituted by the government has decided in favour of raising the threshold for cases referred to the National Company Law Tribunal (NCLT), according to a report by Economic Times.
The committee also agreed on decentralisation of power to regional directors, the Registrar of Companies (RoCs) and an in-house adjudication mechanism with an aim to lower NCLT's burden.
The move may result in the resolution of lesser economic offences being dealt with in-house, which will in turn bring down the number of routine cases pending with the NCLT.
It will also lead to banks' bad loans getting resolved faster as the tribunal is intrinsic to the insolvency process.
The changes proposed by the panel do not require any existing laws to be amended.
NCLT benches only hear cases where the quantum of the fine is in excess of Rs 5 lakh at the moment. The panel has now put the ball in the government's court, giving it the prerogative to set the new limit.
The Companies Act categorises violations into three classes – major, minor, and others.
Minor violations, which are offences arising out of violation of procedure, are settled through the in-house mechanism. Major violations mostly comprise fraud and are punishable by imprisonment and a fine.
Violations classified under the 'others' category are more serious than minor cases, but do not involve fraud.
All offences classified under 'major' and 'others' categories are referred to special courts. Apart from fraud, these cases may also pertain to non-filing of financial statements and annual reports.
The proposed reforms will shift around 15 such violations, including non-filing related cases, to the in-house mechanism.
The government is also working on eliminating repeated hearings by introducing one-time resolution of cases pertaining to liquidation, restoration, and de-registration. The aim is to remove the bottlenecks in the settling of insolvency cases by NCLT benches.A total of 9,000 cases are pending before benches of the NCLT, many of which pertain to routine offences. Benches of the NCLT in Mumbai and New Delhi are saddled with 5,000 and 2,100 pending cases, respectively.