National Company Law Tribunal towards Insolvency and Bankruptcy code

The National Company Law Tribunal (NCLT) is a quasi-judicial body that was established under the Companies Act, 2013, with the objective of providing a faster and more efficient mechanism for resolving corporate disputes. One of the key areas where the NCLT has been playing an increasingly important role in recent years is in the resolution of insolvency and bankruptcy cases under the Insolvency and Bankruptcy Code (IBC), 2016. In this essay, we will discuss the role of the NCLT in the IBC process, its functioning, and its impact on the Indian corporate sector.

The IBC was enacted in 2016 with the aim of providing a consolidated framework for the resolution of insolvency and bankruptcy cases in India. Prior to the enactment of the IBC, the process of insolvency and bankruptcy resolution in India was fragmented and time-consuming, often leading to delays and inefficiencies. The IBC sought to address these issues by providing a time-bound and structured process for the resolution of insolvency and bankruptcy cases, with a focus on maximizing the value of distressed assets.

The NCLT plays a central role in the IBC process, with several of its provisions providing for the initiation and resolution of insolvency proceedings. Under the IBC, an insolvency resolution process (IRP) can be initiated by a financial creditor, operational creditor, or the corporate debtor itself. The IRP is managed by an insolvency professional (IP), who is appointed by the NCLT, and the process is overseen by the NCLT.

The first step in the IRP process is the admission of the application by the NCLT. Once the application is admitted, the NCLT appoints an IP, who takes charge of the management of the company. The IP is responsible for managing the affairs of the company during the IRP period and is accountable to the NCLT. During the IRP period, the company is protected from any legal action by its creditors, and the IP is responsible for managing the company’s affairs in a way that maximizes the value of its assets.

If the IRP process is successful, the company is either restructured, sold to a new owner, or liquidated. The NCLT oversees the entire process, including the approval of the resolution plan, the sale of the company, and the distribution of the proceeds to the creditors. The entire process is time-bound, with a maximum period of 330 days from the date of admission of the application to the approval of the resolution plan.

Functions of the NCLT under the IBC:

• Adjudicating insolvency and bankruptcy cases: The NCLT is the first point of contact for insolvency and bankruptcy cases filed under the IBC. It has the power to admit or reject these cases based on the eligibility criteria laid down in the IBC. Once a case is admitted, the NCLT supervises the resolution process and ensures that it is carried out in a fair and transparent manner.
• Appointment of insolvency professionals: The NCLT appoints an insolvency professional to manage the affairs of the company during the insolvency resolution process. The insolvency professional is responsible for taking all necessary steps to preserve the value of the assets of the company and to maximize the recovery of creditors.
• Approval of resolution plans: The NCLT is responsible for approving the resolution plan submitted by the resolution applicant. The resolution plan should be in compliance with the provisions of the IBC and should ensure the maximum recovery for creditors.
• Liquidation of assets: If the resolution plan is not approved by the NCLT or if the resolution process fails, the NCLT orders the liquidation of the assets of the company. The liquidation process is carried out under the supervision of the NCLT and the proceeds are distributed among the creditors in a prescribed manner.
• Adjudication of disputes: The NCLT also has the power to adjudicate disputes between stakeholders during the insolvency resolution process. This ensures that all disputes are resolved in a timely and efficient manner and does not disrupt the resolution process.

Benefits of the NCLT under the IBC:

• Speedy resolution: The NCLT has been instrumental in expediting the resolution of insolvency and bankruptcy cases in India. Under the previous regime, the resolution process was time-consuming and often led to delays. The NCLT has significantly reduced the time taken to resolve cases and has provided a much-needed impetus to the resolution process.
• Professional management: The appointment of an insolvency professional ensures that the affairs of the company are managed by a qualified and experienced professional. This ensures that the assets of the company are preserved and maximized for the benefit of the creditors.
• Fairness and transparency: The NCLT ensures that the resolution process is carried out in a fair and transparent manner. This provides a level playing field for all stakeholders and ensures that the resolution process is not marred by malpractices.
• Maximum recovery: The NCLT ensures that the resolution plan approved is in compliance with the IBC and ensures maximum recovery for creditors. This has been a significant boost for creditors who were often left with little or no recovery under the previous regime.

Examples of cases resolved by the NCLT under the IBC:

• Essar Steel: The Essar Steel case was one of the largest cases to be resolved by the NCLT under the IBC. The resolution process was carried out in a fair and transparent manner, and the resolution plan submitted by ArcelorMittal was approved by the NCLT. This led to the resolution of one of the largest non-performing assets in the country.
• Bhushan Steel: The Bhushan Steel case was also one of the largest cases to be resolved by the NCLT under the IBC. The resolution process was carried out in a transparent and efficient manner, and the resolution plan submitted by Tata Steel was approved by the NCLT. This led to the recovery of a significant amount of debt owed by Bhushan Steel to its creditors.
• Jet Airways: The Jet Airways case was one of the first cases to be resolved under the IBC in the aviation sector. The resolution process was carried out in a timely and efficient manner, and the resolution plan submitted by a consortium of investors led by Kalrock Capital was approved by the NCLT. This led to the revival of Jet Airways and the recovery of debt owed to its creditors.
• Videocon Industries: The Videocon Industries case was a high-profile case that was resolved by the NCLT under the IBC. The resolution process was carried out in a transparent and fair manner, and the resolution plan submitted by Twin Star Technologies was approved by the NCLT. This led to the recovery of a significant amount of debt owed by Videocon Industries to its creditors.