Bankruptcy law will prevent another Mallya-like case: NCLT chief MM Kumar
NCLT president M.M. Kumar on how it is building capacity to cope with new types of cases it will handle and the importance of quick disposal of cases
The success of the ambitious Insolvency and Bankruptcy Code implemented by the government in record time is dependent on its institutions like the regulator, the adjudicating authority and the professionals involved. The National Company Law Tribunal (NCLT), set up in 2016, took on the roles of not just the Company Law Board, but other jurisdictions of winding-up, liquidation and corporate insolvency as the adjudicating authority.
In an interview, NCLT president M.M. Kumar talks about how NCLT is building capacity to cope with the new type of cases it will handle and the importance of quick disposal of cases for India to become a hub of investments. Edited excerpts.
We have seen some big debt-related cases recently. What are the chances of those occurring now?
Now, the provisions in the Insolvency and Bankruptcy Code say that the day a default is committed for more than Rs1 lakh, the machinery must be put to action. If the person concerned does not disclose it, he will be liable. Therefore, to think that another (Vijay) Mallya will happen, the possibility is very remote now; it has been taken care of. It appears that the law is foolproof, if worked out properly by each stakeholder. The provisions in various statutes are quite stringent now which will put the people involved in the default to task. So, I don’t think that the professionals should commit any lapse on their part.
What is the kind of work being done at NCLT now?
NCLT was devised under Companies Act 2010 and then further amended under 2013 Act. Initially, it was doing the work which used to be done by the Company Law Board. From 1 December 2016, under the Insolvency Code, we are going to get a number of petitions from the high court, filed under Section 433 of Companies Act. These are winding-up petitions and from 15 December, we have been given the jurisdiction to adjudicate winding-up matters. Likewise, corporate debts usually before the Debt Recovery Tribunals will now be before the NCLT. We addressed communications to chief justices of high courts to identify the transferable cases.
Having such a wide jurisdiction, how feasible is it to have all the work under one organization?
If you closely monitor the tribunal and the proceedings, the way they have been entrusted to the tribunal—they are step by step. In the next two-three months, we will have all cases transferred; with the abatement of BIFR (Board for Industrial and Financial Reconstruction) proceedings, parties may or may not come to file the petition before the tribunal. For corporate debt, there is a possibility that with the creditors and the board, the case is solved in the board itself. So at the moment, it is not very easy to say what type of work pressure will come on the NCLT. But in any case, the NCLT is thoroughly prepared and making all efforts. The team of officers which presently has 24 members is very well equipped. I’m sure the NCLT will not disappoint the stakeholders in achieving the objective which is expected.
How are you preparing for the newer jurisdictions, since a large number of cases are likely to be shifted?
We have 10 locations for the time being; all 10 are at the seat of the high courts. We are also contemplating opening benches say at Jaipur, Kochi and even in Odisha. So, the benches are going to increase in order to avoid inconvenience to litigant public. I believe that the government is already taking steps to increase the number suitably so that we may be able to cope with the rush of work which may arise with the enforcement of the insolvency code.
The basic objective of establishing the NCLT was that it should serve as a one-window institution for solving the problems of the corporate sector. The jurisdiction of the high court in the respect of the corporate sector, jurisdiction of the DRT, jurisdiction of BIFR, AAIFR (Appellate Authority for Industrial and Financial Reconstruction), they have been taken away and NCLT would be exercising all these jurisdictions. Objective is efficient and quick disposal of cases, so that India may become a favourite destination for investments.
Every three months, we will be holding colloquiums where we will invite a variety of experts to impart better education to all of us. Members of the bar, company secretaries and chartered accountants are also under obligation to assist the tribunal.
How does the NCLT expect to meet the short deadlines across Companies Act and Bankruptcy Code?
If you read Section 422 of the Companies Act, a three-month time period has been given and an extension of 60 days can be granted by the president. It is a very ambitious a timeline imposed by the statute and I personally feel that the type of cases which come before the NCLT may not be disposed of within the timeline given in the statute. There are a number of cases where the volumes of pleadings run into 80 volumes and the arguments go on for weeks. But all efforts are being made to adhere to the timelines.
Likewise, in the Insolvency and Bankruptcy Code, there are provisions for disposal of petition within 180 days. Time will tell whether we will be able to cope within the time limit. This time limit depends on a number of factors - the manpower (human resources) available, the efficiency of the members, the assistance from the bar and attitude not to seek adjournment.