Home / Politics / Policy /  Company law tribunal formally takes over winding-up matters under Companies Act

New Delhi: Beginning Thursday, the National Company Law Tribunal (NCLT) formally takes over winding-up matters under the Companies Act 2013.

The government earlier notified that all pending proceedings and cases of reconstruction and winding-up will stand transferred to the NCLT from 15 November. It also notified rules empowering the NCLT to be the appropriate adjudicating authority to handle corporate insolvency matters under the insolvency and bankruptcy code (IBC).

This move is expected to provide some respite to the high courts and district courts which are overburdened with a large number of pending cases. According to available data, as of 2015, the high courts had over 3.87 million pending cases and district courts have to grapple with a pendency of over 20 million cases.

However, practitioners estimate the actual impact of the transfer of cases to be much less.

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“The NCLT will majorly be handling fresh filings under the Companies Act 2013 and the insolvency and bankruptcy code," said Sumant Batra, chairman of the law firm Kesar Dass B. & Associates.

The notification does not transfer all petitions of winding-up to the NCLT. Batra added that only fresh petitions where no notice has been issued to the other side in the dispute or where notice has been issued and not served a copy of the petition will be transferred from the courts. Proceedings started on the recommendations of board of financial reconstruction (BIFR) will also stay with the courts.

Hence, it will be a very small number which will be transferred, Batra said.

Further, the issue of pending cases may not be limited to courts alone.

Chakrapani Misra, a Mumbai-based partner at law firm Khaitan & Co., said that even the NCLT benches, which started functioning in June this year, are overworked.

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“From practical experience of observing the working of NCLT, one can see that the benches are overworked and additional burden like winding up matters and scheme matters being transferred to NCLT from 15 December would further choke the system which is likely to lead to more delays. There is an urgent need to booster the bench strength to effectively deal with the increased work load," Misra said.

At present, there are 12 benches of the NCLT spread across 10 cities including New Delhi, Mumbai, Chennai and Kolkata. Aside from chairperson M.M. Kumar, the NCLT has 23 members—16 judicial members, 7 technical members.

The NCLT was made operational on 1 June. It took over the company law related work from the erstwhile company law board (CLB) on 1 July. The government also made the NCLT the authority for handling corporate insolvencies.

For this, the government made the insolvency and bankruptcy board operational from 1 December and notified rules for insolvency professionals, agencies, and model by-laws under the bankruptcy code. It also issued rules for corporate insolvency resolution and application to adjudicating authority.

What remain unaddressed are the provisions of the insolvency code pertaining to individual insolvency resolution, which was to be under the jurisdiction of the debt recovery tribunals. The government has not notified regulations for personal insolvency till now.

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