Overview: The Supreme Court has taken a strong note of the chronic backlog in approving resolution plans by the NCLT. A specific case where a plan, approved by the CoC on 4 July 2024, remains pending for almost two years, prompted the Court to order a nationwide data collection.
Key Developments
- The bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan directed the NCLT Principal Bench, New Delhi, and the IBBI to furnish comprehensive data on pending approval applications.
- The Court asked for (i) the number of pending applications, (ii) the duration of each pending case, and (iii) reasons for the delay.
- Two weeks were granted to the NCLT and IBBI to submit the report; further action will depend on the findings.
- Senior counsels Mr. Gopal Jain and Mr. Navin Pahwa were appointed as Amicus Curiae to assist the Court.
Important Facts
The dispute originates from an insolvency proceeding involving IIFL Finance Ltd.. IIFL’s claim of ₹85 crore was rejected by the Resolution Professional in 2020, later upheld by the NCLT and the National Company Law Appellate Tribunal in 2023, and is now before the Supreme Court. Meanwhile, a July 3 2024 arbitral award questioned the legitimacy of the loan documents, alleging fraud.
The Resolution Plan approved by the CoC on 4 July 2024 was filed before the NCLT on 12 July 2024, yet it has lingered without adjudication for nearly two years. The Court highlighted that such delays undermine the objective of the IBC to complete the CIRP within the stipulated period.
Exam Relevance
Understanding the functioning of the NCLT and the role of the IBBI is essential for GS 3 (Economy) and GS 2 (Polity) topics. The case illustrates challenges in the implementation of the IBC, a flagship reform aimed at improving ease of doing business and protecting creditor rights.
For essay and answer‑writing, candidates can discuss the balance between speedy resolution of distressed assets and safeguarding due process, the impact of procedural delays on investor confidence, and the need for institutional reforms.
Way Forward
- The NCLT and IBBI should submit the requested data within the stipulated two‑week period.
- Based on the report, the Supreme Court may issue directives to streamline approval timelines, possibly amending procedural rules under the IBC.
- Strengthening monitoring mechanisms and imposing penalties for undue delays could enhance the efficacy of the CIRP.
- Stakeholders, including creditors and resolution professionals, must ensure transparent documentation to avoid disputes like the fraud allegation in the IIFL case.
Timely adjudication of resolution plans is crucial to uphold the spirit of the IBC, protect creditor interests, and maintain confidence in India’s corporate governance framework.