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What is the News?
The Supreme Court has said that the “judicial delay” was the main reason for the failure of the insolvency regime in India prior to the Insolvency and Bankruptcy Code (IBC),2016 came into force. Hence, it has urged the company law tribunals to “strictly adhere” to the timelines under the IBC and clear pending resolution plans.
Note: IBC mandates a 330 -day outer limit for the conclusion of the corporate insolvency resolution process (CIRP).
The Ministry of Corporate Affairs Standing Committee on Finance(2020-2021) has released a report titled ‘Implementation of Insolvency and Bankruptcy Code- Pitfalls and Solutions’.
The report has said that more than 71% of the insolvency cases have been pending before the NCLT (National Company Law Tribunal) and NCLAT (National Company Law Appellate Tribunal) for over 180 days.
What has the Supreme Court said on judicial delays in Insolvency cases?
The Supreme Court has said that judicial delay should not become a reason for the failure of the Insolvency and Bankruptcy Code(IBC) regime.
The court said that the major reasons for judicial delays include NCLT taking the considerable time in admitting corporate insolvency resolution process (CIRP), multiplicity of litigation and appeals to the NCLAT and the Supreme Court.
These inordinate delays cause commercial uncertainty, degradation in the value of the corporate debtor, and makes the insolvency process inefficient and expensive.
Hence, it has urged the NCLT and the NCLAT to strictly adhere to the timelines stipulated under the IBC and clear pending resolution plans as early as possible.
Source: This post is based on the article “Don’t let judicial delays fail IBC: Supreme Court” published in The Hindu on 13th September 2021.