Deadline 14 days, but time to decide on admitting insolvency cases goes on

Resolution professional in Anil Ambani insolvency case says that it had been more than a year since a suit for recovery was filed against the businessman

Company law tribunals have 14 days to admit or reject an insolvency case, but official data shows that not one application was admitted in this period.

A discussion paper by the Insolvency and Bankruptcy Board of India lays down the time taken for admission of Section 9 applications (to start insolvency proceedings) in the last two financial years:

The resolution professional (RP) in the Anil Ambani insolvency case sought an urgent hearing of the matter, saying that it had been more than a year since a suit for recovery of Rs 1,200 crore loan was brought against the businessman.

The National Company Law Appellate Tribunal (NCLAT) has tried to address this issue. In the matter of JK Jute Mills Company, Limited versus Surendra Trading Company the NCLAT held that the objective of the 14-day period was to prevent delay in hearing cases. 

In the matter of RP of International Recreation and Amusement Limited (IRAL), a lender of the company approached NCLAT seeking it to direct the concerned National Company Law Tribunal(NCLT) to hear the case at the earliest after the Principal Bench of the NCLT Delhi had adjourned the matter as many as 18 times since 2019. NCLAT observed that there is a need to introduce a supervisory provision. “Due to lack of supervisory jurisdiction, many aggrieved persons are compelled to file an appeal,” it held. 

“Similarly in State Bank of India versus Sanjay Singhal (Promoter of Bhushan Steels) the case was admitted after 14 days of the RP report,” said Raj Bhalla, partner at MV Kini. 

To tackle the delay, the IBC was amended in 2019 and the NCLTs were required to record reasons in writing for delay in the admission of applications filed by lenders. The recent amendments to the Information Utility (IU) Regulations by the IBBI were also aimed at addressing delays in the insolvency process.

Nirav Shah, partner at DSK Legal, said a lender could consider approaching the appellate authority for directions to pass orders within a specific time. A party may also consider filing a writ under Article 227 of the Constitution (which is the supervisory jurisdiction that the High Court exercises). “However, in our view, the High Court is unlikely to interfere unless grave injustice or tremendous prejudice can be demonstrated,” he said.