National Company Law Tribunal
Source: PIB
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Overview
- News in Brief
- National Company Law Tribunal (NCLT)
- Insolvency and Bankruptcy Code
Why in News?
The Kolkata bench of the National Company Law Tribunal (NCLT) recently approved the resolution plan of the state-backed National Asset Reconstruction Company (NARCL) for two insolvent Srei companies under the corporate insolvency resolution process (CIRP).
News in Brief
- It will be the first acquisition by the government-owned ARC.
- National Company Law Tribunal, Kolkata has orally pronounced an order approving the resolution plan submitted by National Asset Reconstruction Company.
- It is the part of corporate insolvency resolution process of the companies under Section 31 of the Insolvency and Bankruptcy Code.
National Company Law Tribunal (NCLT)
- National Company Law Tribunal (NCLT) is a quasi-judicial body in India.
- It was established under the Companies Act, 2013.
- To deal with matters related to company law and insolvency and bankruptcy law.
- It was formed to replace the Company Law Board (CLB) and the Board for Industrial and Financial Reconstruction (BIFR), which were the previous bodies responsible for handling similar matters.
- Civil courts do not have jurisdiction over matters handled by NCLT.
- Judicial members are usually retired judges from the higher judiciary, and technical members are experts in fields such as law, finance, economics, and accountancy.
- Authority: Even if the parties reach a settlement after the NCLT authorises an insolvency petition under the IBC, 2016, the case cannot be dismissed until the Supreme Court exercises its power under Article 142.
Article 142 provides a unique power to the Supreme Court, to do “complete justice” between the parties, where, at times, the law or statute may not provide a remedy. In those situations, the Court can extend itself to put an end to a dispute in a manner that would fit the facts of the case
The NCLT has jurisdiction over various corporate matters
- Company Law Matters: NCLT handles cases related to mergers, amalgamations, demergers, oppression and mismanagement, class actions, winding up of companies, reduction of share capital, etc.
- Insolvency and Bankruptcy Matters: NCLT is also the adjudicating authority for corporate insolvency resolution under the Insolvency and Bankruptcy Code, 2016. It deals with cases where a company is unable to pay its debts and is undergoing the insolvency resolution process.
Insolvency and Bankruptcy Code
- The Insolvency and Bankruptcy Code (IBC) is a comprehensive legislation in India that was enacted in 2016.
Image by Gerd Altmann from Pixabay - The objective of providing a time-bound and efficient process for resolving insolvency and bankruptcy-related issues for corporate entities, individuals, and partnerships.
- The IBC replaced multiple existing laws and mechanisms related to insolvency and bankruptcy, streamlining the process and promoting ease of doing business in India.
- It has helped in increasing the recovery rate for creditors and has been a major reform in India’s business and economic landscape.
Key features of the Insolvency and Bankruptcy Code
- Adjudicating Authorities: The IBC established the National Company Law Tribunal (NCLT) as the adjudicating authority for corporate insolvency cases and the Debt Recovery Tribunal (DRT) for individual and partnership insolvency cases.
- Insolvency Resolution Process: The IBC provides a structured process for the resolution of insolvency. It starts with the initiation of insolvency proceedings by either the debtor or the creditors. A licensed insolvency professional takes control of the debtor’s assets and formulates a resolution plan.
- Corporate Insolvency Resolution Process (CIRP): For corporate debtors, the CIRP lasts for a maximum of 330 days, during which a resolution plan is developed and approved by the committee of creditors. If no viable resolution plan is found within this period, the company goes into liquidation.
- Insolvency Professionals (IPs): Insolvency professionals play a crucial role in the insolvency process. They are licensed professionals responsible for managing and administering the affairs of the debtor during the insolvency resolution process.
- Committee of Creditors (CoC): In corporate insolvency cases, the CoC is formed, consisting of financial creditors, who decide on the approval or rejection of the resolution plan.
- Liquidation: If a resolution plan is not approved or if the debtor defaults on implementing an approved plan, the company may go into liquidation. In the liquidation process, the debtor’s assets are sold off, and the proceeds are distributed among the creditors as per the priority defined in the law.
- Fast-Track Insolvency: The IBC provides for a fast-track insolvency process for small and micro enterprises, aiming for quicker resolution.
- Cross-Border Insolvency: The IBC also incorporates provisions for dealing with cross-border insolvency cases, allowing for better coordination with foreign jurisdictions.
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