Delays in Insolvency Resolution: A Growing Concern at NCLT

The average time for insolvency resolution at the National Company Law Tribunal (NCLT) surged from 654 days in 2022-23 to 716 days in 2023-24. Government data revealed an increase in litigation as the primary cause. Amendments and regulation changes aimed at improving efficiency have yet to show significant impact.

The average time taken for an insolvency resolution process at the National Company Law Tribunal (NCLT) was 716 days in the last fiscal year, a rise from 654 days in 2022-23, according to official data.

The corporate affairs ministry informed the Rajya Sabha that in 2021-22, the average time was 557 days, with a 23% realisable amount compared to admitted claims.

Under the Insolvency and Bankruptcy Code (IBC), the resolution time should be 330 days, including litigation. However, in 2023-24, it increased to 716 days, with a 27% realisable amount, as revealed by Minister of State for Corporate Affairs Harsh Malhotra in a written reply.

The data also showed that in 2022-23, resolution took 654 days, with a 36% realisable amount. Since its inception in 2016, the IBC has been amended six times.

"During financial year 2023-24, 12 amendments were made to various regulations and model bye-laws, resulting in 86 changes to strengthen the process," said Minister Malhotra.

As per the Insolvency and Bankruptcy Board of India (IBBI), 1,973 corporate insolvency processes were ongoing as of June 30, 2024, with 1,249 cases exceeding the 330-day resolution timeline.

"The increase in resolution time is largely due to litigation and interlocutory applications," Malhotra added.

In another written reply, Malhotra stated that 19,770 cases were pending before NCLT as of June 30, 2024, with 10,125 pending for over a year. Additionally, 3,019 cases were pending before the National Company Law Appellate Tribunal (NCLAT), with 1,356 pending for over a year.

(With inputs from agencies.)