Beyond Statutory Timelines: How NCLT Overload Threatens the IBC’s Core Objectives

The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘IBC’) is said to be one of the most rapid-changing statutes with a plethora of amendments and regulations in a short amount of time since its inception. It was established primarily to ensure swift resolution, value maximisation, and balanced protection for all stakeholders. However, a decade later, the promise to ensure time-boundness stands jeopardised. The National Company Law Tribunal (hereinafter referred to as the ‘NCLT’) which forms the Code’s principal Adjudicating Authority is now overburdened, understaffed, and entangled in the spirals of complex litigation. As the time-limit extends and cases pile up, the statutory-intended balance between speed, value maximisation, and stakeholder protection begins to unravel.

The journey of IBC laws has come a long way, marking its importance in restructuring the corporate horizons of the country and adopting a unified approach to streamline the revival of individual companies and LLPs in India. Prior to the IBC, insolvency matters in India used to be governed by various statutes, including the Companies Act 1956 which dealt with corporate winding-up, alongside the Sick Industrial (Special Provisions) Companies Act, 1985 (SICA) which aimed at reviving financially distressed industrial firms. LLPs used to be governed by the Limited Liability Partnerships Act 2008, and individual bankruptcies used to be resolved by the CPC through Recovery of Money Suits (Order IV Rule 1).

However, due to procedural delays, jurisdictional difficulties, and insufficient mechanisms to deal with modern corporate complexities, the IBC was enacted to offer a comprehensive legal remedy to revive financially failed companies, paving a broad way towards asset maximization, timely resolution, and the promotion of entrepreneurship. The statutory authority given to the NCLT, however, has fallen short to incorporate the promised objectives in the Code.

NCLT at Crossroads

Over the years since the inception of the Code, the performance of the NCLT has not been very satisfactory. As per various reports published by the authorities, individual researchers, and government bodies, the IBC has the highest number of pending cases in the NCLT. As per Case Status Report, March 2025, 23,612 cases of IBC are pending as on 31st March 2025. This glaring number of pending cases is a call for concern as the objective of timely resolution falls short. Moreover, it fails to address the issues which were causes of concern with the erstwhile insolvency legal landscape. The amount involved in these cases is INR 13,93,902.35 crores as on 31st March 2025. This has become a road-block in resolving the issue to provide protection to the creditors and therefore reduces the trust of domestic as well as foreign investors in the Indian economy.

As we move ahead into the new age, the Indian economy is becoming one of the fastest growing economies in the world, but to cross the threshold to become a developed economy, tribunals like the NCLT have to step up and provide for faster resolution so as to support the growth of India. It has taken an average of approx. 602 days (not including the time for the approvals from the Adjudicating Authority) for the conclusion of 1,258 CIRPsCIRPCorporate Insolvency Resolution Process. which yielded resolutions plans as on June 2025. Likewise for the 2,824 CIRPs, which resulted in liquidation, it took approx. 502 days to be concluded. For 1,439 liquidation proceedings, which were concluded by the submission of the final report, around 651 days was the average timeline. This is a gross failure on the part of the NCLT not able to adhere to a strict timeline of 330 days as prescribed under the Code.

The Supreme Court in Essar Steel, wherein the actual time taken for resolution was 865 days, relaxed the statutory time-limit, observing that the timeline of 270 days is directory and not mandatory, placing utmost confidence in the Committee of Creditors (CoC). In Jaypee Infratech, the case exceeding 5 years for resolution, prolonged litigation concerning the claims of the homebuyers and rival resolution bids led to significant delays, ultimately leaving thousands of homebuyers in limbo and causing a steady decline in the value of creditors’ recoveries.

During the hearing of Jet Airways, the Hon’ble Court called upon the various stakeholders involved in the IBC process and observed that strict adherence to the Code’s provisions, coupled with ethical conduct, is pivotal for all key participants in the IBC, including the adjudicating authorities, debtors, Resolution Professionals, Creditors, Applicants, Valuers, and Liquidators, in order to ensure effective implementation. The Apex Court observed that the Tribunals continue to grapple with infrastructural and operational constraints, resulting in the Judges having to manage multiple benches or work part-time. These limitations have not only impeded the timely resolution of insolvency matters but have also highlighted systemic delays pervasive across various facets of the insolvency framework.

At times, the technical complexity in certain matters exposes a gap in the specialised expertise of tribunal judges, which can be critical for effective adjudication. It is noteworthy that both insolvency disputes under the IBC and Company law matters fall within the jurisdiction of the NCLT/NCLAT, each governed by distinct procedural and substantive frameworks. From a practitioner’s standpoint, or through regular appearances before these forums, it becomes evident that a substantial portion of the Tribunal’s time is absorbed by IBC-related cases, often resulting in Company law matters being deferred to later dates. It is also pertinent to mention that due to the understaffing of the NCLT, a number of vacancies are yet to be filled in all the sixteen benches of the NCLT.

Further, the NCLT has also witnessed the transfer of many ongoing matters from the Company Law Board, Board of Industrial and Financial Reconstruction making up to around 700 ongoing cases in the NCLT . With the influx of new cases, and a slow rate of disposal, the NCLT is already over-burdened, resulting in delays and inefficiency. Another interesting fact to note is how most companies under the regime of restructuring end up with liquidation of assets. Taking all the facts into consideration, the efficiency of the NCLT in dealing with insolvency matters in line of the Code is put to question very significantly.

The Way Forward

In light of the impediments faced by the institutional body, a number of Committee Reports, judicial precedents, and juridical academia have come to realise the need for a separate dedicated Tribunal for the purpose of insolvency. The speech delivered by Mrs. Nirmala Sitharaman, Finance Minister, in Parliament, deliberating on the difficulties faced by the NCLT and the thought of the government towards making insolvency convenient for ease of doing business, added fuel to the fire. The Hon’ble Bombay High Court, while commenting on the performance of the NCLT suggested making ‘the working and functioning of these tribunals litigant friendly and effective’, by placing at the disposal of the judicial members, the trained and competent staff. Further, an Expert Panel headed by T.K. Viswanathan and comprising members of the Insolvency & Bankruptcy Board of India (IBBI) suggested a full-fledged framework to weave in ‘out of court’ settlements into the insolvency process. This ‘rescue culture’ was expected to expedite insolvency cases in the country.

Exploring across the various remedies discussed throughout this article, the conclusion that steers ahead of the IBC landscape is the establishment of a separate dedicated tribunal specifically to deal with IBC-related matters. Some specific established branches of the NCLT, where the influx of IBC related matters is higher, for example, Mumbai and Delhi branch with more than 50% of the registered companies could be specifically be designated to handle the IBC related matters. The Government and various stakeholders have to come together and contribute to an institutional body which earmarks on the start of a new era of Insolvency in India.