Time-Bound Insolvency Resolution Impossible Without Infrastructure: Supreme Court Takes Suo Motu Cognizance Of NCLT Vacancies & Delays

"In the state of affairs that are presently prevailing, the objective of time bound resolution is impossible to achieve," Supreme Court, in a significant development, took suo motu cognizance of the systemic delays and gross infrastructure deficits plaguing the National Company Law Tribunal (NCLT) across the country.

A bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan observed that the very purpose of the Insolvency and Bankruptcy Code (IBC), 2016, which aims for time-bound reorganization of corporate persons, is being frustrated by a "dismal" lack of judicial and administrative resources.

The matter arose during the hearing of civil appeals filed by the AVJ Heightss Apartment Owners Association against IIFL Finance Limited. Upon noticing severe delays in the approval of Resolution Plans, the Court had previously sought reports from the NCLT Registrar and the Insolvency and Bankruptcy Board of India (IBBI). The current proceedings focused on the data provided regarding pendency and the operational hurdles faced by the tribunals.

The primary question before the Court was whether the existing administrative and judicial infrastructure of the NCLT is sufficient to meet the statutory mandate of time-bound resolution under the IBC. The Court also sought to determine the causes behind the significant delays in adjudicating Resolution Plan approval applications and the impact of contractual staffing on tribunal efficiency.

Dismal State of Pendency and Delays

The Court expressed deep concern over the data provided by the Registrar of the NCLT Principal Bench, which revealed that 363 applications for the approval of Resolution Plans are currently awaiting adjudication. The Bench noted that the delay in these cases ranges from 48 days to 738 days, with some cases languishing for up to four years.

The Court observed that the primary reasons assigned for these delays include a lack of adequate infrastructure and the necessity of "half-day sittings" due to the constant interchange of bench combinations. The judges remarked that the large pendency of objections to Resolution Plans filed by various stakeholders further complicates the time-bound mandate of the IBC.

Severe Shortage of Judicial and Technical Members

Court Highlights Vacancy Crisis In NCLT

During the proceedings, the Court was informed that there is a severe shortage of both judicial and technical members across the country. While the statutory sanctioned strength of the NCLT is 63 members, comprising one President and 31 Judicial and Technical Members each, only 28 Judicial Members and 26 Technical Members are currently posted.

The Bench stated that the acute shortage of ten members is "severally affecting the efficiency" of the functioning of NCLT Benches. This deficit prevents the tribunals from disposing of cases within the prescribed time limits, thereby undermining the economic objectives of the Insolvency and Bankruptcy Code.

Unprecedented Reliance on Contractual Staff

Appointment of Contractual Staff Termed "Unheard Of"

The Court took serious exception to the fact that almost the entire administrative framework of the NCLT, including the post of Registrar in several benches, is filled on a contractual basis. It was brought to the Court's notice that Secretary, Court Masters, Stenographers, and legal assistants are all temporary appointments whose services are intermittently terminated.

The Bench described this reliance on contractual staff as "something unheard of" for a judicial body exercising such vast jurisdiction. The Court also noted reports of strikes by NCLT staff due to non-payment of salaries, emphasizing that the lack of permanent staff and research associates for members directly impacts the quality and speed of judicial outcomes.

Objectives of IBC Under Threat

Time-Bound Resolution Objective Frustrated

The Court reiterated that the IBC was enacted as a crucial piece of economic legislation to ensure the maximization of asset value and to keep companies afloat as going concerns. By shifting from a promoter-driven process under the old SICA regime to a creditor-driven process, the IBC was intended to support the credit market and improve the ease of doing business.

The Bench observed that thousands of crores of rupees are at stake in these proceedings. It noted that if the system is not addressed on a "war footing," the objective of sustaining companies and protecting labor will be lost. The Court emphasized that an effective legal framework for timely resolution is essential for higher economic growth.

Proposed Structural Reforms and Guidelines

Amicus Curiae Proposes Directives For Permanent Recruitment

The Court recorded various suggestions provided by the Amicus Curiae, including a directive to the Ministry of Corporate Affairs to recruit permanent staff and provide courtrooms equal to the number of benches. It was suggested that NCLT should decide issues of eligibility under Section 29A and challenges to claims before taking up the Plan Approval Application to avoid fragmented litigation.

The Bench also noted the suggestion that the disposal of avoidance applications should not be linked to the approval of the Resolution Plan, as per the mandate of Section 26 of the IBC. Furthermore, the Amicus proposed that specific regulators, such as RERA or the Income Tax Department, should be impleaded at the initial stage in relevant cases to prevent late-stage hurdles.

Suo Motu Cognizance in Public Interest

Matter Referred To Chief Justice Of India

In light of the "green and dismal" picture of the tribunal's functioning, the Court decided to take suo motu cognizance of the issue in the larger public interest. The Bench stated that the deficiencies in technology, infrastructure, and administrative support require immediate judicial intervention at the highest level to prevent the IBC from becoming a "total failure."

The Court concluded by directing the Registry to place the matter before the Hon’ble Chief Justice of India for further orders and directions. The merits of the individual civil appeals have been deferred pending the procedural directions to be issued by the Chief Justice regarding the systemic overhaul of the NCLT.

The Supreme Court has effectively initiated a systemic review of the NCLT's operational capacity, highlighting that statutory amendments like Section 31(2A) for 30-day plan approvals cannot be realized without physical and human infrastructure. The matter now awaits administrative directions from the Chief Justice of India.

Date of Decision: 29 April 2026