Supreme Court Criticism Spurs NCLT Reform Urgency

Recent developments have cast a spotlight on the National Company Law Tribunal (NCLT) and its appellate body, the National Company Law Appellate Tribunal (NCLAT). The Supreme Court has repeatedly criticised these bodies for administrative inefficiencies and operational delays. This has triggered calls for urgent reforms to streamline their functioning and restore balance between insolvency and company law adjudication.

Judicial Criticism and Supreme Court Directives

The Supreme Court has expressed strong dissatisfaction with the NCLT and NCLAT’s performance. In the 2025 Mansi Brar Fernandez case, the Court mandated filling vacancies on a war footing and directed the creation of dedicated benches for Insolvency and Bankruptcy Code (IBC) cases. Earlier, in the 2024 Jet Airways resolution case, the Court brought into light systemic flaws and delays in the tribunals. These criticisms underline the urgent need for operational reforms.

Dual Role and Functional Imbalance of NCLT

Since the Insolvency and Bankruptcy Code, 2016, the NCLT has handled both company law matters and insolvency cases. This dual mandate has caused a functional skew towards insolvency cases, as these require strict timelines and priority. Data from March 2025 shows 48,089 fresh IBC cases filed, compared to 36,374 under the Companies Act. Pending IBC cases are nearly double those under company law. This overload affects quality and timeliness of adjudication.

Case Load and Disposal Rates

Despite the heavy case load, the NCLT’s disposal rate is commendable. Some benches operate below full strength, and members often manage multiple benches. However, rising insolvency filings and strict timelines create pressure. The backlog threatens to undermine the tribunal’s effectiveness. The Company Law Committee (2022) and Standing Committee on Finance (2021) have both recommended dedicated IBC benches to reduce delays.

Historical Concerns on Tribunalisation

The debate over tribunalisation of company law matters dates back to the 2010 Madras Bar Association case. Critics warned of executive interference and structural overloads. Though the Supreme Court upheld the NCLT’s constitutionality, many safeguards remain unimplemented. The issue of unregulated member transfers is still under judicial review. This has contributed to uneven bench strength and operational challenges.

Proposals for Structural Reforms

Recent parliamentary recommendations advocate creating exclusive tribunals for IBC cases to manage the growing caseload. This approach aims to reduce delays, which now average 507 days against the 330-day statutory limit. Converting existing NCLT benches to dedicated IBC tribunals is preferred over establishing new bodies, to save time and costs. Jurisdiction over company law matters may be returned to High Courts, restoring a clearer division of responsibilities.

Operational and Institutional Challenges

The NCLT’s current challenges stem from overlapping jurisdictions and resource constraints. Member vacancies, bench strength disparities, and administrative bottlenecks hamper efficient functioning. Addressing these issues requires coordinated action among the judiciary, legislature, and executive. The reforms seek to balance insolvency resolution speed with comprehensive company law adjudication.

Future Outlook for NCLT and NCLAT

The success of proposed reforms depends on timely implementation and institutional commitment. Dedicated IBC benches could improve resolution timelines and reduce pendency. Restoring company law jurisdiction to High Courts may enhance specialised adjudication. Monitoring and accountability mechanisms are essential to prevent recurrence of past inefficiencies. The evolving framework aims to strengthen India’s corporate legal infrastructure.

Questions for UPSC:

1. Critically analyse the impact of tribunalisation on the adjudication of corporate disputes in India with suitable examples.
2. What are the challenges faced by quasi-judicial bodies like the National Company Law Tribunal? How can these be addressed to enhance judicial efficiency?
3. Explain the significance of the Insolvency and Bankruptcy Code, 2016 in India’s economic reforms. Comment on the role of judicial oversight in its implementation.
4. With reference to the separation of powers, critically examine the risks of executive interference in judicial or quasi-judicial institutions in India.

Answer Hints:

1. Critically analyse the impact of tribunalisation on the adjudication of corporate disputes in India with suitable examples.

1. Tribunalisation aimed to streamline corporate dispute resolution by creating specialized bodies like NCLT and NCLAT.
2. It replaced fragmented forums, consolidating company law and insolvency matters under one umbrella.
3. However, dual mandate led to functional imbalance, prioritizing IBC cases over company law disputes.
4. Examples – Supreme Court criticism in Mansi Brar Fernandez (2025) and Jet Airways (2024) brought into light delays and inefficiencies.
5. Unregulated member transfers and understaffing caused uneven bench strength and operational challenges.
6. Overall, tribunalisation improved specialization but created new bottlenecks needing reform.

2. What are the challenges faced by quasi-judicial bodies like the National Company Law Tribunal? How can these be addressed to enhance judicial efficiency?

1. Challenges include heavy caseload, especially rising IBC filings, causing backlog and delay.
2. Dual jurisdiction causes skewed focus towards insolvency, neglecting company law matters.
3. Vacancies, understaffed benches, and multiple bench handling by members reduce efficiency.
4. Unregulated transfers lead to bench imbalance and operational disruptions.
5. Proposed solutions – dedicated IBC benches, filling vacancies urgently, restoring company law jurisdiction to High Courts.
6. Enhanced coordination among judiciary, legislature, and executive is essential for reforms.

3. Explain the significance of the Insolvency and Bankruptcy Code, 2016 in India’s economic reforms. Comment on the role of judicial oversight in its implementation.

1. IBC consolidated fragmented insolvency laws, introducing a time-bound resolution process to improve creditor recovery.
2. It enhanced ease of doing business by providing a clear insolvency framework and reducing delays.
3. Strict timelines (330 days) aim to prevent prolonged insolvency proceedings.
4. Judicial oversight by NCLT and NCLAT ensures fair adjudication but has faced operational challenges.
5. Supreme Court interventions (e.g., Mansi Brar Fernandez, Jet Airways) tell the need for efficient tribunal functioning.
6. Judicial monitoring helps balance speedy resolution with protecting stakeholders’ rights.

4. With reference to the separation of powers, critically examine the risks of executive interference in judicial or quasi-judicial institutions in India.

1. Executive controls appointments, transfers, and postings of tribunal members, risking undue influence.
2. Unregulated transfers in NCLT benches have led to vacancies and bench imbalances, affecting independence.
3. Madras Bar Association cases (2010, 2021) brought into light concerns over executive interference and structural overload.
4. Such interference undermines judicial autonomy and public confidence in impartial adjudication.
5. Separation of powers demands safeguards like transparent appointments and fixed tenure to protect tribunal independence.
6. Judicial review and constitutional mandates are essential to check executive overreach in quasi-judicial bodies.