'Time for Government to appoint NCLT Members & NCLAT chief'

The Government should implement capacity-building measures and ensure efficient, quick appointments of National Company Law Tribunal (NCLT) members together with the appointment of the president and chairman of National Company Law Appellate Tribunal (NCLAT), Justice (Retd.) MM Kumar, past president, NCLT said at an ASSOCHAM virtual summit.

“NCLT is a specialised tribunal, it has Companies Act and IBC (Insolvency and Bankruptcy Code), these specialist tribunals are required to be very well equipped and should be in a position to dispose of more cases,” said Justice Kumar addressing the first session of an ASSOCHAM series of National E-Summit on IBC and Valuation.

Justice Kumar further said, “Data of NCLT is not very encouraging, 750-800 cases are disposed of. Now the time has come for the government to take up these issues.” While the number of liquidation cases is staggering, but when one starts analysing it is seen that a large number of liquidation cases are those which are coming from erstwhile SICA (Sick Industrial Companies Act) or very old cases transferred from the HCs. “That number should not worry us,” he said.

Haircut being imposed is a worrying process. “There are write-ups in newspapers and journals that cartels are operating, and professionals are not doing their job properly and all sorts of things are being said out in the open. That aspect that how it can be clubbed needs to be seen,” he worried.

Talking about the need to revamp the valuation system, Justice Kumar said, “I think professional bodies IRP, RPs, CAs are doing a very good job, I think there needs to be some revamping of the valuation system. IBBI (Insolvency and Bankruptcy Board of India) made a large number of attempts. Our law is very old in so far as in terms of valuation of intangible assets, non-financial assets, and contingent claims.”

IBBI is trying to build up the whole regime of valuers, bringing them under one umbrella, some association was also being formed and valuers are being given special training. On liquidation period he said, “Ease of Doing business is the banner, under that, they cannot show to the world at large that we take two years for liquidation. Therefore, if there is no efficient target fixed in law, there is a likelihood of being even lazier.”

Section 128 of the Indian Contract Act should be used more and more to write the guarantee agreement properly. “It is a very interesting section which says that liability of a guarantor is co-extensive with the principal borrower and in the contract of guarantee, a stipulation can be added that first the creditor will exhaust all the remedies against the corporate debtor, the principal borrower then he can resort to the personal guarantor,” Justice Kumar noted.

The government should do something to protect the entrepreneurs who have faced the Corporate Insolvency Resolution Process (CIRP). “IBC has no doubt created financial discipline, but it has also created a feeling of alienation that can be assuaged by the government by bringing a scheme to rehabilitate those who have been adversely affected,” said Justice Kumar.

“Today the position is, entrepreneurs who have gone under CIRP or liquidation are not given loans, they are ineligible. Those people are in dismay, there might be some mechanism by which they might not be allowed to come back for a year or two but after some time they should be allowed to return as they are quite skilful and are national assets and their skills may be used to advance the financial discipline in the country, to enhance the economy of the country.”