5 ASIAN LEGAL BUSINESS – INDIA E-MAGAZINE WWW.LEGALBUSINESSONLINE.COM 90 percent for the first time since its inception in 2016, a special parliamentary committee noted that the appointment process reveals “a vicious cycle of appointment of new members alongside retirement/completion of term of old members thereby rendering a perpetual vacancy in the tribunal that is plagued with inordinate delays in cases regarding both IBC and Companies Act.” “Apart from the human resource gaps, the committee would like to highlight that the NCLT is functioning with poor infrastructural setup,” the report found. Admission of claims, which is to take place within 14 days under the IBC, does not conclude for at least three months in any contested case, says Dasgupta. And there is no guarantee that once a matter is listed on a cause list it will be heard. Over 25 percent of the time, the court will not convene, or the case will not reach due to the large number of matters listed above it on the day. And in 50 percent of cases, arguments do not conclude due to judicial incompetency or unnecessary delay tactics, Dasgupta explains. Due to huge backlogs, continuances are easily granted, with next hearing for the case scheduled at least 20-30 days later, Dasgupta adds. The NCLT is also responsible for approving mergers and amalgamations under the Companies Act, which takes up only one day week, further delaying the M&A process in the country as well. NEED FOR DISCIPLINE There is a need for judicial discipline and proper training, lawyers say, adding that their frustration with the system stems from a lack of judicial competency. An NCLT bench comprises a judicial member and a technical member. The judicial members come from lower courts and have little to no understanding of financial laws, debt recovery or the functioning of such specialised tribunals. Meanwhile, the technical members are career bureaucrats who generally do not function at a commercial pace. They do not understand modern commercial concepts needed for any debt recovery proceedings and are poorly and improperly trained. It is also tough to train careerists who have retired from government service. This lack of training and commercial understanding means more time is granted to hear frivolous objections. NCLT approval for resolution plans, which should be a ‘tick-in-the-box’ exercise once the committee of creditors approves the plan, becomes a longdrawn process taking up to five years in some cases. This has led to many successful resolution applicants backing out of resolution plans that have lost value post-CoC approval, pending NCLT approval. The value of a company in insolvency continues to fall, and a resolution plan that was valid at the time of approval if thrown out the window by years of delay at the NCLT, Dasgupta explains. This means fewer investors will look at IBC assets as valid investment options, further reducing the IBC’s effectiveness as a debt resolution mechanism. Lawyers, on conditions of anonymity, have shared instances where technical members are sleeping on the bench during hearings, while some have been known to grant untimely continuances for months on the basis of procedural and filing errors, which are not contested and would take minutes to resolve. The solution is to have younger, commercial-minded, industry-fit and regularly trained lawyers on specialised NCLT benches focused only on IBC cases, lawyers say. An increase in the number of benches and prioritising resolution of claims rather than admission, as is the government’s policy today, will also release pressure, Dasgupta adds. Mandatory institutionalised training is also necessary to improve the situation, another lawyer says. The National Judicial Academy in Bhopal must host training camps not just once, but continuously, to apprise judges of the latest developments, key phrases and financial state in the market, with experts from the industry leading such training. A top tier law firm partner even suggests that law firm practitioners like himself will be willing to serve as judges for some years as a public service, if the law can so allow for it. Deals $8.5 BLN Viacom18’s merger with Star India Deal Type: M&A Firms: AZB & Partners; Cleary Gottlieb Steen & Hamilton; Covington & Burling; J. Sagar Associates; Khaitan & Co; Shardul Amarchand Mangaldas; Skadden, Arps, Slate, Meagher & Flom Jurisdictions: India, U.S. $2.1 BLN British American Tobacco’s divestment in ITC Deal Type: M&A Firms: Herbert Smith Freehills; Shardul Amarchand Mangaldas & Co Jurisdictions: India, UK $1 BLN Sterlite Power and GIC’s power transmission joint venture Deal Type: JV Firms: AZB & Partners; Khaitan & Co; Shardul Amarchand Mangaldas & Co Jurisdictions: India, Singapore $718 MLN Edelweiss Alternatives’ acquisition of L&T Infrastructure Development Projects Deal Type: M&A Firms: AZB & Partners; Trilegal Jurisdictions: Canada, India, Singapore $300 MLN Bharat Highways InvIT’s IPO Deal Type: IPO Firms: J Sagar Associates; Shardul Amarchand Mangaldas & Co; Trilegal Jurisdiction: India $233 MLN Multiples and Advent International’s investment in Svatantra Microfin Deal Type: M&A Firms: Cyril Amarchand Mangaldas; Khaitan & Co Jurisdiction: India