Introduction
Senior Advocate Sanjiv Sen has expressed dissatisfaction with the Central government’s handling of issues facing the National Company Law Tribunals (NCLTs). Having a robust practice in commercial law, with significant exposure to company law, insolvency, taxation, and arbitration, Sen has frequently appeared before the Supreme Court, High Courts, NCLT, and the National Company Law Appellate Tribunal (NCLAT). His notable insolvency cases include those involving Jaypee Infratech, Essar Steel, and Bhushan Power and Steel.
In an interview with Bar & Bench’s SN Thyagarajan marking the tenth anniversary of the Insolvency and Bankruptcy Code (IBC), Sen shared his insights into the workings of the NCLTs and NCLAT, delays in insolvency processes, and the treatment of operational creditors.
Tribunal Performance Assessment
When asked about the performance of the NCLT and NCLAT over the past decade, Sen remarked that, while ideally, High Courts should handle all matters, tribunalisation has become necessary due to the substantial backlog in courts. He noted that the NCLT, operational since 2016, has primarily focused on insolvency cases post-IBC, sidelining pure company law matters.
Sen acknowledged the consolidation of diverse jurisdictions under one tribunal as a positive move, citing the NCLT’s specialization and efficiency in scheduling hearings compared to traditional High Courts.
Delay Factors and Infrastructure Issues
Sen criticized the inadequate infrastructure of the NCLT, highlighting issues such as the tribunal’s location in a high-security area in Delhi, requiring lawyers to obtain entry passes, and the overcrowded and poorly maintained courtrooms.
He pointed out that despite recent efforts to fill vacancies, more than 15 remain open, and the NCLAT has been without a Chairperson since July 1. Temporary staffing and payment delays further exacerbate the tribunal’s operational difficulties. Sen attributed some delays to frivolous litigation by former promoters and unsuccessful resolution applicants.
Government’s Role and Recommendations
Sen described the government’s approach to the NCLT’s challenges and necessary legislative amendments under the IBC and Companies Act as lackadaisical. He advocated for a more proactive stance, suggesting longer tenure for judicial members to attract capable legal professionals.
He emphasized the need for a dedicated complex for the NCLT, more members and benches, and better infrastructure to alleviate the burden on current members.
Artificial Intelligence in Judgments
Discussing the reliance on AI in judicial decisions, Sen warned against its unverified use, citing a case where an NCLT order was overturned due to AI-generated errors. He stressed the importance of verifying AI-sourced information and urged for comprehensive training for judicial and technical members in AI usage.
Operational Creditors and Legislative Amendments
Sen noted that the IBC currently favors financial creditors, leaving operational creditors without significant influence in the insolvency process. He called for legislative amendments to ensure operational creditors have representation, even without voting rights, on the Committee of Creditors (CoC).
While acknowledging the government’s relatively swift amendments to the IBC, Sen highlighted the need for further improvements to protect operational creditors and ensure balanced representation.
Judicial Scrutiny and Commercial Wisdom
Sen referenced the Supreme Court’s ruling in K Sashidhar, affirming that CoC decisions made in commercial wisdom are not subject to judicial review. He cautioned against judicial interference in commercial decisions, emphasizing that such actions could undermine the resolution process.
