Supreme Court Flags NCLT Two-Year Delay in Insolvency Approvals, Takes Suo Motu Cognisance

Kaustav Chowdhury
5 days ago
4 min read

The Supreme Court of India has taken suo motu cognisance of alarming delays at the National Company Law Tribunal (NCLT) in approving resolution plans under the Insolvency and Bankruptcy Code, 2016 (IBC). A bench of Justice JB Pardiwala and Justice KV Viswanathan acted on a Registrar report from the NCLT Principal Bench, revealing that 383 applications for approval of resolution plans are pending across various NCLT benches. The delays range from 48 days to 738 days, with some cases languishing for nearly four years. Describing the situation as "extremely grim and dismal," the Court warned that the purpose of enacting the IBC would stand frustrated if such bottlenecks persist.

Why Time Is the Backbone of the IBC

The IBC was enacted in 2016 as a landmark reform to address India's chronic problem of delayed debt resolution. Its design philosophy rests on time-bound outcomes: the entire Corporate Insolvency Resolution Process (CIRP) is meant to be completed within 180 days, extendable by 90 days in complex cases, with an outer limit of 330 days. Speed preserves the value of distressed assets, protects creditors, and ensures viable businesses are rescued before their worth erodes beyond recovery.

The approval of a resolution plan by the NCLT is the final step in this process. Once the Committee of Creditors (CoC) votes to accept a plan, it goes to the NCLT for approval under Section 31. Only after the tribunal's order does the plan become binding on all stakeholders. When this step is delayed by hundreds of days, the time-bound architecture of the Code collapses. The IBC Amendment Act 2026, which introduced project-wise insolvency and group insolvency reforms, was intended to modernise the framework further, but legislative upgrades mean little if the adjudicating infrastructure cannot keep pace.

The Numbers Behind the Crisis

The Registrar's report laid bare the scale of the problem. Of the 383 pending applications for plan approval, the delay periods paint a troubling picture:

These figures are significant because they represent delays at the very last stage of the process. By the time a plan reaches the NCLT, the commercial negotiations, voting, and stakeholder consultations are complete. The tribunal's role is to verify compliance with Sections 30 and 31 of the IBC and pass an appropriate order. Prolonged delays at this final checkpoint undermine the commercial certainty that resolution applicants and creditors rely upon.

Root Cause: The Tribunal's Capacity Deficit

The Supreme Court identified the root cause as a severe shortage of judicial and technical members at the NCLT. This is not a new observation; stakeholders have long flagged the mismatch between the tribunal's caseload and its sanctioned strength. The NCLT handles not only IBC matters but also company law petitions, compromises, arrangements, and other corporate disputes. With vacancies persisting across benches, the docket has swelled beyond what available members can manage.

The jurisdictional reach of the NCLT extends across diverse corporate disputes, including matters involving corporate restructuring and asset division. This wide mandate, combined with insufficient judicial strength, creates a compounding effect where every category of case suffers from spillover delays.

The consequence is a vicious cycle. Delays erode asset values, which discourages resolution applicants from offering competitive plans, which leads to lower recovery rates for creditors. Businesses that could have been revived lose employees, customers, and market position during the wait. For entities such as LLPs and other registered business structures considering expansion or acquisition of distressed assets, uncertainty in tribunal timelines becomes a material commercial risk.

The Court's Response and Next Steps

The Supreme Court's decision to take suo motu cognisance signals the gravity with which it views the problem. Rather than waiting for a specific litigant to raise the issue, the Court acted on institutional information, recognising that the delay is systemic rather than case-specific. The bench directed that the matter be placed before the Chief Justice of India for further directions, which could lead to specific orders regarding NCLT appointments and infrastructure.

This intervention carries weight because the Supreme Court has consistently emphasised the time-bound nature of the IBC. In previous rulings, the Court held that delays defeat legislative intent and harm all stakeholders. The present suo motu action reinforces these principles by turning the spotlight on the adjudicatory machinery itself.

Broader Implications for Stakeholders

The ripple effects of NCLT delays extend well beyond individual insolvency cases. For financial institutions, delayed resolution ties up capital that could be redeployed. For resolution applicants, uncertainty about when a plan will be approved affects investment decisions and financing arrangements. For employees, the limbo between resolution and liquidation means prolonged uncertainty about job security.

India's insolvency framework does not operate in isolation from broader economic goals. As the country deepens trade relationships through agreements such as the India-UK Free Trade Agreement taking effect in July 2026, the efficiency of dispute resolution mechanisms becomes a factor in global investor confidence. Foreign investors evaluating distressed asset opportunities in India will consider whether the tribunal system can deliver timely outcomes.

The Court's intervention may also accelerate a broader conversation about tribunal reform, including questions about the appointment process for NCLT members, the adequacy of infrastructure, and whether bench strength is calibrated to the volume of cases the IBC generates.

Key Takeaways

This development underscores the urgent need for filling NCLT vacancies and strengthening tribunal infrastructure to preserve the time-bound character of India's insolvency regime.