Supreme Court Flags Two-Year Delays in NCLT Resolution Plan Approvals

On April 20, 2026, the Supreme Court issued a critical order highlighting severe delays in the National Company Law Tribunal's approval of resolution plans under the Insolvency and Bankruptcy Code. Justices J B Pardiwala and K V Viswanathan heard a case where NCLT approval of a resolution plan had been pending for nearly two years, an unacceptable timeline that undermines the entire purpose of the IBC. The Court directed the NCLT Principal Bench and the Insolvency and Bankruptcy Board of India to provide nationwide data on pending resolution plan applications and take immediate steps to eliminate backlogs.

The Purpose and Timeline of the Insolvency Code

When the Insolvency and Bankruptcy Code, 2016 was enacted, it revolutionized insolvency proceedings in India by imposing strict timelines. The Corporate Insolvency Resolution Process is meant to complete within 180 days, with a possible 90-day extension. The court system was designed to support and facilitate this timeline, not obstruct it. A resolution plan represents months of negotiation between the resolution professional, creditors, and prospective purchasers. Once a resolution plan is formulated and approved by the Committee of Creditors, it should move to NCLT approval swiftly. The NCLT's role is to examine whether the plan is in the interests of creditors and complies with the IBC, not to conduct de novo investigations or re-litigate creditor decisions.

Why Two-Year Delays Defeat the IBC's Purpose

A resolution plan pending for two years creates cascading harms. The corporate debtor remains in suspension, unable to operate normally or pivot to sustainable business. Assets deteriorate in value when businesses are frozen. Employees remain in limbo regarding their jobs and dues. Operational creditors cannot plan future relationships with the company. Most importantly, the uncertainty itself destroys value: suppliers demand cash transactions instead of credit, customers seek alternative vendors, and investors lose confidence. What was meant to be a rescue mechanism becomes a form of corporate purgatory. The delay suggests fundamental systemic failure in how NCLT resources are allocated or cases are managed.

The Supreme Court's Direction

The April 20, 2026 order directed two specific actions. First, the NCLT Principal Bench must compile and submit to the Supreme Court comprehensive data on all pending resolution plan applications across all NCLT benches nationwide, including how long each has been pending. This data will enable the Court to understand the magnitude of the problem and identify whether delays are systemic or case-specific. Second, the IBBI must submit an action plan for clearing backlogs within a reasonable timeframe. The Court also implicitly signaled that it would closely monitor whether this direction is complied with, suggesting that further orders may follow if backlogs are not substantially addressed.

Possible Causes of the Delay

Industry observers have identified several potential causes for resolution plan approval delays. NCLT benches have finite capacity, and India's number of NCLT judges and supporting staff may be insufficient given the volume of IBC cases. Some tribunals may be conducting overly detailed scrutinies of resolution plans that exceed their statutory mandate. In some cases, unresolved objections from creditors or other stakeholders may be holding up proceedings, though the code envisages that such objections be resolved during the creditor voting process, not at the tribunal stage. Additionally, some NCLT orders have been challenged before High Courts, creating parallel litigation that delays finality. A comprehensive review by the IBBI will be essential to identify the bottlenecks.

What This Means for Debtors and Stakeholders

For corporate debtors awaiting NCLT approval of a resolution plan, this Supreme Court intervention is positive news. It signals that the apex court recognizes the problem and is prepared to intervene. For resolution professionals, it suggests that the Court will support timely tribunal decisions and may scrutinize dilatory conduct or excessive delays. For creditors, it indicates that the Court expects NCLT to move expeditiously so that their claims are resolved and recovery can proceed. This development may also influence NCLT judges to streamline their examination of resolution plans, focusing on statutory compliance rather than policy-level scrutiny.

Next Steps and Expected Outcomes

The NCLT Principal Bench and IBBI will need to work together to compile the nationwide data and formulate a response. Once the Court receives this data, it may issue further directions specifying maximum timelines for resolution plan approvals at each NCLT bench. The Court might also consider directing additional resources to NCLT, sanctioning of additional judges, or streamlined procedures for approval of uncontested resolution plans. These interventions will be crucial to restore public and creditor confidence in the insolvency resolution process and to fulfill the original promise of the IBC as a time-bound mechanism for corporate rehabilitation.

Conclusion

The Supreme Court's April 2026 intervention on NCLT delays addresses a critical vulnerability in India's insolvency framework. The IBC was designed to resolve corporate insolvencies swiftly and fairly, but delays at the tribunal approval stage have undermined this purpose. By demanding data and directing the IBBI to develop a clearance plan, the Court has escalated the issue and signaled its commitment to ensuring the insolvency process works as intended. Stakeholders should monitor developments in response to this order and expect that subsequent directions will impose binding timelines for NCLT resolution plan approvals.