Special Bench Ordered for Swift Resolution of JM Financial's Insolvency Petition After Two-Year Delay
In a significant ruling, the Bombay High Court has directed the National Company Law Tribunal (NCLT) Mumbai to expedite the disposal of an insolvency case filed by JM Financial Asset Reconstruction Company Ltd. against a debtor, which has been languishing for over two years. The High Court has ordered the constitution of a Special Bench to address the petition promptly, highlighting concerns over the delay in pronouncement of judgments that frustrates the objectives of the Insolvency and Bankruptcy Code (IBC), 2016.
The case dates back to 2019 when JM Financial filed a petition under Section 7 of the IBC, citing a default by the debtor amounting to Rs.167 crores. Despite having been heard twice, the NCLT Mumbai has failed to pronounce its judgment. The petitioner approached the High Court after the NCLT de-reserved the case due to the transfer of one of its members, a move that the High Court deemed unacceptable.
The High Court bench, comprising Justices Manish Pitale and Shreeram V. Shirsat, emphasized the importance of adhering to timelines in insolvency proceedings, as outlined in Supreme Court guidelines. In their judgment, they cited precedents from cases such as Anil Rai v. State of Bihar, which stress timely delivery of judgments.
The court noted that the delay has undermined the purpose of the IBC, which is designed to provide swift redressal in insolvency matters. The NCLT's failure to dispose of the case promptly, despite the Supreme Court's guidelines, prompted the High Court to intervene and mandate the constitution of a Special Bench within two weeks to resolve the matter by June 30, 2026.
The judgment also addressed administrative processes within the NCLT, asserting that the transfer of members should not lead to de-reservation of cases that have been heard and reserved for orders. The court has instructed the NCLT to list the case under 'for directions' to facilitate its swift disposal.
The intervention application filed by a third party in the company petition will also be considered by the specially constituted Bench. The High Court made it clear that it does not express any opinion on the merits of the petition or the intervention application, but stresses the need for their resolution alongside the main petition.
This directive from the Bombay High Court underscores the judiciary's commitment to ensuring efficiency in insolvency proceedings and adherence to legal timelines, reflecting the broader push for judicial reforms aimed at reducing backlog and enhancing the speed of justice delivery.
Bottom line:-
Delay in pronouncement of orders by NCLT after reserving judgments frustrates the objectives of proceedings under the Insolvency and Bankruptcy Code, 2016. Courts must ensure adherence to timelines for disposal of cases.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Section 7
