Merger cases pile up as insolvency cases take precedence

A total of 9,073 cases are under consideration in NCLT. These include 1,630 cases of merger and amalgamation, 2,511 cases of insolvency and 4,932 cases under various other sections of the Companies Act.

As the National Company Law Tribunal (NCLT), the quasi judicial body which has been set up to fast-track issues related to Indian corporates, seems to be heavily preoccupied with the Insolvency and Bankruptcy Code (IBC) matters, there is a pile up of merger and acquisitions cases before it.

According to media reports, several companies, especially small and medium-sized, which are seeking approval of mergers are now in a quandary as the Bench is busy with IBC cases.

Reports say that some of the aggrieved parties have now approached the Securities and Exchange Board of India (Sebi) and Ministry of Corporate Affairs to seek their intervention.

There are 1,630 cases of merger and amalgamation pending before the tribunal as of 31 January 2018, as per government data.

In March, Minister of State for Corporate Affairs P P Chaudhary had informed the Rajya Sabha that a  total of 9,073 cases are under consideration in NCLT. These include 1,630 cases of merger and amalgamation, 2,511 cases of insolvency and 4,932 cases under various other sections of the Companies Act.

Chaudhary had assured that all necessary steps are being taken to dispose of the cases as per prescribed time limit laid down in the Companies Act and the IBC. 

However, assurances notwithstanding that all procedures are being followed for speedy and timely disposal,  the backlog seems to have only grown since January, say industry sources.

The entire purpose of mandating NCLT to grant merger approval to expedite the process, seems to have been defeated for the lack of quorum.

Earlier, high courts had to approve any merger or scheme of arrangement. Now, the NCLT is the judicial body for approving such schemes.

Ironically, while the rationale behind making NCLT as the authority was to fast-track such approvals; the tribunal is taking more time than what High Courts used to take.

The NPA crisis seems to overshadowed all concerns as the government is focussing on resolving the bad loan issue plaguing the banking sector. Further, with the Reserve Bank of India (RBI) mandating that if a debtor defaulted on more than Rs 20 billion, its case would have to be taken up by the NCLT within 15 days, the tribunal seems to be giving priority to insolvency matters over other cases.

According to legal experts, there is a need to create an ecosystem to ensure the tribunal isn’t bogged down with multiple legislation.

 

(Source: Business Standard, media reports)


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