What is the role of the National Company Law Tribunal (NCLT) in the bankruptcy & insolvency proceedings?

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Answer By law4u team

The National Company Law Tribunal (NCLT) plays a crucial role in bankruptcy and insolvency proceedings in India. It was established under the Companies Act, 2013, and the Insolvency and Bankruptcy Code, 2016, to handle matters related to the corporate insolvency resolution process and liquidation of companies. Here are the key roles and functions of the NCLT in bankruptcy and insolvency proceedings: Adjudicating Insolvency Cases: NCLT is responsible for adjudicating corporate insolvency cases filed under the Insolvency and Bankruptcy Code (IBC). It examines the applications filed by financial creditors, operational creditors, or the corporate debtor itself to initiate the insolvency process. Appointment of Insolvency Professionals: NCLT appoints insolvency professionals who are responsible for managing the affairs of the insolvent company during the resolution process. These professionals play a pivotal role in determining the fate of the company, whether it will be resolved or liquidated. Approval of Resolution Plans: NCLT evaluates and approves resolution plans submitted by resolution applicants. These plans outline how the insolvent company's affairs will be restructured or how its assets will be sold to maximize creditor recovery. The NCLT ensures that the plans meet the legal requirements and are in the best interest of all stakeholders. Initiating Liquidation: If a resolution plan is not approved or implemented within the specified timeframe, NCLT can initiate the liquidation process. This involves selling the company's assets and distributing the proceeds to creditors according to the priority set by the IBC. Handling Appeals: NCLT also deals with appeals against its decisions. Parties dissatisfied with the NCLT's orders can appeal to the National Company Law Appellate Tribunal (NCLAT) and, in some cases, even to the Supreme Court of India. Monitoring the CIRP: The NCLT closely monitors the corporate insolvency resolution process (CIRP) to ensure that it is conducted in a fair and transparent manner. It has the authority to intervene and issue directions as necessary to protect the interests of all stakeholders. Cross-Border Insolvency: The NCLT has jurisdiction over cross-border insolvency cases, allowing it to cooperate and coordinate with foreign courts and insolvency authorities in cases involving assets and creditors in multiple jurisdictions. Miscellaneous Matters: In addition to insolvency cases, the NCLT handles various other matters related to company law, mergers and acquisitions, and corporate governance, making it a key institution for corporate legal matters in India. The NCLT's role in bankruptcy and insolvency proceedings is central to the effective implementation of the IBC and the resolution of financial distress in the corporate sector in India. It aims to strike a balance between the interests of creditors, debtors, and other stakeholders while facilitating the resolution or liquidation of financially distressed companies in a time-bound and efficient manner.

Answer By Anik

Dear client, If the company is unable to pay all the debts, then the creditors or company itself can file an application for insolvency petition before the national company law tribunal under the insolvency and bankruptcy code, 2016 the NCLT’s responsibilities include, Admitting and rejecting the applications- The financial creditor, operational creditor or corporate debtor can file an application for insolvency before the NCLT to initiate the corporate insolvency resolution process (CIRP). Once the application is filed after filling all the requirements under section 7,9, or 10 of the insolvency and bankruptcy code 2016 the NCLT either admits the petition and appoints an interim resolution professional (IRP) If the application is defective and does not fulfil the requirement then NCLT has the power to reject it. Moratorium order When the NCLT admitting the insolvency petition, the NCLT under the section 14 of insolvency and bankruptcy code declares a moratorium which prevents :- Lawsuit against the company Prevent recovery of debts by the creditors Attachment, sale or transfer of the company assets Foreclosure and enforcement of security interest by lenders. Appointment of interim resolution professionals The NCLT appoints an interim resolution professional to take over the management process of the company asset and to prepare a resolution plan. On the approval of the creditors then the IRP is later confirmed as the resolution professional (RP). Approval or rejection of resolution plan Once the committee of the creditors approves the plan with 66% of voting then the NCLT reviews and accepts it. If no viable plan is submitted by the resolution professionals the NCLT may order for liquidation of the company under the section 33 of insolvency and bankruptcy code, 2016. I hope this answer helps. In case of future queries please feel free to contact us. Thank you

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