NEW DELHI: The Supreme Court on Wednesday took suo motu cognizance of delays and structural loopholes in insolvency courts, labeling risks to creditors and the effectiveness of India’s bankruptcy framework.
Justices JB Pardiwala and KV Viswanathan said delays in the National Company Law Tribunal (NCLT), infrastructural deficiencies and staff shortages need to be addressed on a war footing, given their impact on the critical economic framework.
“The picture being painted by all before us is grim and grim in the extreme. We take cognizance of the above in the larger public interest. We believe that all the above issues need to be addressed on a war footing,” the bench observed.
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The court’s intervention follows an April 21 directive to the Insolvency and Bankruptcy Board of India (IBBI) and the NCLT Registry to submit data on pending resolution plans and delays. The matter will now be placed before the Chief Justice of India to give further directions, including setting up a bench to examine the matters in detail.
The issue came up during the hearing in the AVJ Heights (AVJ Developers) insolvency case, where the plea challenged the NCLT order upholding IIFL Finance’s decision. ₹85 million receivable. The case entered the IBC process in 2019. During the hearing, the court expanded its remit to examine broader systemic delays affecting insolvency resolution.
Figures presented to the court showed approval delays ranging from 48 days to more than 730-738 days, with some cases stretching up to four years, undermining the Insolvency and Bankruptcy Code’s (IBC) mandate of time-bound resolution of disputed assets. Under the IBC, insolvency resolution is designed to be completed within a maximum of 330 days.
A key issue that was highlighted was the lack of members in the NCLT. Against a sanctioning strength of 63 members, only 54 are currently in place, slowing down hearings and decisions and adding to the backlog.
Infrastructural gaps across the NCLT benches, from inadequate physical equipment to limited technological support, reduced working hours and in some cases disrupted proceedings. Frequent bench changes and limited sittings, including half-day hearings, further contributed to delays.
“So sad, so sad that they are dealing with land worth thousands of crores but they don’t have an adequate place to sit and decide things. This is so sad,” Justice Pardiwala said.
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The Supreme Court also expressed concern about staffing issues within the court system. Key administrative roles, including registrars and support staff such as bailiffs, stenographers and paralegals, are often filled on a contract basis. These measures, along with reports of irregular salary payments and frequent terminations, raised concerns about the stability and effectiveness of the tribunal’s operations.
Abuse of provisions such as section 65 of the IBC, which deals with the fraudulent or willful initiation of insolvency proceedings, has also been identified as contributing to delays. The court noted concerns regarding the qualifications, selection and appointment of tribunal members, as well as broader procedural inefficiencies.
The Supreme Court emphasized that the NCLT exercises jurisdiction under both the Companies Act, 2013 and the IBC, so its effective functioning is critical to the country’s economic and credit ecosystem. The IBC replaced earlier frameworks such as the Sick Industrial Companies Act (SICA) to allow a creditor-driven and time-bound resolution process.
However, the court noted that, given the current state of delay, this goal appears to be increasingly difficult to achieve. With thousands of crores of rupees at stake, extended resolution timelines risk eroding asset values and weakening creditor confidence.
“This crackdown is likely to lead to stricter enforcement of the timetable and administrative reforms, but cannot replace the capacity gaps,” said Raheel Patel, partner at Gandhi Law Associates.
Timeline slip
Data from IBBI highlights the extent of this problem. Between April and December 2025, 513 new insolvency cases were taken up by the NCLT benches, while 525 were disposed of. In the same period, 182 crisis resolution plans were approved. As of December 2025, nearly 1,879 cases were pending before courts at various stages.
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On average, the 1,376 resolution plans that have been approved under the IBC to date have taken approximately 619 days, excluding certain periods not counted by the tribunals. About three-quarters of pending cases are pending for more than 270 days, indicating a significant deviation from statutory deadlines.
Since the IBC came into effect in December 2016, the NCLT has admitted 8,659 insolvency cases by September 2025. Of these, around 1,300 were resolved, with 1,223 withdrawn and 1,342 settled, according to IBBI data.
