Tezzbuzz Desk: The case of Essel Group Chairman Subhash Chandra is in discussion these days. NCLT had earlier approved a repayment plan of Rs 6.25 crore in a personal insolvency case worth about Rs 22,006 crore. However, on September 1, a five-member bench stayed the old order. After this matter came to light, questions are being raised about the role of NCLT i.e. National Company Law Tribunal and its way of working. Does NCLT waive anyone's loan and how is the company's loan decided?
First of all, it is important to understand that NCLT itself does not waive the loan of any person or company. It is a quasi-judicial body, which provides legal monitoring and approval of cases under Company Law and IBC i.e. Insolvency and Bankruptcy Code. The role of Committee of Creditors i.e. CoC is very important in the process of debt resolution. Till March 2026, 8,987 CIRP cases were filed under IBC, in which 1,419 corporate debtors were resolved through approved resolution plans. Lenders gained about Rs 4.32 lakh crore in these cases. However, Subhash Chandra's case pertains to personal insolvency, whereas the figures given above are of corporate CIRP cases.
NCLT was established on 1 June 2016 under Section 408 of the Companies Act, 2013. After the implementation of IBC, it was made the adjudicating authority in corporate insolvency cases. Its decision can be appealed in NCLAT and in some cases the path to the Supreme Court is also open. NCLT not only hears cases related to bankrupt companies, but also deals with matters like company restructuring, merger, settlement, company closure and insolvency resolution.
Default of a company in repaying its debts can trigger insolvency process. Financial creditors like banks or financial institutions and operational creditors like suppliers can approach NCLT under IBC. In some circumstances the company itself can apply to initiate CIRP. NCLT examines the application and default and once the application is accepted, CIRP starts. There is a provision in the law to take a decision on the application within 14 days. As soon as CIRP starts, the moratorium is imposed on the company. In simple language, this is a kind of 'pause period', in which many types of recovery and legal action against the company are put on hold. After this, Interim Resolution Professional i.e. IRP is appointed. The role of the old management is limited and the IRP takes the process forward by gathering information related to the company's assets, financial position and business.
After this, claims for their dues are taken from all the lenders and CoC of eligible financial creditors is formed. This CoC takes important commercial decisions related to the future of the company. The resolution professional invites resolution plans from potential buyers and investors. These plans include the way to save the company, the amount to be given to the lenders and the plan to run the business further. It is not necessary that the lenders get back the same amount after resolution as per the total debt owed by a company. It is not right to call it 'loan waiver' directly. This could be a result of settlement or restructuring of debt under insolvency resolution. After getting approval from CoC, the resolution plan goes to NCLT. NCLT looks at whether the plan is in compliance with the IBC and applicable laws.
If no workable resolution plan is found for the company, the matter may head towards liquidation. In this, lenders are paid from the money received by selling the company's assets. Priority of payment is also fixed in IBC. There is a provision to complete CIRP normally in 180 days, which can be increased in some circumstances to a total of 330 days. However, in many cases the process becomes lengthy due to legal challenges and court proceedings. Till March 2026, 1,419 corporate debtors in 8,987 CIRP cases were resolved through approved resolution plans. Lenders gained around Rs 4.32 lakh crore from these cases. Many other cases were also closed through routes like settlement, appeal, review and withdrawal under section 12A. That is, the objective of NCLT and IBC is not only to declare the company bankrupt, but also to save the business if possible, maintain its value and provide better recovery to the lenders.