--- title: "Supreme Court Takes Suo Motu Cognizance of NCLT Delays: What It Means for Resolution Plan Approvals Under the Insolvency and Bankruptcy Code" date: 2026-06-27 author: "Navod Prasannan" url: https://ksandk.com/insolvency/nclt-delays-in-resolution-plan-approval/ --- # Supreme Court Takes Suo Motu Cognizance of NCLT Delays: What It Means for Resolution Plan Approvals Under the Insolvency and Bankruptcy Code Posted On - 27 June, 2026 • By - Navod Prasannan ![Supreme Court Takes Suo Motu Cognizance - A gavel striking a sound block, symbolizing justice and legal authority in a courtr](https://ksandk.com/wp-content/uploads/supreme-court-takes-suo-motu-cognizance-of-nclt-1782548584638.webp) ## **Introduction** In a significant development for India’s insolvency regime, the Supreme Court has taken suo motu cognizance of systemic delays by the National Company Law Tribunal (NCLT) in approving resolution plans under the Insolvency and Bankruptcy Code, 2016 (IBC). The Court observed that prolonged pendency of resolution plan approval applications threatens the very objective of the IBC, which was enacted to provide a time-bound insolvency resolution process, preserve enterprise value, and maximise recoveries for creditors.  The proceedings could have far-reaching implications for insolvency professionals, financial creditors, resolution applicants, distressed asset investors, and companies undergoing Corporate Insolvency Resolution Process (CIRP), as they highlight structural shortcomings in the functioning of the NCLT and may pave the way for institutional reforms.  ## **Background** The issue came before the Supreme Court while hearing appeals arising out of insolvency proceedings involving AVJ Developers (India) Pvt. Ltd. During the proceedings, the Court noted that although the Committee of Creditors (CoC) had approved a resolution plan in July 2024, the application seeking approval under Section 31 of the IBC continued to remain pending before the NCLT for an extended period.  Recognising that the issue was not confined to a single case, the Bench directed the NCLT Principal Bench and the Insolvency and Bankruptcy Board of India (IBBI) to furnish comprehensive data regarding:  - the number of pending resolution plan approval applications;  - the duration of their pendency; and  - the reasons for such delays.  The data revealed a concerning nationwide pattern rather than isolated administrative delays.  ## **Supreme Court’s Observations** Upon examining the report submitted by the NCLT, the Bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan described the situation as “grim” and “dismal.”  ### ***The Court noted that:*** - 383 applications for approval of resolution plans were pending before various NCLT benches across the country;  - the period of pendency ranged from 48 days to approximately 738 days, with certain matters remaining pending for almost four years; and  - such delays fundamentally undermine the legislative purpose of the Insolvency and Bankruptcy Code.  The Court emphasised that once the commercial wisdom of the Committee of Creditors has culminated in approval of a resolution plan, prolonged judicial delays erode the effectiveness of the insolvency framework.  Accordingly, the matter was directed to be placed before the Chief Justice of India for consideration as a suo motu proceeding involving broader systemic reforms.  ## **Why Timely Approval of Resolution Plans Matters Under the IBC** The [Insolvency and Bankruptcy Code](https://ksandk.com/insolvency/nclts-jurisdiction-limits-section-605c-ibc/) is founded upon one central principle – speed.  Unlike traditional recovery proceedings, the IBC seeks to preserve the value of distressed businesses by ensuring that insolvency proceedings conclude within prescribed timelines. While the Code originally contemplated completion of the Corporate Insolvency Resolution Process within 180 days, extendable to 330 days (including litigation), judicial delays at the stage of approval under Section 31 often extend the process well beyond the statutory framework.  Such delays have significant commercial consequences:  - deterioration in the value of the corporate debtor;  - uncertainty for successful resolution applicants;  - reduced recoveries for financial and operational creditors;  - disruption of employee and supplier relationships;  - erosion of investor confidence in distressed asset acquisitions; and  - increased litigation costs.  The Supreme Court has consistently held that time is the essence of the IBC, recognising that delays often destroy the economic value sought to be preserved through the insolvency process.  ## **Consistency with Earlier Supreme Court Jurisprudence** The Court’s observations are consistent with earlier landmark judgments interpreting the Insolvency and Bankruptcy Code.  In Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, the Supreme Court emphasised that the IBC is designed to achieve speedy resolution, maximise the value of corporate assets, and balance the interests of all stakeholders.  Similarly, in Ebix Singapore Pvt. Ltd. v. Committee of Creditors of Educomp Solutions L**td.**, the Court observed that permitting uncertainty or prolonged delays after approval by the Committee of Creditors would undermine the commercial certainty upon which the insolvency framework is built.  Likewise, in K. Sashidhar v. Indian Overseas Bank, the Court reaffirmed that while the commercial wisdom of the Committee of Creditors deserves judicial deference, the adjudicatory process must remain efficient to ensure that the objectives of the Code are realised.  The present suo motu proceedings extend this jurisprudence beyond interpretation of statutory provisions and focus on the institutional capacity required to implement the Code effectively.  ## **Structural Challenges Identified by the Supreme Court** The Court attributed the delays to broader structural deficiencies within the NCLT. Among the issues highlighted were:  - substantial vacancies in judicial and technical member positions;  - inadequate administrative infrastructure;  - frequent reconstitution of benches;  - reduced working capacity due to limited bench strength;  - growing backlog of insolvency matters; and  - procedural delays arising from numerous objections filed during approval proceedings.  The Court observed that unless these institutional shortcomings are addressed urgently, statutory timelines under the IBC will continue to remain difficult to achieve in practice.  ## **Legal and Commercial Implications** The Supreme Court’s intervention is likely to have implications extending beyond the immediate proceedings. The decision signals increased judicial scrutiny of institutional delays affecting insolvency adjudication and may accelerate reforms relating to:  - appointment of judicial and technical members to the NCLT;  - strengthening tribunal infrastructure;  - streamlining procedures for approval of resolution plans;  - reducing avoidable objections at the approval stage; and  - ensuring greater adherence to the timelines envisaged under the IBC.  For lenders, insolvency professionals, distressed asset funds, strategic investors, and successful resolution applicants, the proceedings underscore that speed remains a critical component of value maximisation under the insolvency framework.  The development also reinforces that delays occurring after approval by the Committee of Creditors can significantly impact transaction certainty, financing arrangements, employee retention, and implementation of revival plans.  ## **Key Takeaways** The Supreme Court’s suo motu proceedings represent one of the most significant institutional reviews of the insolvency framework since the enactment of the IBC.  Rather than addressing an isolated dispute, the Court has focused on a systemic issue that affects the efficiency and credibility of India’s insolvency ecosystem. The proceedings acknowledge that the success of the Insolvency and Bankruptcy Code depends not only upon robust legislation but equally upon adjudicatory institutions capable of delivering timely justice.  If the concerns identified by the Court translate into structural reforms, the outcome may substantially strengthen India’s insolvency resolution framework, improve confidence among domestic and international investors, and restore the time-bound character that lies at the heart of the IBC.  *Last Updated on 27 June, 2026* --- ## Office Locations - [New Delhi](https://ksandk.com/locations/top-corporate-law-firm-in-delhi/) (HQ): +91-11-41318190 | info@ksandk.com - [Mumbai](https://ksandk.com/locations/top-corporate-law-firm-in-mumbai/): 3 offices (Nariman Point, Lower Parel, Andheri) | mumbai@ksandk.com - [Bangalore](https://ksandk.com/locations/top-corporate-law-firm-in-bangalore/): bangalore@ksandk.com - [Chennai](https://ksandk.com/locations/chennai/): chennai@ksandk.com - [Hyderabad](https://ksandk.com/locations/hyderabad/): hyderabad@ksandk.com - [Pune](https://ksandk.com/locations/pune/): pune@ksandk.com - [Kochi](https://ksandk.com/locations/kochi/): kochi@ksandk.com ## Contact - [Contact Page](https://ksandk.com/contact-us/) - General: info@ksandk.com | +91-11-41318190 - WhatsApp: +91-7428567444 - [Privacy Statement](https://ksandk.com/privacy-statement/) - [Terms of Use](https://ksandk.com/terms-of-use/)