In a bid to bring down the work burden of the NCLTs and fast-track mergers and acquisitions (M&As), the ministry of corporate affairs (MCA) is working on a proposal to empower its regional directors to take a call on certain M&A cases. At present, the directors can review M&As of small firms as well as merger between a parent firm and its subsidiary, but not those between large unrelated firms, which need to be vetted by NCLTs.
The ministry has been working on the proposal for the last 2-3 months and the neceassary directions in this regard could be issued as early as mid-September, a source said. At present, regional directors can approve only M&As under Section 233 of the Companies Act, which include holding company and its wholly-owned subsidiary, merger between two or more small companies (as defined under the Companies Act) and certain other classes of companies. It is not immediately known the nature of M&As that will be added anew to the regional directors' domain. M&As require approvals under the Companies Act while many also need to be vetted under the Sebi Act and/or Competition Act.
The plan to lessen the budren on the tribunals in regulating M&As is in view of the tremendous work load on them which deal with many other matters, including insolvency resolution. As on February 2019, around 14,000 applications had been filed for initiation of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC). As of March 2019, various NCLT benches in the country had ordered the commencement of CIRP of 1,858 corporate debtors.
The source said while NCLTs and NCLATs have facilitated recovery of more than `1.83 lakh crore under CIRP till April 2019, it is clear that the infrastructure requires to be scaled up to deal with the pending cases in a speedy and efficient maner. Time-sensitive resolution is a cornerstone of IBC. Delays affect the value of asset causing loss to stakeholders and deters the resolution applicant from participating in the process.
There are around 32 judicial members and 17 technical members in the NCLT. In May this year, the government gave its nod to appoint 32 members -14 judicial and 18 technical. There is one principal bench of NCLT at new Delhi and 11 other benches in cities including Mumbai, Kolkata, Chennai and Bengaluru.
The development comes close on the heels of the report by the Competition Law Review Committee, which was constituted in October 2018 and was chaired by MCA secretary Injeti Srinivas. The high-level panel has suggested a significant change in the form of a 'Green Channel' for combination notifications, in recognition of the need to enable fast paced regulatory approvals for vast majority of M&As that may have no major concerns regarding appreciable adverse effects on competition.