Insolvency and Bankruptcy Code, 2016 (the Code) primarily focus on resolution of the corporate debtor but where the resolution plan fails as the Committee of Creditors (CoC) do not approve the resolution plan and no othe

CS Professional · Insolvency - Law and Practice · PYQS · December 2022
Insolvency and Bankruptcy Code, 2016 (the Code) primarily focus on resolution of the corporate debtor but where the resolution plan fails as the Committee of Creditors (CoC) do not approve the resolution plan and no other way can be adopted then the ultimate resort is the liquidation and dissolution of the corporate debtor. However, even in the case of liquidation of corporate debtor as held by the Supreme Court the liquidator can sale the business of the corporate debtor as a 'going concern'. The liquidation process under chapter - III of Part - II of the Code is being regulated by the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 and the order of liquidation is also being passed by the Adjudicating Authority (AA). A resolution professional is being appointed by AA to act as liquidator. However, occasions may arise where the appointed liquidator can be threatened and may not be allowed to enter the premises of corporate debtor to carry out his functions or the appointment of the liquidator is challenged by CoC after the order of liquidation is passed by the AA. Despite the order of liquidation the entire assets of the corporate debtor do not constitute liquidation estate assets. Consider the above facts and answer the following questions: Can CoC challenge the appointment of liquidator after passing of the order of liquidation by the Adjudicating Authority?

Answer & Explanation:

Section 34(4) of the Code provides for that the Adjudicating Authority shall by order replace the resolution professional, if- (a) the resolution plan submitted by the resolution professional under section 30 was rejected for failure to meet the requirements mentioned in sub-section (2) of section 30; or (b) the Board recommends the replacement of a resolution professional to the Adjudicating Authority for reasons to be recorded in writing; or (c) the resolution professional fails to submit written consent under sub-section (1). The Code nowhere provides for where CoC could challenge replacement of liquidator, after the liquidation order is passed by the Adjudicating Authority. NCLAT in the case of Punjab National Bank Vs. Mr. Kiran Shah, Liquidator of ORG Informatics Ltd held that after the liquidation order, the CoC has no role to play and that they are simply claimants, whose matters are to be determined by the liquidator and hence cannot move an application for his removal. Considering the above, CoC cannot challenge the appointment of liquidator after passing the order of liquidation by the Adjudicating Authority.

Topics: Liquidation Process

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