Powers and Duties of Liquidator under Voluntary Liquidation

Status as on- 16/06/2021

The liquidator or the Insolvency Resolution Professional is an officer of the court who looks after the affairs of the company, once an order for liquidation of the company is passed under section 33 of the Insolvency and Bankruptcy Code, 2016. (The Code).

Initially, it is an order for the Corporate Insolvency Resolution Process which is passed against the Corporate Debtor by the Hon’ble National Company Law Tribunal. As and when the CIRP progresses and the IRP comes to the conclusion that no resolution plan is received or the same has failed; as a last recourse the Hon’ble National Company Law Tribunal upon the request made by the IRP (Insolvency Resolution Professional) passes an order for the liquidation of the company, wherein all the assets of the company are sold of in order to settle the claims of all the creditors of the company. In other words the Resolution Professional appointed under CIRP shall act because the Liquidator for the aim of Liquidation unless replaced by the Adjudicating Authority.

Powers and Duties of Liquidator under IBC-

To hold on the operations of the corporate ,
To consult with Shareholders,
To distribute unsold assets,
To maximise the returns for creditors,
To verify claims of the creditors,
To obtain professional assistance, if needed to discharge his duties & obligations,
To raise money, if required as Security of Assets of the Company,
To take measure to protect the assets of the corporate debtor,
To evaluate the assets and property of corporate debtor and prepare the report,
To sell the immovable and movable property and actionable claims of the company debtor in liquidation by public auction or private contract, with power to transfer such property to any person or body corporate, or to sell an equivalent in parcels, though transfer are subjected to section 52 and further the liquidator shall not sell the immovable and movable property or actionable claims to a person who isn’t eligible to be a resolution applicant.
To draw, accept, make and endorse any negotiable instruments on behalf of the company debtor,
to require out, in his official name, letter of administration to any deceased contributory and to try to to in his official name the other act necessary for obtaining payment of any money due and payable from a contributory or his estate which can’t be ordinarily wiped out the name of the company debtor, and altogether such cases, the money due and payable shall, for the aim of enabling the liquidator to require out the letter of administration or recover the cash, be deemed to flow from to the liquidator himself,
To institute or defend any suit, prosecution or other legal proceedings, civil or criminal, on behalf of the company debtor,
To investigate into the financial affairs of the corporate debtor to determine undervalued transactions,
To require all such actions, steps, or to sign, execute and verify any paper, deed, receipt document, application, petition, affidavit, bond or instrument and for such purpose to use the common seal, if any required,
To use to the Adjudicating Authority for such orders or directions as could also be necessary,
To report the progress of the liquidation process in the format as specified by the Board, and
To perform such other functions as could also be specified by the Board.

Other than those quoted above the Liquidator has the subsequent Rights and Duties too:-

To admit or reject the claims of the creditors.
Power to access any data system for the aim of verification of Claims and identification of assets forming a part of Liquidation Estate of the company Debtor from sources such as, Information Utility, Credit Information Systems, Central and government Agency, database maintained by the Board etc. as specified in Section 37 of the Code.
To evaluate any preferential transactions, if any done by the Corporate Debtor.
To avoid undervalued transactions, if any.
To distribute the Liquidation proceeds as per Section 53 of the Code.
To make application for the Dissolution of the Corporate Debtor once all assets of the corporate debtor are diluted.

REPLACEMENT OF THE IRP/LIQUIDATOR:

The IRP can be replaced only due to the following reason as mentioned under Section 34(4) of the Code, the Adjudicating Authority may order to change the Liquidator :–

The resolution plan submitted by the Resolution Professional under section 30 of the Code, was rejected for failure to satisfy the wants as per Section 30(2).;or,
The Insolvency and Bankruptcy Board of India (The Board) recommends the replacement of the Resolution Professional for recorded reasons; or,
The Resolution professional fails to submit written consent for appointment as Liquidator.

For cases where the Resolution Professional is required to urge replaced , the Adjudicating Authority may direct the Board to propose names of Insolvency Professionals eligible to be appointed as Liquidator alongside written consent form within 10 days of the direction issued, and upon receipt of the proposal, the order of appointment of Liquidator is passed.

Disclaimer – The above article is based on interpretation of the related judicial pronouncement and related laws which may differ person to person. The readers are expected to take expert opinion before placing reliance on it. For more information, please reach us at support@centrik.in or call us at 8383011629