CoC’s Primacy in Liquidator Selection Reaffirmed: NCLAT Limits Adjudicating Authority’s Role Under Section 34 IBC
- REEDLAW
- 32 minutes ago
- 5 min read
REEDLAW Legal News Network reports: In a pivotal ruling on 1 December 2025, the Appellate Tribunal reaffirmed that the Committee of Creditors retained exclusive authority to select and recommend a professional for appointment as liquidator under Section 34 of the Insolvency and Bankruptcy Code. The decision clarified that the Adjudicating Authority’s role was strictly confined to formal appointment and could not be expanded into an independent power of selection, even where an IBBI circular suggested otherwise.
The National Company Law Appellate Tribunal, New Delhi Bench comprising Justice N. Seshasayee (Judicial Member) and Mr. Arun Baroka (Technical Member), while adjudicating a batch of two appeals, held that only the Committee of Creditors was empowered to choose and recommend the Resolution Professional for replacement and appointment as liquidator by invoking Section 34(1) read with Section 27 of the IBC. The Bench clarified that the Adjudicating Authority was limited to the ministerial act of appointment and could not independently select a liquidator, further ruling that the statutory scheme under Section 34 prevailed over the IBBI circular that attempted to restrict the same individual from acting as both RP and liquidator.
The appeals arose from a dispute concerning whether the Committee of Creditors or the Adjudicating Authority held the authority to appoint the liquidator once liquidation was ordered. CIRP of the Corporate Debtor had failed, and the CoC, in both matters, had resolved with overwhelming voting share—100% in one case and 98% in the other—that liquidation must commence. During CIRP, the CoC had appointed separate Resolution Professionals, but upon passage of the liquidation resolution, it nominated a different entity to act as liquidator. The Adjudicating Authority, however, disregarded the CoC’s choice and appointed another individual as liquidator, who was neither the RP nor the CoC’s nominee. Aggrieved, the Appellant challenged the orders on the ground that the authority to select a liquidator vested exclusively with the CoC under the scheme of the Code.
The Appellant argued that Section 27 vested the CoC with the power to appoint or replace a resolution professional, and Section 34(1) enabled such RP to continue as liquidator unless unwilling. It was further contended that the IBBI’s circular dated 18.07.2023, which purported to disallow the same RP from acting as liquidator, lacked statutory authority, as already held in an earlier decision of the Tribunal. The Appellant submitted that the Adjudicating Authority had only the power to replace but not the authority to select a liquidator of its own choice.
The Respondents contended that under Section 34(1), the RP could continue as liquidator only upon written consent, and in the absence of such consent, Section 34(4)(c) empowered the Adjudicating Authority to replace the RP. It was argued that neither the CoC nor the Stakeholders’ Consultation Committee had any statutory authority to appoint a liquidator, and that the Code consciously excluded the CoC’s participation in this stage. Both RPs in the present matter had not provided written consent, which, according to the Respondents, necessitated a replacement by the Adjudicating Authority.
The Tribunal examined the scheme of the Code, beginning from the appointment of the IRP, and noted that at no stage was the Adjudicating Authority vested with the power to select an IRP or RP of its own choice. The design of the Code separated the selection of the professional from the act of formal appointment, thereby ensuring that the selection remained with the creditor body or the petitioner, subject to confirmation by the Board. Applying this principle to Section 34, the Tribunal held that the Adjudicating Authority was empowered only to formally replace the RP but could not supplant the CoC’s authority to select the replacement. Any replacement required to be made under Section 34(4)(c) must follow the procedure under Section 27, which vested selection power exclusively with the CoC.
The Tribunal further observed that although the Adjudicating Authority ordinarily could not override the CoC’s decision, in extreme circumstances involving gross misconduct, collusion, or fraud on the statute, the Adjudicating Authority could intervene independent of the CoC. Such inherent authority flowed from the judicial function of preventing abuse of process. However, no such circumstances existed in the present case.
In applying these principles to the facts, the Tribunal noted that the CoC had nominated a separate entity as liquidator without indicating any unwillingness on the part of the RP. The Tribunal accepted the Appellant’s submission that such nomination occurred under the belief that the IBBI circular was binding at the time. Although the minutes did not expressly record the RP’s unwillingness, the Tribunal concluded that the CoC nevertheless retained authority to select the substitute liquidator. It held that the CoC’s nominee must first be confirmed by the Board as per Section 27 and, upon such confirmation, the Adjudicating Authority would be required to appoint the nominee as the liquidator.
The appeals were accordingly allowed, and the orders of the Adjudicating Authority appointing its own nominee were set aside. The Tribunal directed that upon confirmation by the Board, the CoC’s chosen entity be appointed as liquidator. No order as to costs.
Mr. Abhijeet Sinha, Sr. Adv. with Ms. Kiran Sharma, Ms. Niharika Sharma, Mr. Somdutta Bhattacharya, Advocates, Mr. Saikat Sarkar and Ms. Heena Kochar, Advocates, represented the Appellants in Company Appeal (AT) (Ins) No. 914 of 2025.
Mr. Abhijeet Sinha, Sr. Adv. with Ms. Kiran Sharma, Ms. Niharika Sharma, Mr. Somdutta Bhattacharya, Mr. Shankari Mishra and Ms. Mehak Khandelwal, Advocates, represented the Appellants in Company Appeal (AT) (Ins) No. 915 of 2025.
PCS Alam Khan appeared for the Respondent No. 2 in Company Appeal (AT) (Ins) No. 914 of 2025.
Mr. Bharat Gupta, Mr. Varun Tyagi, Mr. Vishesh Chauhan, Mr. Ishan Srivastava, Ms. Shagun Gupta and Ms. Snigdha S. Jena, Advocates, appeared for the Respondent No. 2 in Company Appeal (AT) (Ins) No. 915 of 2025.
This is premium content available to our subscribers.
To access the full content related to this article — including the complete judgment, detailed legal analysis, ratio decidendi, headnotes, cited case laws, and updates on relevant statutes and notifications — we invite you to subscribe to REEDLAW’s premium research platform.
Click here to Subscribe and unlock exclusive access to structured legal analysis, judicial summaries, and a comprehensive legal research database.
REEDLAW Legal Intelligence & Research is India’s most trusted legal publishing and research platform, empowering professionals with structured judicial insights and authoritative legal intelligence since 1985.
The platform offers comprehensive resources spanning Corporate Insolvency, Bankruptcy, Company Law, SARFAESI, Debt Recovery, Contract, MSMEs, Arbitration, Banking, and Commercial Laws. Through curated journals like IBC Reporter and Bank CLR, and an advanced Online Legal Research Database, REEDLAW simplifies complex legal research for professionals, institutions, and academia across India.
Comments