IBBI Letter Cannot Override Section 34 IBC: NCLAT Affirms No Vested Right for RP to Become Liquidator
- REEDLAW
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REEDLAW Legal News Network reports: In a pivotal ruling on 1 December 2025, the Appellate Tribunal reaffirmed that an IBBI letter issued on 18.07.2023 cannot supersede the statutory mandate of Section 34 of the Insolvency and Bankruptcy Code. It further clarified that a Resolution Professional has no vested entitlement to be appointed as liquidator and that replacing the incumbent mid-process is unwarranted when liquidation has already progressed substantially and enjoys full approval of the Committee of Creditors.
The Appellate Tribunal, constituted by Justice N. Seshasayee (Judicial Member) and Mr. Arun Baroka and Mr. Indevar Pandey (Technical Members), examined whether the statutory framework under Section 34 could be influenced or overridden by the IBBI’s 18.07.2023 letter. It determined that the letter held no overriding force and emphasised that the Resolution Professional possessed no vested right to claim appointment as liquidator. The Tribunal found that once liquidation had advanced meaningfully and received continued CoC support, replacing the liquidator at such a stage lacked justification and would undermine the stability and continuity of the liquidation process.
The Appellant, who had been functioning as the Resolution Professional, had been recommended by the Committee of Creditors to act as the liquidator when the Corporate Debtor was placed into liquidation. The Appellant had also furnished written consent in Form AA as required under Section 34(1) of the IBC and moved an application before the Adjudicating Authority seeking liquidation of the Corporate Debtor and approval of his appointment. However, while considering the request for liquidation, the Adjudicating Authority relied on a communication issued by the Insolvency and Bankruptcy Board of India (IBBI) dated 18.07.2023, which suggested that under certain circumstances, a liquidator other than the Resolution Professional may be appointed. Acting on this letter, the Adjudicating Authority ordered liquidation but replaced the Appellant with the Respondent as the liquidator, despite there being no disciplinary proceedings against the Appellant and despite the clear recommendation of the CoC.
Aggrieved by this, the Appellant approached the High Court challenging the appointment and the applicability of the IBBI letter. The writ petition was dismissed on the ground that an alternative statutory remedy was available, following which the present appeal was filed. Meanwhile, the Respondent appointed as liquidator submitted that substantial progress had already been made in the liquidation process, including preparation of the liquidation estate, the asset memorandum, verification of claims, and initiation of asset sale. The Financial Creditor holding over 92% voting share also supported continuation of the existing liquidator to avoid prejudice to the liquidation process.
The Appellant relied heavily on a prior decision of this Tribunal in Manish Jaju Erstwhile Resolution Professional of Rajesh Landmark Projects Private Limited v. Committee of Creditors of Rajesh Landmark Projects Private Limited and Another, REEDLAW 2025 NCLAT Del 09570, which clarified that the IBBI did not possess authority to override the statutory mechanism prescribed under Section 34(4) of the IBC for appointment of a liquidator. However, while acknowledging that the erroneous reliance on the IBBI letter no longer survived in law, the Tribunal held that such clarification did not automatically entitle the Appellant to be reinstated as liquidator mid-process. The Tribunal noted that the Appellant did not possess a vested right to insist on his appointment and that substituting the liquidator at an advanced stage would lead to unnecessary delays, increased costs, and disruption to the liquidation process, particularly when the majority of Financial Creditors had expressed no objection to the existing arrangement.
The Tribunal further observed that although the Adjudicating Authority had incorrectly treated itself as bound by the IBBI letter, the Appellant could not impose his preference upon the majority CoC at this stage, especially when the Respondent liquidator had already taken substantial steps toward completion of liquidation. The Tribunal reiterated its earlier position in Omkara Asset Reconstruction Private Limited and Another v. Amit Vijay Karia and Another, REEDLAW 2025 NCLAT Del 12501, that the Adjudicating Authority cannot override the choice of the CoC in the appointment of a liquidator, but held that this principle did not justify undoing the process already underway.
In conclusion, the Tribunal found no substantive reason to interfere with the appointment of the existing liquidator and dismissed the appeal without costs.
Dr. Rajansh Thukral and Mr. Sidharth Thukral, Advocates
For the Respondent/ Defendant: Mr. Gopal Jain and Mr. Shubham Gupta Advocates for R-1 and 2
Mr. Anand Varma, Mr. Ayush Gupta and Ms. Priyanshi Goel, Advocates for R-3
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