Liquidator Cannot Challenge His Replacement As He Is Not A ‘Person Aggrieved’ Under IBC: NCLAT
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), New Delhi has held that a liquidator cannot maintain an appeal challenging his replacement under the Insolvency and Bankruptcy Code, observing that removal from a statutory assignment does not confer a vested right to continue in office. The Bench comprising Justice Ashok Bhushan (Chairperson) and Indevar Pandey (Technical Member) dismissed the appeal filed by the erstwhile liquidator of Tecpro Systems Limited, holding that such a professional cannot be treated as a “person aggrieved” within the meaning of Section 61 of the IBC.
The appeal was filed by Ramachandran Subramanian, who had been appointed as liquidator of Tecpro Systems Limited after the company entered liquidation on 16 January 2020 following the failure of an approved resolution plan. The liquidation proceedings were conducted under the supervision of the National Company Law Tribunal, Delhi Bench, which later passed an order on 9 January 2026 replacing him with another insolvency professional, Anil Kohli.
The corporate debtor had earlier undergone Corporate Insolvency Resolution Process after a petition filed by Edelweiss Asset Reconstruction Company Ltd. (EARCL), which had become the dominant financial creditor after acquiring stressed assets of the company from State Bank of India. A resolution plan approved during CIRP ultimately failed due to non-implementation by the successful resolution applicant, leading the Adjudicating Authority to order liquidation and appoint the appellant as liquidator.
During the liquidation process, several applications were filed by EARCL seeking the appellant’s replacement. In October 2024, the Stakeholders’ Consultation Committee considered an agenda for replacement of the liquidator, and voting conducted between 17 and 18 October 2024 resulted in more than 92 percent of the voting share favouring replacement.
Subsequently, an application was filed before the NCLT seeking replacement of the liquidator with another insolvency professional. At the same time, the appellant filed a separate application contending that EARCL should be treated as a related party under Section 5(24) of the IBC and therefore should not have been permitted to vote on the proposal for his removal.
The appellant argued that EARCL exercised significant control over the affairs of the corporate debtor even prior to the commencement of CIRP. It was contended that the asset reconstruction company had installed monitoring arrangements through Ernst & Young, exercised oversight over management decisions, introduced escrow mechanisms and played a role in restructuring the corporate debtor’s operations. On this basis, it was submitted that EARCL should be treated as a related party financial creditor and its vote in the Stakeholders’ Consultation Committee should be excluded.
The appellant further pointed out that when a fresh voting exercise was conducted under the supervision of a retired judge excluding the vote of EARCL, the proposal for replacement secured only about 59 percent support, falling short of the statutory requirement of two-thirds majority under Regulation 31A(11) of the IBBI (Liquidation Process) Regulations.
The respondents opposed the appeal, contending that a liquidator does not possess any personal or proprietary right to continue in office once the Adjudicating Authority directs replacement. It was argued that the office of liquidator is fiduciary and functional in nature and that removal from such assignment does not create any enforceable personal right capable of being appealed against.
The appellate tribunal first examined whether the appellant had the locus to maintain the appeal. Referring to earlier decisions of the tribunal, the Bench reiterated that insolvency professionals, including resolution professionals and liquidators, do not acquire any vested legal right to continue once the competent authority decides to replace them.
The tribunal observed that a liquidator is appointed under the statutory framework of the IBC to perform fiduciary functions for the benefit of all stakeholders. Such an appointment does not confer a proprietary or personal entitlement to continue indefinitely. The Bench stated that removal from a statutory assignment, without affecting any independent civil or proprietary right, does not make the professional a “person aggrieved” under Section 61 of the Code.
The tribunal noted that the liquidation process remains under the supervision of the Adjudicating Authority and that the authority has the power to replace the liquidator if it considers such replacement necessary for the smooth conduct of the liquidation proceedings.
“The liquidation process remains under the supervision of Adjudicating Authority. If the Authority, on overall consideration of stakeholder confidence, conduct of proceedings and repeated friction, forms an opinion that continuation of the Liquidator is not conducive to smooth completion of liquidation, it is within its jurisdiction to direct replacement,” the Bench observed.
The tribunal also examined the appellant’s contention that EARCL should be treated as a related party of the corporate debtor. It noted that the shares held by EARCL were pledged shares forming part of the security package originally created in favour of State Bank of India and later assigned to EARCL. Since those pledged shares had never been invoked, ownership and voting rights remained with the pledgor and did not confer managerial control on EARCL.
The tribunal further observed that the presence of a board observer, monitoring arrangements and escrow mechanisms were common protective measures adopted by lenders in distressed accounts and could not by themselves be treated as evidence of management or policy control over the corporate debtor.
It also took note of the chronology of events and observed that no objection regarding EARCL being a related party had been raised during CIRP or for several years during the liquidation process. The tribunal noted that the related party allegation surfaced only after proceedings were initiated seeking the replacement of the liquidator.
On examining the statutory provisions, the tribunal held that EARCL did not fall within the definition of a related party under Section 5(24) of the IBC. It further observed that even otherwise, the second proviso to Section 21(2) permits a regulated financial creditor to participate in the committee of creditors even if it becomes a related party solely due to conversion or substitution of debt into equity before the insolvency commencement date.
The appellate tribunal concluded that the replacement of the appellant as liquidator was within the supervisory powers of the Adjudicating Authority and that no illegality or jurisdictional error had been demonstrated. Holding that the appellant had no vested right to continue as liquidator and lacked locus to challenge his replacement, the tribunal dismissed the appeal and upheld the order of the NCLT replacing him.
Cause Title: Ramachandran Subramanian Vs Anil Kohli and Edelweiss Asset Reconstruction Company Limited (EARCL).
Case Number: Company Appeal (AT) (Insolvency) 267/2026
Coram: Justice Ashok Bhushan (Chairperson) and Indevar Pandey (Technical Member)
