NCLAT: Only CoC Has Authority to Appoint Liquidator; NCLT's Power Limited To Replacing RP
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi has held that the power to select a liquidator vests exclusively with the Committee of Creditors (CoC), and that the Adjudicating Authority (NCLT) cannot appoint a liquidator of its own choice when a Resolution Professional (RP) does not consent to continue in liquidation. The Tribunal clarified that when Section 34(1) and Section 34(4)(c) of the Insolvency and Bankruptcy Code, 2016 (IBC) are read together with Section 27, the Adjudicating Authority’s role is confined to formally appointing the RP or replacement proposed by the CoC, subject to confirmation by the Insolvency and Bankruptcy Board of India (IBBI).
The judgment was delivered by a Bench comprising Justice N. Seshasayee (Judicial Member) and Arun Baroka (Technical Member) in two connected appeals filed by Omkara Asset Reconstruction Private Limited, which held 100% and about 98% voting share respectively in the CoCs of Chinar Realty Private Limited and Chinar Retails and Infrastructure Private Limited. In both cases, the corporate insolvency resolution process (CIRP) had failed and the CoCs resolved to send the companies into liquidation. While doing so, they nominated AAA Insolvency Professionals LLP and Stress Credit Resolution Pvt Ltd (SCRIL) as liquidators in place of the RPs engaged during CIRP.
However, the NCLT, Indore Bench, while passing liquidation orders on 11 June 2025, appointed different individuals as liquidators who were neither the RPs during CIRP nor the nominees proposed by the CoCs. Challenging this, Omkara ARC argued that the statutory scheme of the IBC never allows the Adjudicating Authority to select an insolvency professional of its own choice at any stage and that the CoC’s commercial wisdom extends to the choice of liquidator as well.
Examining the framework of the Code from the stage of appointment of the Interim Resolution Professional (IRP) to liquidation, NCLAT analysed Sections 7, 9, 10 and 16 of the IBC to show that the choice of IRP lies either with the petitioning creditor, the corporate debtor, or, where not named, with the IBBI. The Adjudicating Authority only appoints the person so recommended. The Tribunal observed that “at no stage, the Adjudicating Authority has been given any independent authority to appoint the IRP of its choice,” and that the Code consciously separates the selection process from the act of formal appointment.
The Bench then traced the next stage under Section 22, where the CoC decides whether to retain the IRP as RP or replace him with another professional, again subject to IBBI confirmation. Similarly, Section 27 permits the CoC to replace an RP without assigning reasons, with the Adjudicating Authority bound to appoint the RP so chosen. On this structure, the Tribunal concluded that the IBC consistently leaves the choice of insolvency professional to stakeholders or the Board and not to the Adjudicating Authority.
Turning to liquidation, the Tribunal examined Section 34(1) and Section 34(4)(c) alongside Regulation 31A(11) of the IBBI (Liquidation Process) Regulations, 2016. It noted that Section 34(1) provides that the RP appointed for CIRP shall act as liquidator “subject to submission of a written consent”, and only where such consent is not forthcoming can there be a replacement. However, it emphasised that this replacement cannot be of the NCLT’s own choosing. Interpreting these provisions, NCLAT held that Section 34(1) “only has authorised the Adjudicating Authority to replace the resolution professional and not to appoint a liquidator,” and that the authority to select the replacement lies with the CoC under Section 27. Therefore, “replacement of RP within the meaning of Sec.34(1) read with Sec.34(4)(c) can be done only as per the procedure contemplated in Sec.27.”
The Tribunal also dealt with the IBBI circular dated 18 July 2023, which required that the RP and the liquidator must be different individuals or entities. It noted that this circular had already been held invalid in Manish Jaju v. CoC & Ors., C.A. (AT) (Ins.) No. 1165 of 2025, where the NCLAT ruled that IBBI cannot override the statutory scheme of Section 34 through delegated legislation. In the present case, although the CoCs had nominated liquidators different from the RPs in perceived compliance with that circular, the Tribunal clarified that the circular could not now be used to justify departure from the Code’s scheme. Nonetheless, it held that there was no legal impediment in giving effect to the CoC’s choice of AAA Insolvency Professionals LLP and SCRIL as liquidators, subject to IBBI confirmation.
Importantly, NCLAT acknowledged that there is a narrow exceptional sphere where the Adjudicating Authority may act independently of the CoC or the Stakeholders’ Consultation Committee. It observed that if there are “tangible and incontrovertible facts” indicating gross misconduct or collusion between the RP or liquidator and the CoC/SCC, thereby perpetrating a fraud on the statute, the tribunal cannot remain a passive spectator. Referring to broader principles on judicial duty and fraud on statute, the Bench stated that the power to intervene in such situations is “inherent in the very structure of our judicial system of which the tribunals are a part and it does not require the statute to spell the authority to do it.”
Applying these principles to the facts, the NCLAT found that the NCLT Indore had overstepped its jurisdiction by appointing liquidators of its own choice in both Chinar Realty and Chinar Retails matters, despite the CoC having already nominated insolvency professionals. Holding that “only CoC has the authority to select the candidate for replacing the RP for the purposes of Sec.34(4)(c) of the IBC,” the Tribunal allowed both appeals, set aside the NCLT’s orders dated 11 June 2025, and directed that once the IBBI confirms AAA Insolvency Professionals LLP and Stress Credit Resolution Pvt Ltd (SCRIL), the Adjudicating Authority shall appoint them as liquidators in the respective corporate debtors.
Appearance
For Appellant: Senior Advocate Abhijeet Sinha with Advocates Kiran Sharma, Niharika Sharma, Somdutta Bhattacharya, Saikat Sarkar, Heena Kochar, and Advocates Shankari Mishra and Mehak Khandelwal.
For Respondent: Advocates Bharat Gupta, Varun Tyagi, Vishesh Chauhan, Ishan Srivastava, Shagun Gupta and Snigdha S. Jena for Mayuri Daga.
Cause Title: Omkara Asset Reconstruction Pvt. Ltd. v. Amit Vijay Karia & Anr. with COC of Chinar Retails and Infrastructure Private Limited v. Amit Vijay Karia & Anr.
Case No: Company Appeal (AT) (Ins.) No. 914 of 2025 with Company Appeal (AT) (Ins.) No. 915 of 2025.
Coram: Justice N. Seshasayee (Judicial Member), Arun Baroka (Technical Member)
