IBC Section 34: Appointment of liquidator and fee to be paid

Section 34 of Insolvency and Bankruptcy Code, 2016: Appointment of liquidator and fee to be paid

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

(1) Where the Adjudicating Authority passes an order for liquidation of the corporate debtor under section 33, the resolution professional appointed for the corporate insolvency resolution process under Chapter II shall, subject to submission of a written consent by the resolution professional to the Adjudicatory Authority in specified form, act as the liquidator for the purposes of liquidation unless replaced by the Adjudicating Authority under sub-section (4).

(2) On the appointment of a liquidator under this section, all powers of the board of directors, key managerial personnel and the partners of the corporate debtor, as the case may be, shall cease to have effect and shall be vested in the liquidator.

(3) The personnel of the corporate debtor shall extend all assistance and cooperation to the liquidator as may be required by him in managing the affairs of the corporate debtor and provisions of section 19 shall apply in relation to voluntary liquidation process as they apply in relation to liquidation process with the substitution of references to the liquidator for references to the interim resolution professional.

(4) The Adjudicating Authority shall by order replace the resolution professional, if-

(a) the resolution plan submitted by the resolution professional under section 30 was rejected for failure to meet the requirements mentioned in sub-section (2) of section 30; or

(b) the Board recommends the replacement of a resolution professional to the Adjudicating Authority for reasons to be recorded in writing; or (c) the resolution professional fails to submit written consent under sub-section (1).

(5) For the purposes of clauses (a) and (c) of sub-section (4), the Adjudicating Authority may direct the Board to propose the name of another insolvency professional to be appointed as a liquidator.

(6) The Board shall propose the name of another insolvency professional along with written consent from the insolvency professional in the specified form, within ten days of the direction issued by the Adjudicating Authority under sub-section (5).

(7) The Adjudicating Authority shall, on receipt of the proposal of the Board for the appointment of an insolvency professional as liquidator, by an order appoint such insolvency professional as the liquidator.

(8) An insolvency professional proposed to be appointed as a liquidator shall charge such fee for the conduct of the liquidation proceedings and in such proportion to the value of the liquidation estate assets, as may be specified by the Board.

(9) The fees for the conduct of the liquidation proceedings under sub-section (8) shall be paid to the liquidator from the proceeds of the liquidation estate under section 53.

1. Ins. by Act 26 of 2018, s. 25 (w.e.f. 6-6-2018).

2. Subs. by s. 26, ibid, for "Chapter II shall" (w.e.f 6-6-2018).

Legal Commentary & Landmark Judgments: Section 34

Section 34 regulates the appointment of the liquidator, passing of fees, and cessation of the powers of the board of directors upon the Adjudicating Authority ordering liquidation under Section 33.

Appointment of Liquidator: Where the Adjudicating Authority passes an order for liquidation of the corporate debtor under Section 33, the Resolution Professional shall act as the liquidator unless replaced.
Replacement Criteria (Section 34(4)): The NCLT replaces the RP with another liquidator if: (a) The plan was rejected for failure to meet requirements; (b) The IBBI recommends replacement; (c) The RP expresses unwillingness in writing.
Cessation of Board Powers (Section 34(2)): On the appointment of a liquidator, all powers of the board of directors, key managerial personnel, and partners of the corporate debtor shall cease and vest in the liquidator.
Discharge of Personnel (Section 34(3)): The personnel of the corporate debtor shall extend all cooperation to the liquidator under Section 19.

Key Landmark Precedents:

Arun Kumar Jagatramka v. Jindal Steel & Power Ltd. (2021) 7 SCC 474: The Supreme Court held that upon passing a liquidation order under Section 33/34, the corporate debtor enters corporate death; Section 29A disqualifications apply equally to liquidation sales, schemes under Section 230, and auctions.
Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17: Affirmed that the liquidator under Section 34 assumes full executive and custodial authority to realize assets for collective distribution.

Courtroom Practice & Strategic Litigation Guidance:

Upon appointment as liquidator, issue public notices under Regulation 12, take control of company seals and bank mandates, and calculate liquidator fees strictly in accordance with Regulation 4 of the IBBI (Liquidation Process) Regulations, 2016.