Board (IBBI) dilutes the powers of the Adjudicating Authority in the Liquidation Process.

Board vide Insolvency and Bankruptcy Board of India (Liquidation Process) (Fourth Amendment) Regulations, 2020. On 13.11.2020, inserted the following clause in the Liquidation regulations;

“37A. Assignment of not readily realisable assets.

(1) A liquidator may assign or transfer a not readily realisable asset through a transparent process, in consultation with the stakeholders’ consultation committee in accordance with regulation 31A, for a consideration to any person, who is eligible to submit a resolution plan for insolvency resolution of the corporate debtor.

Board as per the above regulations has made it mandatory for the Liquidator to consult “stakeholders’ consultation committee” for disposal of not readily realisable assets. Here it is worth to note that the Code does not envisage any role of “stakeholders’ consultation committee”, rather there is no mention of “stakeholders’ consultation committee” in Chapter III of Part II of the Code. The concept of “stakeholders’ consultation committee” is just a figment of imagination of the Board. 

Code under section 35(1) specifically provides that the powers & duties of the Liquidator are subject to the directions of the Adjudicating Authority. Code further provides that the Liquidator shall have the power to consult any of the stakeholders. The said consultation of the Liquidator with the stakeholder is neither mandatory nor binding on the Liquidator, as per the provisions of the Code.

Thus, the Board, with the amendments in  the Liquidation regulations supra above, has divested the Adjudicating Authority of its powers & delegated the same to “stakeholders’ consultation committee”, whose existence itself is not envisaged in the Code.

For ready reference the relevant sections of the Code are quoted below;

#  Section 35. Powers and duties of liquidator. -

(1) Subject to the directions of the Adjudicating Authority, the liquidator shall have the following powers and duties, namely: -

(a) to verify claims of all the creditors;

(b) to take into his custody or control all the assets, property, effects and actionable claims of the corporate debtor;

(c) to evaluate the assets and property of the corporate debtor in the manner as may be specified by the Board and prepare a report;

(d) to take such measures to protect and preserve the assets and properties of the corporate debtor as he considers necessary;

(e) to carry on the business of the corporate debtor for its beneficial liquidation as he considers necessary;

(f) subject to section 52, to sell the immovable and movable property and actionable claims of the corporate debtor in liquidation by public auction or private contract, with power to transfer such property to any person or body corporate, or to sell the same in parcels in such manner as may be specified:

Provided that the liquidator shall not sell the immovable and movable property or actionable claims of the corporate debtor in liquidation to any person who is not eligible to be a resolution applicant.

(n) to apply to the Adjudicating Authority for such orders or directions as may be necessary for the liquidation of the corporate debtor and to report the progress of the liquidation process in a manner as may be specified by the Board; and

(2) The liquidator shall have the power to consult any of the stakeholders entitled to a distribution of proceeds under section 53:

• Provided that any such consultation shall not be binding on the liquidator:

• Provided further that the records of any such consultation shall be made available to all other stakeholders not so consulted, in a manner specified by the Board.

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