Replacement of resolution professionals in liquidation

The Insolvency and Bankruptcy Code, 2016 (IBC), has been in the news since it came into force in December 2016. Apart from laying down new law in the restructuring domain, the code provides guidelines for the appointment of an interim resolution professional/resolution professional (RP), who is responsible for management of the corporate debtor and for control and custody of its assets during the corporate insolvency resolution process (CIRP).

Section 33 of the IBC sets out the various circumstances in which the adjudicating authority must pass an order directing liquidation of the corporate debtor. These include non-receipt of a resolution plan within the CIRP period or rejection of the resolution plan under section 31, or the decision taken by the committee of creditors to liquidate the company even prior to completion of the CIRP period of 180 or 270 days.

The adjudicating authority, in any of the circumstances under which it passes an order for liquidation of the company, is required to appoint a liquidator to conduct the liquidation process. Section 34 of the IBC, which relates to appointment of a liquidator, stipulates that upon passing of the liquidation order, the RP appointed for the CIRP shall act as the liquidator, unless the adjudicating authority decides to replace the RP on the grounds provided in section 34(4), i.e. the resolution plan submitted by the RP was rejected due to non-compliance with the requisites of section 30(2) or the Insolvency and Bankruptcy Board of India (IBBI) has recommended the replacement, for reasons to be recorded in writing.

Dhir & Dhir Associates is a leading full-service law firm in India. Varsha Banerjee is an associate partner at Dhir & Dhir Associates.