Liquidator Appointment After CIRP Failure: Key Takeaways From NCLAT's Ruling

Who appoints the liquidator under IBC? NCLAT's latest ruling settles the debate on creditor primacy and NCLT's limited role.

1. Introduction: When Liquidation Begins, Who Chooses the Liquidator?

The Insolvency and Bankruptcy Code, 2016 ("IBC" or "the Code") is often celebrated for bringing creditor primacy and time-bound resolution into India's distressed asset regime. Yet, as the Code matures, the Indian insolvency jurisprudence continues to grapple with interpretive gaps left by legislative silences. One such gap lies at the intersection of creditor control and judicial discretion at the point where resolution gives way to liquidation.

In its judgment dated 01 December 2025 in Omkara Asset Reconstruction Pvt. Ltd. v. Amit Vijay Karia and a connected appeal, the National Company Law Appellate Tribunal ("NCLAT") has delivered a ruling that decisively tilts the balance in favour of creditor choice, even at the threshold of liquidation. The decision clarifies that when a resolution professional ("RP") declines to furnish consent to act as liquidator under section 34(1) of the IBC, the authority to nominate a replacement liquidator vests with the Committee of Creditors ("CoC"), and not with the Adjudicating Authority. The role of the National Company Law Tribunal ("NCLT") is confined to formally appointing the professional so nominated.

At one level, the ruling resolves a practical controversy that has increasingly surfaced before insolvency benches across the country. At another, it raises a deeper jurisprudential question: does the statutory architecture of the IBC truly support the extension of creditor primacy into liquidation, a phase that the Code otherwise treats as structurally distinct from the Corporate Insolvency Resolution Process ("CIRP")?

This article critically examines the NCLAT's reasoning, the statutory framework governing liquidator appointments, and whether the judgment preserves the internal logic of the IBC or subtly redraws the boundaries between resolution and liquidation.

2. The Factual Matrix: A Nomination Disregarded

The dispute before the NCLAT arose in a context shaped significantly by regulatory intervention and its subsequent judicial undoing. During the CIRP of the corporate debtor, liquidation was ordered under section 33 of the IBC after resolution efforts failed. As contemplated under section 34(1), the RP was required to act as the liquidator, subject to furnishing written consent.

The RP, however, declined to provide such consent. In response, the CoC exercised what it considered to be its residual authority and nominated another insolvency professional to act as the liquidator. This decision was taken against the backdrop of the Insolvency and Bankruptcy Board of India ("IBBI") Circular dated 18 July 2023, which advised that an insolvency professional other than the RP should ordinarily be appointed as liquidator to ensure independence.

The Adjudicating Authority chose not to accept the CoC's nomination. Instead, it appointed a different insolvency professional, effectively drawing from an IBBI panel applicable to that Bench. This divergence between creditor choice and judicial appointment triggered the appeal.

By the time the matter reached the NCLAT, the regulatory landscape had shifted. The IBBI Circular of 18 July 2023 had already been set aside on 08 September 2025 in Manish Jaju v. CoC of Rajesh Landmark Projects Pvt. Ltd., on the ground that the Board cannot, through a circular, amend or override the statutory framework of section 34 of the IBC. The NCLAT was therefore required to decide the issue purely on the basis of the Code itself.

3. The Statutory Framework: Sections 34 and 27 Under the Lens

The starting point of the analysis lies in section 34 of the IBC. Section 34(1) provides that upon an order of liquidation, the RP shall act as the liquidator, subject to the submission of written consent. This appointment is expressly stated to be "unless replaced by the Adjudicating Authority under sub-section (4)."

Section 34(4)(c) then mandates replacement where the RP fails to provide the written consent required under section 34(1). However, the provision is conspicuously silent on the mechanism of replacement. It does not identify who is to select the replacement liquidator, nor does it prescribe a process for such selection.

The NCLAT's interpretive move was to draw upon section 27 of the IBC, which governs the replacement of the RP during CIRP. Section 27 unequivocally vests the power to replace the RP in the CoC, with the Adjudicating Authority acting only as a confirming body after reference to the IBBI.

The question, therefore, was whether the procedure under section 27 could be transposed into section 34(4)(c), notwithstanding the fact that section 27 is textually confined to the resolution stage.

4. CIRP and Liquidation: Two Stages, Two Legal Logics

A defining feature of the IBC is its sharp conceptual separation between CIRP and liquidation. During CIRP, the CoC exercises undisputed primacy over commercial decisions. The RP functions as a facilitator and administrator, operating within a framework of approvals, voting thresholds and reporting obligations that place the CoC at the centre of decision-making.

Liquidation, however, marks a fundamental shift. Once liquidation is ordered under section 33, the CoC stands dissolved for all statutory purposes. The conduct of the process vests in the liquidator, who derives powers directly from sections 35 and 36 of the IBC. Creditors participate thereafter only through the Stakeholders' Consultation Committee, whose role is expressly advisory and whose views are not binding on the liquidator.

This enhanced autonomy of the liquidator is not accidental. It reflects a legislative judgment that liquidation is an execution-driven process, requiring decisional independence to realise assets, adjudicate claims and distribute proceeds in accordance with statutory priorities.

Against this backdrop, the extension of CoC primacy into the appointment of a liquidator raises a structural tension. Can a body that ceases to have any statutory role post-liquidation nevertheless determine who will control the liquidation estate?

5. NCLAT's Reasoning: Consistency Over Compartmentalisation

The NCLAT answered this question in the affirmative. Its reasoning proceeded from a holistic reading of the appointment architecture under the IBC. The tribunal noted that at every stage of insolvency proceedings, appointment of the Interim Resolution Professional, confirmation of the Resolution Professional, and replacement of the RP under section 27, the Adjudicating Authority never enjoys an independent power of selection.

In the NCLAT's view, permitting the Adjudicating Authority to select a liquidator of its own choice under section 34(4)(c) would create an anomalous enlargement of judicial discretion at a stage where no such discretion exists earlier. The tribunal emphasised that the Code consistently limits the role of the Adjudicating Authority to formal appointment and oversight, not choice.

By this logic, the replacement contemplated under section 34(4)(c) must necessarily follow the same creditor-driven mechanism as section 27. The CoC, being the only collective decision-making body familiar with the corporate debtor and its insolvency history, was held to be best placed to nominate a suitable liquidator.

The NCLAT further held that the invalidation of the IBBI Circular eliminated any regulatory basis for panel-based appointments by the Adjudicating Authority. In the absence of express statutory authorisation, such appointments were impermissible.

6. Judicial Discipline Versus Statutory Silence

From a doctrinal standpoint, the judgment reflects a preference for interpretive consistency over strict textual compartmentalisation. The NCLAT effectively filled a statutory silence by importing a familiar mechanism from CIRP into liquidation.

However, this interpretive move is not without difficulty. Section 34 does not refer to the CoC at all. Nor does it incorporate section 27 by reference. The conclusion that creditor primacy survives into liquidator appointment is therefore not grounded in express statutory language, but in an inferred legislative intent to restrict judicial discretion.

This raises a critical question in insolvency jurisprudence: when the statute is silent, should courts prioritise structural consistency or respect stage-specific design? The liquidation framework of the IBC is intentionally distinct. By allowing the CoC to determine the liquidator, the judgment arguably introduces a resolution-stage influence into a process that the Code otherwise seeks to insulate from creditor control.

7. The Role of the Adjudicating Authority Revisited

It is important to note that the NCLAT did not entirely denude the Adjudicating Authority of supervisory power. The tribunal expressly acknowledged that in cases involving fraud, collusion, misconduct or lack of eligibility, the NCLT retains the authority to refuse appointment or direct substitution.

This recognition preserves a crucial safety valve. It ensures that creditor choice does not become absolute and that the integrity of the liquidation process remains subject to judicial oversight. Yet, the threshold for such intervention remains high, reinforcing the primacy of creditor nomination as the default rule.

8. Implications for Insolvency Practice

From a practical perspective, the ruling brings much-needed clarity. Insolvency professionals, creditors and tribunals now have a clear roadmap when an RP declines consent to act as liquidator. Panel-based or bench-specific appointments, in the absence of statutory backing, are likely to face judicial resistance.

For asset reconstruction companies and financial creditors, the decision reinforces their influence over the insolvency lifecycle, extending creditor confidence into the liquidation stage. For insolvency professionals, it underscores the importance of maintaining creditor trust even beyond CIRP.

At a systemic level, the judgment strengthens the creditor-centric ethos of the IBC. Yet, it also subtly recalibrates the liquidation framework by allowing pre-liquidation dynamics to shape post-liquidation control.

9. A Critical Balance: Continuity or Conflation?

Whether the NCLAT's approach ultimately preserves or distorts the architecture of the IBC remains open to debate. On one hand, the ruling prevents an expansion of judicial discretion that the Code has consistently avoided. On the other, it blurs the conceptual boundary between CIRP and liquidation by allowing a dissolved body to influence the identity of the liquidator.

The absence of express legislative guidance on this issue suggests that Parliament may not have fully anticipated this contingency. In such circumstances, judicial interpretation inevitably fills the gap. The NCLAT has chosen to fill it in favour of continuity and creditor confidence.

The larger jurisprudential question, however, may yet invite scrutiny by higher courts: in choosing consistency of appointment over the distinct statutory design of liquidation, has the NCLAT upheld the spirit of the Code, or has it inadvertently crossed a line that Parliament deliberately left uncrossed?

10. Conclusion: Drawing Lines in Insolvency Law

The decision in Omkara Asset Reconstruction Pvt. Ltd. v. Amit Vijay Karia is a significant addition to India's insolvency jurisprudence. It decisively answers a practical question while simultaneously opening a deeper debate on the boundaries of creditor primacy.

By holding that "not your panel, not your pick" applies equally at the liquidation stage, the NCLAT has drawn a clear line against judicial selection of liquidators. Whether this line aligns perfectly with the statutory design of the IBC or merely reflects a pragmatic judicial bridge between two distinct stages is a question that may shape future insolvency litigation.

For now, the message is unmistakable: when it comes to liquidator appointments following a refusal of consent, the creditor's choice prevails, and the Adjudicating Authority's role remains one of confirmation, not creation.

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