Tag Archives: Liquidation Process


The Discussion Paper on Streamlining the Liquidation Process, dated 14 June 2022, issued by the Insolvency and Bankruptcy Board of India, is a well-intended step with some corrective measures.

Stakeholders’ Consultation Committee

Section 53 of the Insolvency and Bankruptcy Code, 2016, empowers the Liquidator to consult any stakeholder entitled to a distribution of proceeds. The Liquidation Regulations have already converted the Liquidator’s power to consult any stakeholders into a duty. Increasingly such consultation is binding on the Liquidator unless a contrary decision is well explained and reported. I welcome a consultation committee meeting to increase transparency and democratic decision-making.

The present discussion paper intends to facilitate the consultation at an early stage and remove discrepancies.

Proposal 1: In this regard, it is proposed that the CoC as constituted during CIRP on the basis of admitted claims shall function as SCC during liquidation process with the voting share of members of SCC being same as that in the CoC. The stakeholders who are part of CoC without voting rights will be part of SCC without voting rights. The Liquidator shall convene first meeting of SCC within seven days of liquidation commencement date.

Draft Regulation: “(1A) The committee of creditors under section 21 shall function as the consultation committee with same voting rights till its constitution under sub-regulation (1).

Provided the directors, partners and one representative of operational creditors, as referred in sub-section (3) of section 24, may attend the meetings, but shall not have any right to vote in such meetings”

“(2) The voting share of members of the consultation committee under sub-regulation (1) shall be proportionate to the share of payments they will receive in terms of Section 53 against their admitted claim during liquidation if the liquidation value is taken as the proceeds for sale.

Provided a secured creditor who has not relinquished their security interests under section 52 shall not be part of the consultation committee under regulation (1) or (1A), as the case may be.

Provided further, the representatives of stakeholders not having voting share in the consultation committee may attend the meetings, but shall not have any right to vote in such meetings”

I have one suggestion: the composition of this “Interim Stakeholders’ Consultation Committee” should be constituted by adjusting the composition per entitlement to a distribution of proceeds under Section 53. In addition, the voting powers of the Interim Stakeholders’ Consultation Committee and regular Stakeholders’ Consultation Committee should be aligned.

I suggest amendments in draft sub-regulations (1A) and (2) as under:

“(1A) The committee of creditors under section 21 shall function as the consultation committee with same voting rights till its constitution under sub-regulation (1).

“(2) The voting share of members of the consultation committee under sub-regulation (1) or (1A) shall be proportionate to the share of payments they will receive in terms of Section 53 against their admitted claim during liquidation if the liquidation value is taken as the proceeds for sale.

Proposal 2: The Liquidator shall record the reason of his decision contrary to the advice of the Stakeholders’ Consultation Committee in writing and forward the same to the Adjudicating Authority and the Board within five days.

This will increase the cost in the form of one more application before the Adjudicating Authority takes such a report on record. Further, it will reduce decisions based on the Liquidator’s commercial wisdom.

Proposal 3: A secured creditors shall intimate its decision regarding realisation or relinquishment of its security interest under section 52 of the Code, in the first meeting of the SCC (practically Interim SCC).

Draft Regulation: “(1) A secured creditor shall inform the Liquidator of its decision to relinquish its security interest to the liquidation estate or realise its security interest within seven days from the liquidation commencement date or in the first meeting of the consultation committee, whichever is later:

Provided that, where a secured creditor does not intimate its decision within seven days from the liquidation commencement date or in the first meeting of the consultation committee, whichever is later, the assets covered under the security interest shall be presumed to be part of the liquidation estate.”

This is a welcome step assuming the secured creditors have filed a claim in the CIRP and part of the Interim SCC). Such secured creditors have enough time to decide after the liquidation resolution and before the Liquidation order. I suggest the status quo in case of secured creditors who, for any reason, have not filed a claim in CIRP.

A second proviso may be added:

Provided also that a secured creditor, who have not filed its claim in the CIRP, shall inform the Liquidator of its decision to relinquish its security interest to the liquidation estate or realise its security interest, as the case may be, in Form C or Form D of Schedule II.”

Proposal 4: The Stakeholders’ Consultation Committee shall now empower to propose replacement of the Liquidator.

This will not be an appropriate step; First it is not in line with the Code; Second the SCC is only a consultative body and thirdly the SCC may replace a hard-working liquidator facilitating the incumbent Liquidator to have the fruit of the Liquidation.

The Code may be amended for the replacement of the Liquidator by the Adjudicating Authority when the Stakeholders’ Consultation Committee applies for such replacement with specific and justified reasons. The Liquidator should have a right to be heard before the SCC and the AA.

Proposal 5: SCC will fix/review the fee of the Liquidator in its first meeting.

I do not see a good reason for this proposal as present regulations adequately cover the fee aspect. In addition, this proposal will open endless negotiations between Liquidator and the stakeholders.

Compromise or Arrangement

Proposal 6: reduction of time period for the Compromise and Arrangement from 90 days to 30 days.

The discussion paper mentions that as of 31 May 2022, only eight liquidation processes have been closed by way of compromise or arrangement under section 230 of the Act, which took an average of 466 days for completion, and the Liquidator has realised only 87% of the liquidation value in these eight cases.

These eight cases are enough to say the reduction of this period may not change the situation as compromise and arrangement is otherwise a time-consuming process. Therefore, such a decrease in time shall promote the auction of the company as a going concern.


Proposal 7: Where the Liquidator is of the opinion that fresh valuation is required, he shall seek advice of SCC for the same and such valuation may be considered for subsequent auctions.

This amendment is a welcome step.

Submission of Progress Reports and SCC Minutes

Proposal 8: The Liquidation Regulations may be amended to provide that the Liquidator shall submit the copy of progress reports, along with the minutes of the SCC, with the Board as and when the same is filed with AA. Further, the format of the Progress report, along with its contents, may be provided in detail by way of a Circular.

This proposal is just a procedural addition and may become an example of over governance.

Events-based timelines of Auction

Proposal 9 and 10: Frist auction notice within 45 days of the Liquidation Commencement Date, Auction on 35th day from the public notice and successive auction notice within 15 days of the failed auction.

These proposals may bring procedural uniformity and predictability to the process. However, the gap between successive auction notice and the auction may be reduced to 15-20 days from the proposed 35 days each time. Most of the participants in successive auctions usually working on their proposal/bids from the first or earlier auctions.

Same time, IBBI may also give more power to SCC to consider proposals for private sales provided such private sales should not hamper transparency in the process. Many potential buyers prefer private sale over auction purchases.

Designating Auction Portal

Proposal 11: The Liquidation Regulations may provide that the auction platforms of PDAs as empanelled from time to time may be exclusively designated for offering auction services.

I restrain myself from making any comment on this proposal.

Preparation of Asset Memorandum

Proposal 12: The Liquidator shall use the information provided in IM and valuation conducted during CIRP for preparation of Asset Memorandum and submit the same to AA within 30 days. Further, the Liquidator shall share the asset memorandum with the SCC after receiving confidentiality undertaking from the members of the SCC.

This proposal is good for transparency and proper advisory by the Stakeholders’ Consultation Committee.

Interim Finance availed during CIRP

Proposal 13: The liquidation cost shall include the interest on interim finance till the same is repaid.

This proposal is welcome.

Treatment of Avoidance Applications

Proposal 14: Before filing of an application of dissolution or closure of the process by Liquidator, SCC shall decide the manner in which proceedings in respect of avoidance transactions or fraudulent or wrongful trading, if any, will be pursued after closure of liquidation proceedings and the manner in which the proceeds, if any, from such proceedings shall be distributed. This decision shall be part of the final report filed before the AA.

I am not sure about the effectiveness of the proposal, but hopeful.


Proposal 15: The Liquidator shall consider the claims collated during the CIRP in respect of claimant who have not submitted their claim during liquidation.

This proposal is a welcome step, but it is always advisable for claimants to file fresh claims.

Disclaimer: The writer is an Insolvency Professional, and his interest may impact the outcome of this discussion.

I am publishing this on the blog for discussion purposes. I will submit my final thought with IBBI one or two days before the last date.  

Aishwarya Mohan Gahrana, Company Secretary and Insolvency Professional

To Join my telegram Channel: https://t.me/AishMGhrana
To Join my telegram discussion group (only for CA/CS/CMA/IP/RV): https://t.me/AishMGhrana



Stakeholders’ Consultation Committee in liquidation do not have any parliamentary backing but a product of subordinate legislation. This is a committee constituted under Regulation 31A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. To understand the scope of stakeholders’ consultation committee we may refer to Section 35(2) and executive overreach in a legislative mandate.

Power to Consult

Section 35(2) empower the liquidator to power to consult any of the stakeholders entitled to a distribution of proceeds under section 53. This is not a duty of the liquidator but power meaning thereby this consultation is completely optional on part of the liquidator. Under law, any such consultation is not be binding on the liquidator.     However, the law mandate record of such consultation, if it takes place. The records of any such consultation shall be made available to all other stakeholders not so consulted, in a manner specified by the Board. [Section 35(2)]

This is the duty of stakeholders consulted to extend all assistance and cooperation to the liquidator to complete the liquidation of the corporate debtor. [Regulation 8(1)]

For the purpose of Second proviso, the liquidator shall maintain the particulars of any consultation with the stakeholders made under this Regulation, as specified in Form A of Schedule II. [Regulation 8(2)]

Consultation Committee

The above law is the major position under the Insolvency and Bankruptcy Code, 2016 and the Liquidation Regulations.

However, the Insolvency and Bankruptcy Board of India (IBBI) to streamline this consultation process, prescribes the Stakeholders’ Consultation. With the recent amendment, the stakeholder’s consultation committee becomes a significant affair. Still, any stakeholder should not consider it as Committee of Creditors which is powerful to decide the faith the resolution process.

The liquidator shall constitute a Stakeholders’ Consultation Committee within sixty days from the liquidation commencement date (the date of liquidation order). The committee shall be constitute based on the List of stakeholders prepared on the basis of claims received and verified. [Regulation 31A(1)]

Duty of Consultation Committee

Regulation 31A cast a duty on the Stakeholders Consultation Committee to advise the liquidator on matters related to –

  • Appointment of Professionals and their remuneration (power given with effect from 30 September 2021);
  • Sale under Regulation 32, including manner of sale, pre-bid qualifications, reserve price, amount of earnest money deposit, and marketing strategy.

The decision(s) taken by the liquidator prior to the constitution of consultation committee shall be placed before the consultation committee for information in its first meeting. [Proviso to Regulation 31A(1)] The Committee has no power to advise on such decision taken place before the constitution of the Stakeholders’ consultation committee.

The Regulations do not limit the power of the liquidator to consult any of the stakeholder under Section 35(2) in any additional matter.


The consultation committee shall have following members [Regulation 31A (2)]:

Secured Financial Creditors: 2 – 4 depends upon percentage of claims to the Liquidation Value;

Unsecured Financial Creditors: 1-2 upon percentage of claims to the Liquidation Value;

Workmen and Employees: 1

Government: 1

Operational Creditors: 1-2 upon percentage of claims to the Liquidation Value;

Shareholder or Partners: 1

No Remuneration

This may be noted that these representatives shall not be entitle to any remuneration or allowance under the Code and these regulations. However, the code do not bar creditors representative by the representative to reimburse the cost but in any case, any cost incurred by these representative shall not form part of the liquidation process cost.

The liquidator may facilitate the stakeholders of each class to nominate their representatives for inclusion in the consultation committee. If the stakeholders of any class fail to nominate their representatives, such representatives shall be selected by a majority of voting share of the class, present and voting. [Regulation 31A (3) and (4)].

Record and Information

Representatives in the consultation committee shall have access to all relevant records and information as may be required to provide advice to the liquidator under sub-regulation (1). It means where the liquidator seeks advise on additional matter, the liquidator may at his option provide the information. [Regulation 31A (5)] This record and information may be provided subject to restriction under the Code and Regulations. The Regulations do not provide any restriction; however, the Liquidator may take hint from the CIRP Regulations and should request a non-disclosure undertaking from these Representatives.


The liquidator shall convene a meeting of the consultation committee when he considers it necessary and shall convene a meeting of the consultation committee when a request is received from at least fifty-one percent of representatives in the consultation committee. [Regulation 31A(6)] However, it is not clear on what matter the Stakeholders’ consultation Committee shall “forced advise” where the liquidator has not called the meeting.

The liquidator should call meeting at reasonable intervals and keep the committee informed of developments.

The liquidator shall chair the meetings of consultation committee and record deliberations of the meeting. [Regulation 31A(7)]

The consultation committee shall advise the liquidator, by a vote of not less than sixty-six percent of the representatives of the consultation committee, present and voting. The advice of the consultation committee shall not be binding on the liquidator. Where the liquidator takes a decision different from the advice given by the consultation committee, he shall record the reasons for the same in writing and mention it in the next progress report. [Regulation 31A (9) and (10)]

Sale as Going Concern

The liquidator shall place the recommendation of committee of creditors made under sub-regulation (1) of regulation 39C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, before the consultation committee for its information. [Regulation 31A(8)]

Under Regulation 39C of those regulations, the committee (of creditors) may recommend that the liquidator (to be appointed) may first explore sale of the corporate debtor as a going concern under clause (e) of regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 or sale of the business of the corporate debtor as a going concern under clause (f) thereof, if an order for liquidation is passed under section 33.

Where the committee of creditors has not identified the assets and liabilities under sub-regulation (2) of regulation 39C of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the liquidator shall identify and group the assets and liabilities to be sold as a going concern, in consultation with the consultation committee. [Regulation 32(3)]

Assignment of not readily realisable assets

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. [Regulation 37A(1)]

Filing of Claims during Liquidation

In an earlier post here, we have discussed filing of claims during corporate insolvency resolution process. In this post, we will discuss filing of claims during liquidation process of corporate persons. During liquidation process for a corporate debtor following forms of the IBBI (Liquidation Process) Regulations 2016 are prescribed to file claims by creditors:

  • Operational Creditors –Form C
  • Financial Creditors – Form D
  • Workmen and Employees (individually) – Form E
  • Workmen and Employees (for All) – Form F
  • Claims by other stakeholders – Form G

Most fields of these forms are identical. In case your claim is complicated or have a good amount of money involved, it is advisable to seek help of a good professional. 

The liquidation process starts after failure of the resolution process of corporate person. In the liquidation process, a creditor is required to file claims within 30 days from the date of the liquidation order. Practically, a creditor may have not more than 14-21 days from the receipt of information of the initiation of liquidation process.

Liquidation Order: Day 0

Receipt of the copy of order by Liquidator – Day 3-5

Public Announcement of Liquidation and Invitation of Claims – Day 5-10

Last Day of filing Claims – Day 30

The liquidator has no power to accept claims after 30 days. All creditors failed to file claims within these 30 days must apply the Adjudicating Authority (National Company Law Tribunal) to condone delay.

All these claim amount shall be calculated as on Liquidation Commencement Date.

The affidavit with the claim form shall be attested by Notary Public.

Common points in these Forms

Common FieldsSource of Information
Name and address of LiquidatorForm Public Announcement
Name and Address of ClaimantYour identity proofs/ loan agreements/Invoices

Certificate of Incorporation/GST details
Identification Number of ClaimantPAN/ GSTN / CoI / UID (Aadhar)
Address of ClaimantLatest Bank Statement/ Telephone or Mobile Bill/ UID (Aadhar)
Email of ClaimantIf you are not a frequent user of email, please provide your most used email address as you need to check this email address almost daily to stay updated.
Details of documentsList of all relevant documents
Details of any dispute as well as the record of pendency or order of suit or arbitration proceedings
Details of how and when debt incurredPlease write one paragraph summery of the default
FC – why loan taken, securities, loan disbursal,  loan period interest and due dates OC – what goods or services provided and for which period, details of period of default with first and last invoice
real estate buyers – Allotment letter, agreement to sale, details of payment made
Details of any mutual credit, mutual debts, or other mutual dealings between the corporate debtor and the creditor which may be set-off against the claimDetails if any
Details of the bank account to which the amount of the claim or any part thereof can be transferred pursuant to a resolution planPlease check your cheque book: account number, type of account, Bank name and branch address, IFSC Code, Swift Code etc
List of documents attached to this proof of claim in order to prove the existence and non-payment of claim due to the operational creditorThis will be good if proper file is prepared with proper index and page numbering.
Signature of creditor or person authorised to act on his behalfPlease attach proper authorisation.
Address of person signingAddress Proof – UID/Bank statement/ mobile or telephone bill/ Electricity bill
Liquidation commence datePublic Announcement

In the case of company or limited liability partnership, the declaration and verification shall be made by the director/manager/secretary and in the case of other entities, an officer authorised for the purpose by the entity].

Amount of Claim

In case of operational Creditor: please check and attach invoices, ledger, commercial agreement, Memorandum of understanding, contracts etc. Copy of proper ledger is strongly advisable. Where any interest is claim document like MSME registration or agreement should be attached. Interest for MSME operational Creditors 18% after first 45 days.

In case of a claim by financial creditors: Please check and attach sanction letters, loan agreement, inter-corporate loan agreement, RBI – FEMA Documentation in case of loan from foreign country, mortgage agreement, hypothecation agreement, guarantee agreements, property papers, vehicle registration details, information utility documents, ledger or bank statement or loan statement, securitization documents, DRT orders etc, name of guarantors or principal borrowers;

In case of real estate buyers: application, allotment letter, agreement to sale, sale deed, loan documentation, payment details, ledger copy or bank statement or loan agreement, RERA order, calculation sheet for interest calculation. Interest for class of creditors shall be 8% per year.

In case of Employee and workmen: appointment letter/ promotion letters/ increment letter/ latest salary slips/ TDS statement

Action Post filing claims

After filing claims, claimants should wait response from the Liquidator. The Liquidator shall respond upon your claims on or before 67th day of the Liquidation Commencement Date. In case the claimant find a requirement to modify or amend the claim, the claimant can do it within 14 days of filing of the claim.

Please follow instructions of the liquidator seeking additional information or document unless you are going to appeal against instruction. Please submit all information required. The liquidator may reject your claim if he is not satisfied with your claim. In case of rejection of claim you are required to file an appeal within 14 days of receipt of such decision. You cannot file an amendment of claim in such appeal.

Submission of false or misleading proof of claims shall attract penalties.