National Company Law Appellate Tribunal, New Delhi: The present company appeal was filed by the Resolution professional (‘appellant’) of Rajesh Landmark Projects (P) Ltd. (‘Corporate Debtor’), challenging the impugned order passed by the National Company Law Tribunal, Court V, Mumbai Bench (‘Adjudicating Authority’), which had allowed an interim application filed by the appellant seeking liquidation of the corporate debtor. However, instead of appointing the appellant as liquidator, it appointed Respondent 2, relying on the Insolvency and Bankruptcy Board of India (‘IBBI’) circular dated 18-7-2023 (‘Circular’).
The Bench of Ashok Bhushan, J. (Chairperson) and Barun Mitra (Technical Member), stated that the legislative scheme of Section 34(1) of the IBC clearly intended the Resolution professional to be appointed as liquidator, with replacement being a discretionary act of the adjudicating authority based on the grounds specified in Section 34(4) of the IBC. Thus, the Tribunal allowed the appeal, stating that the impugned order insofar as it appointed Respondent 2 as liquidator could not be sustained. Since there were no grounds available under Section 34(4) of the IBC for replacing the appellant, the appellant was required to be appointed as liquidator.
Background:
The Corporate Insolvency Resolution Process (‘CIRP’) against the Corporate Debtor was initiated by an order dated 10-10-2022 passed by the Adjudicating Authority. Subsequently, the appellant was appointed as a Resolution Professional by the Committee of Creditors (‘CoC’). In its 33rd meeting on 10-12-2024, the CoC, with 83.93 % voting share, resolved to not approve RARE Asset Reconstruction Company’s Resolution plan and decided to liquidate the corporate debtor. Pursuant to this, the appellant filed Interim Application for Liquidation. The CoC by its resolution resolved to appoint the appellant as liquidator. The Adjudicating Authority, by the impugned order, allowed the liquidation application but, relying on the Circular, appointed Respondent 2 as liquidator instead, leading to this appeal, which was filed only limited to the extent of challenging her appointment.
The appellant submitted that under Section 34(1) of the Insolvency and Bankruptcy Code, 2016 (‘IBC’), he was entitled to be appointed as liquidator, and the CoC had already resolved to appoint him. The adjudicating authority’s reliance on the Circular was misplaced, as it was not a circular but an internal communication by IBBI to the Secretary, NCLT, Principal Bench, New Delhi. The communication displaced the legislative scheme in Section 34(1) of the IBC. This was not a case where the IBBI recommended replacement of the appellant, and the circular was not a recommendation under Section 34(4)(b) of the IBC. The adjudicating authority failed to follow the statutory scheme under Section 34 of the IBC, making its order unsustainable.
The CoC submitted that it had already recommended the appellant as liquidator and supported the appellant’s submission. Respondent 2 contented that the appointment of liquidator was the prerogative of the adjudicating authority, hence, Respondent 2 had no submission on the merits of the appeal.
Analysis, Law, and Decision:
The Tribunal noted that the legislative scheme under Section 34(1) of the IBC clearly provided that, upon written consent, the Resolution Professional was to be appointed as liquidator unless replaced under Section 34(4) of the IBC. It further noted that Section 34(4) of the IBC outlined specific grounds for such replacement. The Tribunal held that in the present case, the adjudicating authority relied on the Circular which claimed to have been issued under Section 34(2)(b) of the IBC.
The Tribunal noted that the subject of the Circular stated it was a “Recommendation of appointment of the liquidator, other than IRP/RP under Section 34(4)(b) of the IBC”. It thus held that it was a general circular issued by the IBBI to the Secretary NCLT, Principal Bench, New Delhi, referring to Section 34(4)(b) of the IBC, and recommended that an Insolvency Professional other than Interim Resolution Professional/Resolution Professional may be appointed as liquidator in all cases.
The Tribunal stated that the legislative scheme of Section 34(1) of the IBC clearly intended the Resolution professional to be appointed, with replacement being a discretionary act of the adjudicating authority based on the grounds specified in Section 34(4) of the IBC, and noted that such replacement could not be made through general circular of the IBBI. Further, the liquidation order under Section 33 of the IBC was related to CIRP under Chapter II of the IBC, and the Resolution professional referred to in Section 34(1) of the IBC was the one who functioned during the CIRP. It noted that the replacement contemplated under Section 34 of the IBC was the replacement of a Resolution Professional, which clearly meant the appellant as Resolution professional who was handling the CIRP.
The Tribunal noted that the Insolvency professional functioned under the regulatory control of the IBBI, which had been given the right under Section 34(4)(b) of the IBC to recommend replacement of the Resolution professional. It stated that this right given to the IBBI was to recommend the replacement of a specific resolution professional in respect to whom the liquidation order had been passed. The Tribunal stated that the decision to recommend for replacement had to be qua the particular Resolution Professional, which may have been due to work and conduct of the Resolution Professional. It further held that the IBBI could not exercise this power to take a decision that, in all cases of liquidation, the Interim Resolution Professional/Resolution Professional be not appointed as liquidator.
The Tribunal held that the power envisaged under Section 34(4)(b) of the IBC was a power to recommend the replacement of the particular Resolution Professional on facts specific to that individual and was not a general power that could be exercised by the IBBI for issuing the Circular. The Tribunal analysed that the IBBI misinterpreted the power given to it under Section 34(4)(b) of the IBC. It further stated that the present case was not one where the Circular was issued by the IBBI recommending replacement of the appellant, hence, the said Circular could not serve as a basis for replacing the appellant as liquidator.
The Tribunal held that the order of the adjudicating authority in the impugned order, appointing Respondent 2 as liquidator, could not be sustained. The appeal was allowed, and the appointment of the appellant as liquidator was substituted in the place of Respondent 2 in the impugned order. It was further directed that Respondent 2 shall be entitled to the expenses incurred.
[Manish Jaju v. Rajesh Landmark Projects (P) Ltd. (CoC), Company Appeal (AT)(Ins) No. 1165 of 2025 decided on 18-9-2025]
Advocates who appeared in this case:
For Appellant: Devul Dighe, Advocate
For Respondents: Pranjit Bhattacharya, Salonee Shukla and Aashima Gautam, Advocates for Respondent-1.