Not Your Panel, Not Your Pick: NCLAT Draws A Clear Line On Liquidator Appointments

The National Company Law Appellate Tribunal (NCLAT), by its judgment dated 01 Dec 2025 in Omkara Asset Reconstruction Pvt Ltd v. Amit Vijay Karia and a connected appeal, has examined an important question: who holds the authority to determine the liquidator when the resolution professional declines to furnish consent under section 34(1) of the Insolvency and Bankruptcy Code, 2016 ('IBC' or 'the Code'). NCLAT has concluded that the authority lies with the Committee of Creditors (CoC), with the Adjudicating Authority's role limited to formal appointment upon such CoC recommendation.

This article examines whether that conclusion is correctly tethered in the statutory scheme governing liquidation.

The factual background is also instructive. The CoC's nomination of a liquidator took place in the context of the IBBI Circular dated 18 July 2023, which advised that an insolvency professional other than the resolution professional should be appointed as liquidator. Although this Circular was subsequently set aside on 08 Sep 2025 in Manish Jaju v. CoC of Rajesh Landmark Projects Pvt. Ltd., it formed the backdrop to the CoC's decision to nominate a new liquidator. When the Adjudicating Authority nevertheless appointed a different insolvency professional, this divergence between the CoC's nomination and NCLAT's choice set the stage for the appellate controversy.

The Statutory Framework: Sections 34(1), 34(4)(c), and 27

NCLAT has reproduced the governing provisions, and the analysis here proceeds strictly on that basis. Section 34(1) states that when liquidation is ordered, the resolution professional shall act as the liquidator, subject to the submission of written consent, “unless replaced by the Adjudicating Authority under sub section (4).” Section 34(4)(c) requires such replacement where the resolution professional fails to provide the written consent contemplated under section 34(1).

NCLAT's consideration was also informed by its recent decision in Manish Jaju (supra), which held that the Board cannot, through a circular, alter the statutory position under section 34. Once the circular was invalidated, the central issue reverted to whether the Code itself contained any express mechanism empowering the Adjudicating Authority to select a liquidator when the resolution professional declined consent.

The statute, however, does not specify who is to select the replacement in such a circumstance. Section 27, which provides for replacement of the resolution professional during the corporate insolvency resolution process, contains no language extending its procedure into the liquidation stage. The task, therefore, is to determine whether NCLAT's application of section 27 to section 34(4)(c) is supported by the structure of the Code.

CIRP and Liquidation: Distinct Legal Architectures

A central feature of the Code is the separation between the Corporate Insolvency Resolution Process (CIRP) and the liquidation process. During CIRP, the CoC exercises complete primacy over commercial decisions and retains the power to replace the resolution professional at any time. The resolution professional functions within a tightly supervised framework and is required to seek approval of the CoC for specified actions.

Liquidation is materially different. Upon commencement under section 33, the CoC no longer has any function, and the statutory scheme reassigns the conduct of the process to the Liquidator, who exercises powers under sections 35 and 36 and functions under the jurisdiction of the Adjudicating Authority, with creditors thereafter participating only through the advisory Stakeholders' Consultation Committee. The Committee is advisory in nature, and its views are not binding on the liquidator.

The Liquidator thus enjoys a relative autonomy under the Code inasmuch as the powers conferred by sections 35 and 36 are vested directly by statute. By contrast, the IRP and RP function within a more circumscribed framework in which their actions are expressly subject and subservient to the commercial decisions and approvals of the CoC.

The autonomy that creditors enjoy under the Code is therefore confined to the CIRP and cannot be equated with the liquidation process, which is designed to function under a different legal logic. This difference is central to the analysis that follows.

NCLAT's Reasoning: Importing Section 27 into Section 34

NCLAT reasoned that at all earlier stages of the Code – appointment of the interim resolution professional, appointment of the resolution professional, and replacement of the resolution professional – the Adjudicating Authority has no independent authority to select a candidate of its own choice. From this, it concluded that even at the liquidation stage, the Adjudicating Authority lacks the power to select a liquidator when the resolution professional declines consent.

NCLAT therefore held that the replacement contemplated under section 34(4)(c) must be carried out through the mechanism of section 27, and that the authority to select a replacement resolution professional lies with the CoC. The Adjudicating Authority's role remains limited to formal appointment after confirmation by the Board.

To fortify its reasoning, NCLAT examined the appointment architecture under the Code from the initiation of CIRP through to the replacement of the resolution professional. It noted that the Adjudicating Authority's role in sections 7, 9, 10, 16, 22 and 27 was limited to formal appointment or confirmation, and that at no stage did the statute contemplate the Adjudicating Authority independently selecting an insolvency professional.

Testing the Judgment Against the Statute

The statutory text reproduced in the judgment contains a silence as to who is to select the liquidator where the resolution professional declines consent. Sections 34(1) and 34(4)(c) do not identify the selecting authority; they only identify the consequence that a replacement is required. Section 27, while providing a procedure for replacement of the resolution professional during CIRP, is confined to the resolution stage. The Code does not state that the section 27 mechanism applies to liquidation, nor does it provide that the CoC retains any authority once liquidation commences.

Read in this statutory context, section 34(4)(c) appears to contemplate that when the resolution professional declines to give the written consent required under section 34(1), the Adjudicating Authority would, as in earlier stages of the Code, obtain a recommendation from the Insolvency and Bankruptcy Board of India and formally appoint that nominee as the liquidator. Nothing in the text of section 34 indicates that the selection was intended to revert to the creditors once liquidation has commenced.

NCLAT's reasoning is therefore not derived from express statutory language but from an inferred legislative intent to maintain consistency in the appointment process. Whether that inference can be reconciled with the separation between CIRP and liquidation, and with the liquidator's greater autonomy under the Code, raises an important question.

It is relevant to note that once liquidation is ordered, the Code assigns no further statutory role to the CoC. The CoC's nomination, therefore, belongs to a stage that precedes liquidation, and the question naturally arises whether a body that has no statutory function thereafter, can nevertheless determine the identity of the professional who will conduct the liquidation. What, if any, can be the interest of the CoC in selecting a liquidator then?

The Adjudicating Authority's order, which NCLAT set aside, had appointed a different insolvency professional primarily on the basis of the IBBI Circular and by drawing from the IBBI panel applicable to that Bench. NCLAT found this approach inconsistent with section 34, as the circular had been invalidated and the Code does not authorise panel-based substitution in preference to the CoC's nomination. If the intention of Parliament had been to allow members of the CoC to have a determinative role in the selection of a liquidator at this stage, the Code would have expressly provided for it.

A Balanced Assessment of NCLAT's Approach

NCLAT's view seeks to maintain continuity in the appointment framework by avoiding any enlargement of the Adjudicating Authority's discretion beyond what is permitted at earlier stages. This conclusion flows from the NCLAT's reading of the appointment provisions across CIRP and liquidation, rather than from any express indication in the Code.

NCLAT's approach relies upon inference rather than express statutory direction. The distinction between CIRP and liquidation, particularly the dissolution of the CoC and the liquidator's enhanced autonomy, may call for a more carefully calibrated consideration as to whether a CIRP-stage mechanism can be transposed into the liquidation stage without explicit legislative support.

NCLAT's recognition that the Adjudicating Authority retains the power to intervene in cases of fraud, collusion or misconduct is significant. It illustrates that while creditor choice is accorded primacy, it is not unbounded, and NCLAT envisages a supervisory jurisdiction to preserve the integrity of the process.

The judgment attempts to deliver clarity on an issue that has generated practical difficulty. However, the statutory provisions reproduced in the judgment do not explicitly identify who is to select a liquidator when the resolution professional declines consent. The conclusion that the CoC retains authority in this respect rests on an interpretive inference drawn from the overall design of the Code rather than on direct statutory text.

Given the separation between CIRP and liquidation, and the enhanced autonomy of the liquidator under the Code, the interpretive question remains open to further consideration.

The ultimate question for higher judicial scrutiny may be this: In choosing consistency of the appointment process over the distinct statutory design of liquidation, has the NCLAT preserved the Code's architecture, or inadvertently elided a line that Parliament deliberately drew?