Liquidation Process (Sec. 33-54)

“(1) Where the Adjudicating Authority, –
(a) before the expiry of the insolvency resolution process period or the maximum
period permitted for completion of the corporate insolvency resolution process under
section 12 or the fast track corporate insolvency resolution process under section 56, as
the case may be, does not receive a resolution plan under sub-section (6) of section 30;
or
(b) rejects the resolution plan under section 31 for the non-compliance of the
requirements specified therein,
it shall –
(i) pass an order requiring the corporate debtor to be liquidated in the manner as
laid down in this Chapter;
(ii) issue a public announcement stating that the corporate debtor is in liquidation;
and
(iii) require such order to be sent to the authority with which the corporate debtor
is registered.
(2) Where the resolution professional, at any time during the corporate insolvency
resolution process but before confirmation of resolution plan, intimates the Adjudicating
Authority of the decision of the committee of creditors 2
[approved by not less than sixty-six per cent. of the voting share] to liquidate the corporate debtor, the Adjudicating Authority
shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of
sub-section (1).
1
[Explanation. – For the purpose of this sub-section, it is hereby declared that the
committee of creditors may take the decision to liquidate the corporate debtor, any time
after its constitution under sub-section (1) of section 21 and before the confirmation of the
resolution plan, including at any time before the preparation of the information
memorandum.]
(3) Where the resolution plan approved by the Adjudicating Authority is contravened
by the concerned corporate debtor, any person other than the corporate debtor, whose
interests are prejudicially affected by such contravention, may make an application to the
Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii), (iii) of
clause (b) sub-section (1).
(4) On receipt of an application under sub-section (3), if the Adjudicating Authority
determines that the corporate debtor has contravened the provisions of the resolution plan,
it shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b)
of sub-section (1).
(5) Subject to section 52, when a liquidation order has been passed, no suit or other
legal proceeding shall be instituted by or against the corporate debtor:
Provided that a suit or other legal proceeding may be instituted by the liquidator, on
behalf of the corporate debtor, with the prior approval of the Adjudicating Authority,
(6) the provisions of sub-section (5) shall not apply to legal proceedings in relation to
such transactions as may be notified by the Central Government in consultation with any
financial sector regulator.
(7) The order for liquidation under this section shall be deemed to be a notice of
discharge to the officers, employees and workmen of the corporate debtor, except when the
business of the corporate debtor is continued during the liquidation process by the liquidator” VL Note : –

“(1) Where the Adjudicating Authority passes an order for liquidation of the corporate
debtor under section 33, the resolution professional appointed for the corporate insolvency
resolution process under 2
[Chapter II shall, subject to submission of a written consent by the
resolution professional to the Adjudicatory Authority in specified form,] shall act as the liquidator
for the purposes of liquidation unless replaced by the Adjudicating Authority under subsection (4). (2) On the appointment of a liquidator under this section, all powers of the board of
directors, key managerial personnel and the partners of the corporate debtor, as the case may
be, shall cease to have effect and shall be vested in the liquidator.
(3) The personnel of the corporate debtor shall extend all assistance and cooperation to
the liquidator as may be required by him in managing the affairs of the corporate debtor and
provisions of section 19 shall apply in relation to voluntary liquidation process as they apply
in relation to liquidation process with the substitution of references to the liquidator for
references to the interim resolution professional.
(4) The Adjudicating Authority shall by order replace the resolution professional, if–
(a) the resolution plan submitted by the resolution professional under section 30
was rejected for failure to meet the requirements mentioned in sub-section (2) of section
30; or
(b) the Board recommends the replacement of a resolution professional to the
Adjudicating Authority for reasons to be recorded 1
[in writing; or]
2
[(c) the resolution professional fails to submit written consent under sub-section (1).]
(5) For the purposes of 3
[clause (a) and clause (c)] of sub-section (4), the Adjudicating
Authority may direct the Board to propose name of another insolvency professional to be
appointed as a liquidator.
(6) The Board shall propose the name of another insolvency professional 4
[along with
written consent from the insolvency professional in the specified form] within ten days of
the direction issued by the Adjudicating Authority under sub-section (5).
(7) The Adjudicating Authority shall, on receipt of the proposal of the Board for the
appointment of an insolvency professional as liquidator, by an order appoint such
insolvency professional as the liquidator.
(8) An insolvency professional proposed to be appointed as a liquidator shall charge
such fee for the conduct of the liquidation proceedings and in such proportion to the value
of the liquidation estate assets, as may be specified by the Board.
(9) The fees for the conduct of the liquidation proceedings under sub-section (8) shall
be paid to the liquidator from the proceeds of the liquidation estate under section 53.” VL Note : –

“(1) Subject to the directions of the Adjudicating Authority, the liquidator shall have the following powers and duties, namely: –
(a) to verify claims of all the creditors;
(b) to take into his custody or control all the assets, property, effects and actionable
claims of the corporate debtor;
(c) to evaluate the assets and property of the corporate debtor in the manner as may
be specified by the Board and prepare a report;
(d) to take such measures to protect and preserve the assets and properties of the
corporate debtor as he considers necessary;
(e) to carry on the business of the corporate debtor for its beneficial liquidation as
he considers necessary;
(f) subject to section 52, to sell the immovable and movable property and
actionable claims of the corporate debtor in liquidation by public auction or private
contract, with power to transfer such property to any person or body corporate, or to
sell the same in parcels in such manner as may be specified:
1
[Provided that the liquidator shall not sell the immovable and movable property or
actionable claims of the corporate debtor in liquidation to any person who is not eligible to
be a resolution applicant.]
(g) to draw, accept, make and endorse any negotiable instruments including bill of
exchange, hundi or promissory note in the name and on behalf of the corporate debtor,
with the same effect with respect to the liability as if such instruments were drawn,
accepted, made or endorsed by or on behalf of the corporate debtor in the ordinary
course of its business;
(h) to take out, in his official name, letter of administration to any deceased
contributory and to do in his official name any other act necessary for obtaining
payment of any money due and payable from a contributory or his estate which cannot
be ordinarily done in the name of the corporate debtor, and in all such cases, the money
due and payable shall, for the purpose of enabling the liquidator to take out the letter of
administration or recover the money, be deemed to be due to the liquidator himself;
(i) to obtain any professional assistance from any person or appoint any
professional, in discharge of his duties, obligations and responsibilities;
(j) to invite and settle claims of creditors and claimants and distribute proceeds in
accordance with the provisions of this Code;
(k) to institute or defend any suit, prosecution or other legal proceedings, civil or
criminal, in the name of on behalf of the corporate debtor; the following powers and duties, namely: –
(a) to verify claims of all the creditors;
(b) to take into his custody or control all the assets, property, effects and actionable
claims of the corporate debtor;
(c) to evaluate the assets and property of the corporate debtor in the manner as may
be specified by the Board and prepare a report;
(d) to take such measures to protect and preserve the assets and properties of the
corporate debtor as he considers necessary;
(e) to carry on the business of the corporate debtor for its beneficial liquidation as
he considers necessary;
(f) subject to section 52, to sell the immovable and movable property and
actionable claims of the corporate debtor in liquidation by public auction or private
contract, with power to transfer such property to any person or body corporate, or to
sell the same in parcels in such manner as may be specified:
1
[Provided that the liquidator shall not sell the immovable and movable property or
actionable claims of the corporate debtor in liquidation to any person who is not eligible to
be a resolution applicant.]
(g) to draw, accept, make and endorse any negotiable instruments including bill of
exchange, hundi or promissory note in the name and on behalf of the corporate debtor,
with the same effect with respect to the liability as if such instruments were drawn,
accepted, made or endorsed by or on behalf of the corporate debtor in the ordinary
course of its business;
(h) to take out, in his official name, letter of administration to any deceased
contributory and to do in his official name any other act necessary for obtaining
payment of any money due and payable from a contributory or his estate which cannot
be ordinarily done in the name of the corporate debtor, and in all such cases, the money
due and payable shall, for the purpose of enabling the liquidator to take out the letter of
administration or recover the money, be deemed to be due to the liquidator himself;
(i) to obtain any professional assistance from any person or appoint any
professional, in discharge of his duties, obligations and responsibilities;
(j) to invite and settle claims of creditors and claimants and distribute proceeds in
accordance with the provisions of this Code;
(k) to institute or defend any suit, prosecution or other legal proceedings, civil or
criminal, in the name of on behalf of the corporate debtor; the following powers and duties, namely: –
(a) to verify claims of all the creditors;
(b) to take into his custody or control all the assets, property, effects and actionable
claims of the corporate debtor;
(c) to evaluate the assets and property of the corporate debtor in the manner as may
be specified by the Board and prepare a report;
(d) to take such measures to protect and preserve the assets and properties of the
corporate debtor as he considers necessary;
(e) to carry on the business of the corporate debtor for its beneficial liquidation as
he considers necessary;
(f) subject to section 52, to sell the immovable and movable property and
actionable claims of the corporate debtor in liquidation by public auction or private
contract, with power to transfer such property to any person or body corporate, or to
sell the same in parcels in such manner as may be specified:
1
[Provided that the liquidator shall not sell the immovable and movable property or
actionable claims of the corporate debtor in liquidation to any person who is not eligible to
be a resolution applicant.]
(g) to draw, accept, make and endorse any negotiable instruments including bill of
exchange, hundi or promissory note in the name and on behalf of the corporate debtor,
with the same effect with respect to the liability as if such instruments were drawn,
accepted, made or endorsed by or on behalf of the corporate debtor in the ordinary
course of its business;
(h) to take out, in his official name, letter of administration to any deceased
contributory and to do in his official name any other act necessary for obtaining
payment of any money due and payable from a contributory or his estate which cannot
be ordinarily done in the name of the corporate debtor, and in all such cases, the money
due and payable shall, for the purpose of enabling the liquidator to take out the letter of
administration or recover the money, be deemed to be due to the liquidator himself;
(i) to obtain any professional assistance from any person or appoint any
professional, in discharge of his duties, obligations and responsibilities;
(j) to invite and settle claims of creditors and claimants and distribute proceeds in
accordance with the provisions of this Code;
(k) to institute or defend any suit, prosecution or other legal proceedings, civil or
criminal, in the name of on behalf of the corporate debtor; (l) to investigate the financial affairs of the corporate debtor to determine
undervalued or preferential transactions;
(m) to take all such actions, steps, or to sign, execute and verify any paper, deed,
receipt document, application, petition, affidavit, bond or instrument and for such
purpose to use the common seal, if any, as may be necessary for liquidation, distribution
of assets and in discharge of his duties and obligations and functions as liquidator;
(n) to apply to the Adjudicating Authority for such orders or directions as may be
necessary for the liquidation of the corporate debtor and to report the progress of the
liquidation process in a manner as may be specified by the Board; and
(o) to perform such other functions as may be specified by the Board.
(2) The liquidator shall have the power to consult any of the stakeholders entitled to a
distribution of proceeds under section 53:
Provided that any such consultation shall not be binding on the liquidator:
Provided further that the records of any such consultation shall be made available to all
other stakeholders not so consulted, in a manner specified by the Board.” VL Note : –

“(1) For the purposes of liquidation, the liquidator shall form an estate of the assets
mentioned in sub-section (3), which will be called the liquidation estate in relation to the
corporate debtor.
(2) The liquidator shall hold the liquidation estate as a fiduciary for the benefit of
all the creditors.
(3) Subject to sub-section (4), the liquidation estate shall comprise all liquidation
estate assets which shall include the following: –
(a) any assets over which the corporate debtor has ownership rights, including all
rights and interests therein as evidenced in the balance sheet of the corporate debtor or
an information utility or records in the registry or any depository recording securities
of the corporate debtor or by any other means as may be specified by the Board,
including shares held in any subsidiary of the corporate debtor;
(b) assets that may or may not be in possession of the corporate debtor including
but not limited to encumbered assets;
(c) tangible assets, whether movable or immovable;
(d) intangible assets including but not limited to intellectual property, securities
(including shares held in a subsidiary of the corporate debtor) and financial instruments,
insurance policies, contractual rights;
(e) assets subject to the determination of ownership by the court or authority; (f) any assets or their value recovered through proceedings for avoidance of
transactions in accordance with this Chapter;
(g) any asset of the corporate debtor in respect of which a secured creditor has
relinquished security interest;
(h) any other property belonging to or vested in the corporate debtor at the
insolvency commencement date; and
(i) all proceeds of liquidation as and when they are realised.
(4) The following shall not be included in the liquidation estate assets and shall not
be used for recovery in the liquidation: –
(a) assets owned by a third party which are in possession of the corporate debtor,
including –
(i) assets held in trust for any third party;
(ii) bailment contracts;
(iii) all sums due to any workmen or employee from the provident fund, the
pension fund and the gratuity fund;
(iv) other contractual arrangements which do not stipulate transfer of title but
only use of the assets; and
(v) such other assets as may be notified by the Central Government in
consultation with any financial sector regulator;
(b) assets in security collateral held by financial services providers and are subject
to netting and set-off in multi-lateral trading or clearing transactions;
(c) personal assets of any shareholder or partner of a corporate debtor as the case
may be provided such assets are not held on account of avoidance transactions that may
be avoided under this Chapter;
(d) assets of any Indian or foreign subsidiary of the corporate debtor; or
(e) any other assets as may be specified by the Board, including assets which could
be subject to set-off on account of mutual dealings between the corporate debtor and
any creditor.” VL Note : –

“(1) Notwithstanding anything contained in any other law for the time being in force,
the liquidator shall have the power to access any information systems for the purpose of
admission and proof of claims and identification of the liquidation estate assets relating to
the corporate debtor from the following sources, namely: –
(a) an information utility; (b) credit information systems regulated under any law for the time being in force;
(c) any agency of the Central, State or Local Government including any registration
authorities;
(d) information systems for financial and non-financial liabilities regulated under
any law for the time being in force;
(e) information systems for securities and assets posted as security interest
regulated under any law for the time being in force;
(f) any database maintained by the Board; and
(g) any other source as may be specified by the Board.
(2) The creditors may require the liquidator to provide them any financial information
relating to the corporate debtor in such manner as may be specified.
(3) The liquidator shall provide information referred to in sub-section (2) to such
creditors who have requested for such information within a period of seven days from the
date of such request or provide reasons for not providing such information.
” VL Note : –

“(1) The liquidator shall receive or collect the claims of creditors within a period of thirty
days from the date of the commencement of the liquidation process.
(2) A financial creditor may submit a claim to the liquidator by providing a record
of such claim with an information utility:
Provided that where the information relating to the claim is not recorded in the
information utility, the financial creditor may submit the claim in the same manner provided
for the submission of claims for the operational creditor under sub-section (3).
(3) An operational creditor may submit a claim to the liquidator in such form and
in such manner and along with such supporting documents required to prove the claim as
may be specified by the Board.
(4) A creditor who is partly a financial creditor and partly an operational creditor
shall submit claims to the liquidator to the extent of his financial debt in the manner as
provided in sub-section (2) and to the extent of his operational debt under sub-section (3).
(5) A creditor may withdraw or vary his claim under this section within fourteen
days of its submission.” VL Note : –

“(1) The liquidator shall verify the claims submitted under section 38 within such time
as specified by the Board.
(2) The liquidator may require any creditor or the corporate debtor or any other person to produce any other document or evidence which he thinks necessary for the purpose of
verifying the whole or any part of the claim.
” VL Note : –

“(1) The liquidator may, after verification of claims under section 39, either admit or
reject the claim, in whole or in part, as the case may be:
Provided that where the liquidator rejects a claim, he shall record in writing the reasons
for such rejection.
(2) The liquidator shall communicate his decision of admission or rejection of
claims to the creditor and corporate debtor within seven days of such admission or rejection
of claims.” VL Note : –

“The liquidator shall determine the value of claims admitted under section 40 in
such manner as may be specified by the Board” VL Note : –

“A creditor may appeal to the Adjudicating Authority against the decision of the
liquidator 1
[accepting or] rejecting the claims within fourteen days of the receipt of such
decision.
” VL Note : –

“(1) Where the liquidator or the resolution professional, as the case may be, is of the
opinion that the corporate debtor has at a relevant time given a preference in such
transactions and in such manner as laid down in sub-section (2) to any persons as referred
to in sub-section (4), he shall apply to the Adjudicating Authority for avoidance of
preferential transactions and for, one or more of the orders referred to in section 44.
(2) A corporate debtor shall be deemed to have given a preference, if–
(a) there is a transfer of property or an interest thereof of the corporate debtor for
the benefit of a creditor or a surety or a guarantor for or on account of an antecedent
financial debt or operational debt or other liabilities owed by the corporate debtor; and
(b) the transfer under clause (a) has the effect of putting such creditor or a surety
or a guarantor in a beneficial position than it would have been in the event of a
distribution of assets being made in accordance with section 53.
(3) For the purposes of sub-section (2), a preference shall not include the following
transfers–
(a) transfer made in the ordinary course of the business or financial affairs of the corporate debtor or the transferee;
(b) any transfer creating a security interest in property acquired by the corporate
debtor to the extent that –
(i) such security interest secures new value and was given at the time of or
after the signing of a security agreement that contains a description of such property
as security interest, and was used by corporate debtor to acquire such property; and
(ii) such transfer was registered with an information utility on or before
thirty days after the corporate debtor receives possession of such property:
Provided that any transfer made in pursuance of the order of a court shall not, preclude
such transfer to be deemed as giving of preference by the corporate debtor.
Explanation. – For the purpose of sub-section (3) of this section, “new value” means
money or its worth in goods, services, or new credit, or release by the transferee of property
previously transferred to such transferee in a transaction that is neither void nor voidable by
the liquidator or the resolution professional under this Code, including proceeds of such
property, but does not include a financial debt or operational debt substituted for existing
financial debt or operational debt.
(4) A preference shall be deemed to be given at a relevant time, if –
(a) It is given to a related party (other than by reason only of being an employee),
during the period of two years preceding the insolvency commencement date; or
(b) a preference is given to a person other than a related party during the period of
one year preceding the insolvency commencement date.” VL Note : –

“(1) The Adjudicating Authority, may, on an application made by the resolution
professional or liquidator under sub-section (1) of section 43, by an order:
(a) require any property transferred in connection with the giving of the preference
to be vested in the corporate debtor;
(b) require any property to be so vested if it represents the application either of the
proceeds of sale of property so transferred or of money so transferred;
(c) release or discharge (in whole or in part) of any security interest created by the
corporate debtor;
(d) require any person to pay such sums in respect of benefits received by him from
the corporate debtor, such sums to the liquidator or the resolution professional, as the
Adjudicating Authority may direct;
(e) direct any guarantor, whose financial debts or operational debts owed to any
person were released or discharged (in whole or in part) by the giving of the preference, to be under such new or revived financial debts or operational debts to that person as
the Adjudicating Authority deems appropriate;
(f) direct for providing security or charge on any property for the discharge of any
financial debt or operational debt under the order, and such security or charge to have
the same priority as a security or charge released or discharged wholly or in part by the
giving of the preference; and
(g) direct for providing the extent to which any person whose property is so vested
in the corporate debtor, or on whom financial debts or operational debts are imposed by
the order, are to be proved in the liquidation or the corporate insolvency resolution
process for financial debts or operational debts which arose from, or were released or
discharged wholly or in part by the giving of the preference:
Provided that an order under this section shall not –
(a) affect any interest in property which was acquired from a person other than the
corporate debtor or any interest derived from such interest and was acquired in
good faith and for value;
(b) require a person, who received a benefit from the preferential transaction in
good faith and for value to pay a sum to the liquidator or the resolution professional.
Explanation-I: For the purpose of this section, it is clarified that where a person, who
has acquired an interest in property from another person other than the corporate debtor, or
who has received a benefit from the preference or such another person to whom the
corporate debtor gave the preference, –
(a) had sufficient information of the initiation or commencement of insolvency
resolution process of the corporate debtor;
(b) is a related party,
it shall be presumed that the interest was acquired, or the benefit was received otherwise
than in good faith unless the contrary is shown.
Explanation-II. – A person shall be deemed to have sufficient information or
opportunity to avail such information if a public announcement regarding the corporate
insolvency resolution process has been made under section 13.” VL Note : –

“(1) If the liquidator or the resolution professional, as the case may be, on an examination
of the transactions of the corporate debtor referred to in sub-section (2) 1
[***] determines
that certain transactions were made during the relevant period under section 46, which were undervalued, he shall make an application to the Adjudicating Authority to declare such
transactions as void and reverse the effect of such transaction in accordance with this
Chapter.
(2) A transaction shall be considered undervalued where the corporate debtor–
(a) makes a gift to a person; or
(b) enters into a transaction with a person which involves the transfer of one or
more assets by the corporate debtor for a consideration the value of which is
significantly less than the value of the consideration provided by the corporate debtor,
and such transaction has not taken place in the ordinary course of business of the corporate
debtor.
” VL Note : –

“(1) In an application for avoiding a transaction at undervalue, the liquidator or the
resolution professional, as the case may be, shall demonstrate that –
(i) such transaction was made with any person within the period of one year
preceding the insolvency commencement date; or
(ii) such transaction was made with a related party within the period of two years
preceding the insolvency commencement date.
(2) The Adjudicating Authority may require an independent expert to assess evidence
relating to the value of the transactions mentioned in this section.” VL Note : –

“(1) Where an undervalued transaction has taken place and the liquidator or the
resolution professional as the case may be, has not reported it to the Adjudicating Authority,
a creditor, member or a partner of a corporate debtor, as the case may be, may make an
application to the Adjudicating Authority to declare such transactions void and reverse their
effect in accordance with this Chapter.
(2) Where, the Adjudicating Authority, after examination of the application made under
sub-section (1), is satisfied that –
(a) undervalued transactions had occurred; and
(b) liquidator or the resolution professional, as the case may be, after having
sufficient information or opportunity to avail information of such transactions did not
report such transaction to the Adjudicating Authority,
it shall pass an order-
(a) restoring the position as it existed before such transactions and reversing the
effects thereof in the manner as laid down in section 45 and section 48; (b) requiring the Board to initiate disciplinary proceedings against the liquidator or
the resolution professional as the case may be.” VL Note : –

“(1) The order of the Adjudicating Authority under sub-section (1) of section 45 may
provide for the following: –
(a) require any property transferred as part of the transaction, to be vested in the
corporate debtor;
(b) release or discharge (in whole or in part) any security interest granted by the
corporate debtor;
(c) require any person to pay such sums, in respect of benefits received by such
person, to the liquidator or the resolution professional as the case may be, as the
Adjudicating Authority may direct; or
(d) require the payment of such consideration for the transaction as may be
determined by an independent expert.” VL Note : –

“(1) Where the corporate debtor has entered into an undervalued transaction as referred
to in sub-section (2) of section 45 and the Adjudicating Authority is satisfied that such
transaction was deliberately entered into by such corporate debtor –
(a) for keeping assets of the corporate debtor beyond the reach of any person who
is entitled to make a claim against the corporate debtor; or
(b) in order to adversely affect the interests of such a person in relation to the claim,
the Adjudicating Authority shall make an order-
(i) restoring the position as it existed before such transaction as if the transaction
had not been entered into; and
(ii) protecting the interests of persons who are victims of such transactions:
Provided that an order under this section –
(a) shall not affect any interest in property which was acquired from a person other
than the corporate debtor and was acquired in good faith, for value and without notice
of the relevant circumstances, or affect any interest deriving from such an interest, and
(b) shall not require a person who received a benefit from the transaction in good
faith, for value and without notice of the relevant circumstances to pay any sum unless
he was a party to the transaction.
” VL Note : –

“(1) Where the corporate debtor has been a party to an extortionate credit transaction
involving the receipt of financial or operational debt during the period within two years
preceding the insolvency commencement date, the liquidator or the resolution professional
as the case may be, may make an application for avoidance of such transaction to the
Adjudicating Authority if the terms of such transaction required exorbitant payments to be
made by the corporate debtor.
(2) The Board may specify the circumstances in which a transactions which shall be
covered under sub-section (1).
Explanation. – For the purpose of this section, it is clarified that any debt extended by
any person providing financial services which is in compliance with any law for the time
being in force in relation to such debt shall in no event be considered as an extortionate
credit transaction.” VL Note : –

“Where the Adjudicating Authority after examining the application made under subsection (1) of section 50 is satisfied that the terms of a credit transaction required exorbitant
payments to be made by the corporate debtor, it shall, by an order –
(a) restore the position as it existed prior to such transaction;
(b) set aside the whole or part of the debt created on account of the extortionate
credit transaction;
(c) modify the terms of the transaction;
(d) require any person who is, or was, a party to the transaction to repay any amount
received by such person; or
(e) require any security interest that was created as part of the extortionate credit
transaction to be relinquished in favour of the liquidator or the resolution professional,
as the case may be.” VL Note : –

“(1) A secured creditor in the liquidation proceedings may-
(a) relinquish its security interest to the liquidation estate and receive proceeds from
the sale of assets by the liquidator in the manner specified in section 53; or
(b) realise its security interest in the manner specified in this section.
(2) Where the secured creditor realises security interest under clause (b) of subsection (1), he shall inform the liquidator of such security interest and identify the asset
subject to such security interest to be realised.
(3) Before any security interest is realised by the secured creditor under this section, the liquidator shall verify such security interest and permit the secured creditor to realise
only such security interest, the existence of which may be proved either –
(a) by the records of such security interest maintained by an information utility; or
(b) by such other means as may be specified by the Board.
(4) A secured creditor may enforce, realise, settle, compromise or deal with the
secured assets in accordance with such law as applicable to the security interest being
realised and to the secured creditor and apply the proceeds to recover the debts due to it.
(5) If in the course of realising a secured asset, any secured creditor faces resistance
from the corporate debtor or any person connected therewith in taking possession of, selling
or otherwise disposing off the security, the secured creditor may make an application to the
Adjudicating Authority to facilitate the secured creditor to realise such security interest in
accordance with law for the time being in force.
(6) The Adjudicating Authority, on the receipt of an application from a secured
creditor under sub-section (5) may pass such order as may be necessary to permit a secured
creditor to realise security interest in accordance with law for the time being in force.
(7) Where the enforcement of the security interest under sub-section (4) yields an
amount by way of proceeds which is in excess of the debts due to the secured creditor, the
secured creditor shall-
(a) account to the liquidator for such surplus; and
(b) tender to the liquidator any surplus funds received from the enforcement of such
secured assets.
(8) The amount of insolvency resolution process costs, due from secured creditors
who realise their security interests in the manner provided in this section, shall be deducted
from the proceeds of any realisation by such secured creditors, and they shall transfer such
amounts to the liquidator to be included in the liquidation estate.
(9) Where the proceeds of the realisation of the secured assets are not adequate to repay
debts owed to the secured creditor, the unpaid debts of such secured creditor shall be paid
by the liquidator in the manner specified in clause (e) of sub-section (1) of section 53.” VL Note : –

“(1) Notwithstanding anything to the contrary contained in any law enacted by the
Parliament or any State Legislature for the time being in force, the proceeds from the sale
of the liquidation assets shall be distributed in the following order of priority and within
such period as may be specified, namely: –
(a) the insolvency resolution process costs and the liquidation costs paid in full;
(b) the following debts which shall rank equally between and among the following: (i) workmen’s dues for the period of twenty-four months preceding the
liquidation commencement date; and
(ii) debts owed to a secured creditor in the event such secured creditor has
relinquished security in the manner set out in section 52;
(c) wages and any unpaid dues owed to employees other than workmen for the
period of twelve months preceding the liquidation commencement date;
(d) financial debts owed to unsecured creditors;
(e) the following dues shall rank equally between and among the following: –
(i) any amount due to the Central Government and the State Government
including the amount to be received on account of the Consolidated Fund of India
and the Consolidated Fund of a State, if any, in respect of the whole or any part of
the period of two years preceding the liquidation commencement date;
(ii) debts owed to a secured creditor for any amount unpaid following the
enforcement of security interest;
(f) any remaining debts and dues;
(g) preference shareholders, if any; and
(h) equity shareholders or partners, as the case may be.
(2) Any contractual arrangements between recipients under sub-section (1) with
equal ranking, if disrupting the order of priority under that sub-section shall be disregarded
by the liquidator.
(3) The fees payable to the liquidator shall be deducted proportionately from the
proceeds payable to each class of recipients under sub-section (1), and the proceeds to the
relevant recipient shall be distributed after such deduction.
Explanation. – For the purpose of this section-
(i) it is hereby clarified that at each stage of the distribution of proceeds in respect
of a class of recipients that rank equally, each of the debts will either be paid in full, or
will be paid in equal proportion within the same class of recipients, if the proceeds are
insufficient to meet the debts in full; and
(ii) the term “workmen’s dues” shall have the same meaning as assigned to it in
section 326 of the Companies Act, 2013 (18 of 2013).
” VL Note : –

“(1) Where the assets of the corporate debtor have been completely liquidated, the
liquidator shall make an application to the Adjudicating Authority for the dissolution of such
corporate debtor. (2) The Adjudicating Authority shall on application filed by the liquidator under
sub-section (1) order that the corporate debtor shall be dissolved from the date of that order
and the corporate debtor shall be dissolved accordingly.
(3) A copy of an order under sub-section (2) shall within seven days from the date
of such order, be forwarded to the authority with which the corporate debtor is registered.” VL Note : –