Stakeholders Consultation Committee Backed Resolution Approved: NCLT Replaces Liquidator under Regulation 31A of IBBI [Read Order]
The replacement was sought due to disagreements over liquidation cost estimates and the pace of progress in the liquidation proceedings. The order recognised that such replacement decisions, when properly recorded and supported by majority approval, fall squarely within the powers of the SCC
IBBI, NCLT Cochin, Stakeholders Consultation Committee
IBBI, NCLT Cochin, Stakeholders Consultation Committee
The Cochin bench of the National Company Law Tribunal (NCLT) approved the replacement of Liquidator Sri K.C. Padmakumar with Sri Sreenivasan P.R., following a resolution passed by the Stakeholders’ Consultation Committee (SCC) with 94.30% majority consent. Relying on Regulation 31A(11) of the IBBI (Liquidation Process) Regulations, 2016, the Tribunal upheld the SCC’s recommendation as a valid exercise of its commercial wisdom.
M/s Asten Pvt. Ltd. underwent liquidation following the Adjudicating Authority’s order dated 19.11.2024, after approval of resolution plans for certain projects. The outgoing Liquidator, Sri K.C. Padmakumar, was appointed from the panel of Insolvency Professionals and conducted the liquidation process, which included public announcement of claims, collation of stakeholder claims, and appointment of professionals, such as a Chartered Accountant and secretarial assistance, to assist in the process.
The Corporate Debtor had admitted claims totalling Rs. 204.10 Crores, placing it within the range where IBBI regulations prescribe minimum fees for insolvency professionals.
During the process, the SCC (Stakeholders Consultation Committee), responsible for guiding liquidation decisions, did not approve the proposed fees for the Liquidator and his appointed professionals.
Separately, due to a lack of consensus on liquidation cost estimates, the SCC passed a resolution with a 94.30% majority recommending the replacement of the existing Liquidator with Sri Sreenivasan P.R., an Insolvency Professional registered under IBBI. The SCC recorded the reasons for this recommendation in accordance with Regulation 31A(11) of the IBBI (Liquidation Process) Regulations, 2016.
The outgoing Liquidator and professionals had served during the liquidation period until the SCC passed the replacement resolution. While the SCC’s vote did not approve remuneration, the Liquidator sought the sanction of fees in line with regulatory provisions.
These facts formed the basis for the NCLT to consider both the replacement of the Liquidator and the sanctioning of fees and professional costs, ensuring compliance with the IBC, 2016, and IBBI regulations while recognising the commercial wisdom of creditors.
In the matter of replacing the liquidator, the appellant contended that the SCC’s resolution reflects the commercial wisdom of the creditors, which is paramount in insolvency proceedings. There is no legal impediment to approving the replacement under Regulation 31A(11) of the IBBI (Liquidation Process) Regulations, 2016.
The Tribunal emphasised that in insolvency proceedings, the commercial wisdom of creditors, expressed through SCC resolutions, carries significant weight. Regulation 31A(11) allows the replacement of a Liquidator based on SCC resolution, provided the recommendation is valid and recorded. The Tribunal found the SCC’s resolution to be in proper form and with clear reasoning (lack of consensus on liquidation costs).
The two-member bench of Madhu Sinha (Technical Member) and Vinay Goel (Judicial Member) approved the replacement of Sri K.C. Padmakumar with Sri Sreenivasan P.R. as the Liquidator.
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