Insolvency 2025

INDIA Law and Practice Contributed by: Shardul Shroff, Misha, Kritika Poddar and Aishwarya Satija, Shardul Amarchand Mangaldas & Co

the CD are thus stayed. See 1.2 Types of Insolvency (Liquidation upon failure of the CIRP or PPIRP). The liquidator may, however, institute a legal proceed - ing, including arbitration proceedings, on behalf of the CD with the prior approval of the NCLT. 5.3 The End of the Liquidation Procedure(s) Voluntary Liquidation The liquidator ordinarily sells the assets through a public auction but may conduct a private sale if: • the asset of the CD is perishable; • the asset is likely to deteriorate in value or be sold at a higher price than the reserve price of a failed auction; or • the NCLT has given prior approval. The liquidator may value and sell the assets of the corporate person in the manner and mode approved by the corporate person. See 1.2 Types of Insolvency See 5.2 Course of the Liquidation Procedure . The liquidator is empowered to sell the assets and the actionable claims of the CD through a public auction or private sale. Creditors can participate in the public auction. Auction purchasers acquire a free and clear title to the assets purchased, as the Code and related regulations thereunder permit the sale of assets only upon relinquishment of security interest by the FC, if any. The liquidator may sell the CD or its business as a going concern during the liquidation proceedings either on the recommendation of the CoC in a CIRP or if the liquidator believes that such a sale will be value-maximising. The regulations under the Code prescribe a timeline of 90 days from the liquidation commencement date for the completion of such sale, failing which the liquidator can sell the assets of the CD via other means. If a CD is sold as a going con - cern, the liquidator applies to the NCLT for the closure of the liquidation process as opposed to consequen - tial dissolution of the CD in other manners of sale. (Voluntary liquidation). Involuntary Liquidation

The liquidator works under the overall guidance and directions of the NCLT and is required to report reg - ularly to the NCLT as per the regulations under the Code. The proceeds from the sale of the liquidation assets will be distributed by the liquidator amongst stake - holders of the CD in the order of priority laid down in the Code. When the assets of the CD are completely liquidated, the liquidator will apply to the NCLT for dissolution of such CD. Pursuant to this, the NCLT will pass an order for dissolution whereby the CD will be considered to have been dissolved. A copy of this order is sent to the authority with which the CD is registered for striking off the name of the CD from the The liquidator establishes an SCC to assist them by giving their advice at various stages of the liquidation process. The SCC consists of all creditors of the CD and is established by the liquidator within 60 days of the commencement of the liquidation process. Until such time, the CoC acting in the CIRP of the CD acts as the SCC in the liquidation process. The liqui - dator is required to consult with the SCC on several aspects such as: • the sale of assets; • fees of professionals; and • the manner of pursuing avoidance transactions after closure of the liquidation process. requisite registration. Role of the creditors The SCC’s advice, which is arrived at by a vote of 66% or more of the value of claims of its members, does not bind the liquidator. However, where the liquida - tor takes a decision that is contrary to the advice of the SCC, they are required to record reasons for the decision in writing and submit records related to the decision to the NCLT and the IBBI. The SCC may also approach the NCLT requesting replacement of the liq - uidator with another eligible insolvency professional. Possibility of opting for arbitration A moratorium is applicable on commencement of liq - uidation whereby no legal proceeding can be instituted by or against the CD. Arbitration proceedings against

206 CHAMBERS.COM