Liquidation on or after Failing of Resolution Plan: formula sheet

Key formulas

Ground 1: no plan received

Section 33(1)(a): no resolution plan under section 30(6) before the CIRP period (section 12) or fast track period (section 56) expires

Applies to both normal and fast track CIRP. Liquidation is mandatory.

Ground 2: plan rejected

Section 33(1)(b): plan rejected under section 31 for non-compliance with its requirements

The rejection must be for non-compliance. Do not say any rejection leads to liquidation without this condition.

Ground 3: CoC decision

Section 33(2): RP intimates CoC decision approved by ≥ 66% of the voting share, any time during CIRP before confirmation of the plan

Can be taken even before the information memorandum is prepared (Explanation).

Ground 4: contravention of plan

Section 33(3) and (4): application by any person other than the corporate debtor whose interests are prejudicially affected; AA finds contravention and passes the order

Covers a plan approved under section 31 or section 54L(1).

Contents of the liquidation order

Section 33(1)(b)(i)-(iii): (i) order to liquidate; (ii) public announcement; (iii) order sent to the authority where the debtor is registered

Same three steps apply to every ground.

Pre-pack ground

Section 54L(4): plan does not change management or control to a non-promoter, after order under section 54J(2) → reject plan, terminate pre-pack, order liquidation

Pre-pack costs are included in liquidation costs.

Effects of the order

Section 33(5) and (7): no suit or proceeding by or against the corporate debtor, except by the liquidator with AA's prior approval; order is deemed a notice of discharge to employees and workmen

Discharge does not apply if the liquidator continues the business.

Default liquidator

Liquidator = the resolution professional of the CIRP (or pre-pack process), on written consent in specified form

Section 34(1). Applies unless the Adjudicating Authority replaces him under section 34(4).

Grounds for replacement

Replace if: (a) plan rejected for failing section 30(2) requirements; (b) Board recommends replacement, reasons in writing; (c) RP fails to submit written consent

Section 34(4). The Adjudicating Authority replaces by order.

Replacement procedure

Adjudicating Authority directs Board to propose a name → Board proposes within 10 days with written consent → Adjudicating Authority appoints by order

Sections 34(5), (6), (7). The direction under 34(5) applies to grounds (a) and (c) only.

Effect of appointment

Powers of board, KMP and partners cease and vest in the liquidator

Section 34(2).

Fee

Fee = as specified by the Board, in proportion to the value of liquidation estate assets; paid from proceeds under section 53

Section 34(8) and (9). Do not quote a percentage unless you are sure of the regulation.

Consultation

Liquidator may consult stakeholders entitled under section 53; not binding; records open to others

Section 35(2).

Sale restriction

No sale of assets to a person not eligible to be a resolution applicant

Proviso to section 35(1)(f).

Formation and nature of estate

Section 36(1)-(2): liquidator forms the liquidation estate and holds it as a fiduciary for all creditors

Use the word fiduciary. It explains why the liquidator cannot favour one creditor.

Included assets

Section 36(3)(a)-(i): owned assets, encumbered assets, tangible and intangible assets, assets awaiting ownership determination, avoidance recoveries, relinquished security assets, other property vested at insolvency commencement date, liquidation proceeds

Shares held in a subsidiary are included, but the subsidiary's own assets are not.

Excluded assets

Section 36(4)(a)-(e): third-party assets, netting and set-off collateral, personal assets of shareholders or partners, subsidiary assets, others specified by the Board

Third-party assets include trust assets, bailment, PF, pension and gratuity dues of workmen or employees, and use-only contracts.

Powers of board after liquidator appointment

Section 34(2): powers of board, KMP and partners cease and vest in the liquidator

Section 34(3) adds the duty of personnel to cooperate.

End of CIRP moratorium

Section 14(4) proviso: moratorium ceases on approval of plan under section 31(1) or liquidation order under section 33

Applies to the corporate debtor. Sections 85 and 101 deal with individuals and firms, for 180 days.

Liquidator's fee

Section 34(8)-(9): fee as specified by the Board in proportion to value of liquidation estate assets, paid from proceeds under section 53

Fee is paid out of the estate proceeds.

Section 53(1) order of priority

(a) CIRP costs + liquidation costs → (b) workmen's dues (24 months) = relinquished secured creditors → (c) employees' wages (12 months) → (d) unsecured financial debts → (e) Government dues (2 years) = secured debt unpaid after enforcement → (f) remaining debts → (g) preference shareholders → (h) equity shareholders or partners

Each tier is paid in full before the next. Tiers (b) and (e) contain two items ranking equally.

Equal ranking rule

Shortfall within a tier → pro rata in equal proportion

Contractual arrangements between equal-ranking recipients that disrupt the priority are disregarded (Section 53(2)).

Liquidator's fee

Fee deducted proportionately from the proceeds payable to each class

Section 53(3). Distribute only after the deduction.

Secured creditor options

Section 52(1): relinquish to the liquidation estate OR realise the security itself

Relinquished security joins the estate (Section 36(3)(g)) and the creditor ranks in Section 53(1)(b).

Deadlines under Liquidation Process Regulations, Reg 21A

Decision within 14 days; payment of share of costs and workmen's dues within 45 days; excess of realised value over admitted claim within 90 days; all from liquidation commencement date

Silence for 14 days means the security is deemed relinquished. Failure to pay makes the asset part of the liquidation estate. Use the regulation as amended up to 22-09-2026.

Shortfall after realisation

Unpaid balance of secured debt ranks under Section 53(1)(e)(ii)

Section 52(9). Any surplus must be handed to the liquidator (Section 52(7)).

Time limit for compromise (reg. 2B)

Complete within 90 days of the liquidation order; filing not after 30 days from liquidation commencement date

The time taken, up to 90 days, is excluded from the liquidation period.

Conditions to file compromise (reg. 2B)

CoC recommendation under reg. 39BA + requisite creditor majority under s.230(6) Companies Act + realisable amount > liquidation value at insolvency commencement date

All must be met. Ineligible persons (who cannot submit a resolution plan) cannot be a party.

Cost of compromise (reg. 2B)

Sanctioned by Tribunal: borne by corporate debtor. Not sanctioned: borne by the parties who proposed it

Liquidator's cost follows the outcome of the Tribunal's decision.

Who can start voluntary liquidation (s.59(1))

Corporate person that intends to liquidate itself and has not committed any default

A defaulting company cannot use section 59.

Directors' declaration (s.59(3)(a))

Majority of directors, by affidavit: full inquiry made; no debt or debts payable in full from asset sale; not liquidating to defraud anyone

Accompanied by audited financials and business records for the previous two years (or since incorporation, if later), and a registered valuer's asset valuation report, if any.

Approvals (s.59(3)(c))

Within 4 weeks of declaration: special resolution of members appointing an insolvency professional as liquidator; if debt exists, creditors holding two-thirds in value approve within 7 days of the resolution

A simple resolution suffices where the company is liquidated on expiry of its fixed duration or on an event in its articles.

Notice and commencement (s.59(4), (5))

Notify Registrar of Companies and the Board within 7 days of the resolution or creditor approval; proceedings deemed to commence from the date of the resolution

Subject to creditor approval.

Dissolution (s.59(7)-(9))

Liquidator applies to Adjudicating Authority once affairs are wound up; order dissolves the company; copy forwarded within 14 days to the registering authority

Sections 35 to 53 and Chapter VII apply with necessary modifications.

Dissolution application (Section 54)

Assets completely liquidated → liquidator applies → Adjudicating Authority orders dissolution from the date of the order

The condition is complete liquidation of assets. The liquidator, not a creditor, files the application.

Copy of dissolution order

Involuntary liquidation (Section 54): 7 days. Voluntary liquidation (Section 59): 14 days

The copy goes to the authority with which the corporate debtor is registered. The time starts from the date of the order.

Final report (Regulation 45)

Account of liquidation + application + final report + compliance certificate (Board's format) → dissolution or closure

As amended w.e.f. 2 June 2026. Closure is the route where the debtor survives, for example a going concern sale.

Appeal against liquidator's decision (Section 42)

Creditor → Adjudicating Authority within 14 days of receiving the decision accepting or rejecting the claim

The word 'accepting' was added in 2018. The appeal is to the Adjudicating Authority, not NCLAT.

Appeal to NCLAT (Section 61)

30 days + up to 15 days for sufficient cause

Section 61(4): an appeal against a liquidation order lies only on grounds of material irregularity or fraud in relation to that order.

Initiation of liquidation (Section 33)

Order to liquidate + public announcement + copy to the registering authority

A CoC decision to liquidate needs not less than 66% of the voting share. After the order, no suit or proceeding may be instituted by or against the corporate debtor, except by the liquidator with prior approval of the Adjudicating Authority.

Quick revision

• Liquidation is ordered by the Adjudicating Authority under section 33.
• The resolution professional acts as liquidator by default, once he submits written consent in the specified form.
• Replacement under section 34(4): plan rejected for failing section 30(2), Board recommendation, or no written consent.
• The Board proposes another professional within ten days of the Adjudicating Authority's direction.
• On the liquidator's appointment, the powers of the board of directors and key managerial personnel vest in the liquidator.
• The liquidator's fee is paid from the liquidation estate proceeds under section 53.
• The liquidator cannot sell property to a person who is not eligible to be a resolution applicant.
• A secured creditor may relinquish its security or realise it under section 52. Surplus must be handed to the liquidator.
• When a secured creditor realises its security, the insolvency resolution process costs due from it are deducted from the realisation proceeds and transferred to the liquidator.
• Voluntary liquidation needs a corporate person that has committed no default and a declaration by a majority of directors that the company has no debt or can pay its debts in full from asset sale proceeds, and is not being liquidated to defraud anyone.
• The members' special resolution must follow within four weeks of the declaration. Creditors holding two-thirds in value of debt must approve within seven days of the resolution, but only if the company owes any debt.
• Notice to the Registrar and the Board goes within seven days of the resolution or the creditors' approval, as the case may be. The liquidator applies for dissolution once the affairs are wound up.

Common mistakes

• Writing that the CoC needs a simple majority, or 51%, to liquidate. Fix: Remember: not less than 66% of the voting share under section 33(2).
• Saying the CoC can decide to liquidate only after the information memorandum is prepared. Fix: The Explanation allows the decision any time after constitution of the CoC and before confirmation of the plan, even before the information memorandum.
• Saying the liquidator is chosen by the committee of creditors. Fix: In liquidation the RP continues as liquidator. Replacement is by the Adjudicating Authority under section 34(4), with the Board proposing a name.
• Forgetting the written consent requirement. Fix: Section 34(1) makes the appointment subject to written consent in specified form. Failure to submit it is itself a ground for replacement under 34(4)(c).
• Treating a subsidiary's assets as part of the estate. Fix: Include the shares under section 36(3)(a) and (d). Exclude the subsidiary's own assets under section 36(4)(d).
• Including provident fund, pension and gratuity dues in the estate. Fix: Section 36(4)(a)(iii) excludes sums due to a workman or employee from these funds. Say so explicitly.
• Placing secured creditors who realise their security in the waterfall at tier (b). Fix: Only those who relinquish rank at (b). A creditor who realises security takes the asset's proceeds outside the waterfall; any unpaid balance ranks at (e)(ii).
• Ranking government dues above unsecured financial creditors. Fix: Under Section 53, Government dues rank at (e), below unsecured financial debts at (d).
• Allowing a defaulting company to opt for voluntary liquidation. Fix: Start every section 59 answer by checking default and solvency.
• Mixing up the 30-day and 90-day limits for compromise. Fix: Remember: file within 30 days of liquidation commencement; complete within 90 days of the liquidation order.

Exam tips

• Write the section number with each ground. Examiners reward the exact reference such as section 33(1)(a) and 33(2).
• Always include the three parts of the order: liquidate, public announcement, and send to the registering authority.
• In case questions, calculate the voting percentage in a visible step and compare it with 66%.
• Mention the 'shall' nature of the order so your conclusion is firm.
• Add one line on consequences under section 33(5) and (7) to gain extra marks.
• Open every answer with section 33 as the trigger, then section 34 for appointment.
• Learn the three replacement grounds in 34(4) and the ten-day Board timeline in 34(6).
• For powers, group section 35(1) into custody and valuation, sale and business, investigation and litigation, and distribution.