Corporate Restructuring, Valuation and Insolvency · Liquidation on or after Failing of Resolution Plan

Grounds for Liquidation under the IBC, 2016

Updated 11 October 2026 · Fact-checked

Section 33 of the IBC lists the grounds on which the Adjudicating Authority must order liquidation: no resolution plan received in time, rejection of a plan under section 31, a CoC decision of at least 66% to liquidate, or contravention of an approved plan. Pre-pack rejection under section 54L(4) is a further route.

Understand Grounds for Liquidation under IBC

Liquidation under the Insolvency and Bankruptcy Code is the last resort. The Code first tries to rescue the corporate debtor through the corporate insolvency resolution process (CIRP). Liquidation follows only when rescue fails or the creditors decide not to attempt it.

Section 33 sets out the grounds. In each case the law uses the word "shall". Once a ground is made out, the Adjudicating Authority (NCLT) has no discretion to refuse. It must pass the liquidation order.

There are four main grounds. First, no resolution plan is received under section 30(6) before the CIRP period, or the maximum period permitted under section 12 (or section 56 for fast track), expires. Second, the Adjudicating Authority rejects the plan under section 31 for non-compliance with the requirements. Third, the resolution professional intimates a CoC decision, approved by not less than 66% of the voting share, to liquidate. Fourth, an approved plan is contravened by the corporate debtor and an affected person applies.

The CoC can decide to liquidate at any time after it is constituted under section 21(1) and before the resolution plan is confirmed. This includes a time before the information memorandum is prepared. The Explanation to section 33(2) says so expressly.

There is also a pre-pack route. Under section 54L(4), if the plan approved by the CoC in a pre-packaged process does not change the management or control to a person who was not a promoter or in management or control, the Adjudicating Authority rejects the plan and passes a liquidation order. The pre-pack costs then become part of the liquidation costs.

Key rules to remember

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.

How to solve Grounds for Liquidation under IBC questions

Use this method for any case-based question asking whether, and why, the NCLT must order liquidation.

1Identify the stage: CIRP, fast track CIRP, pre-pack, or post-approval implementation.
2Match the facts to a ground in section 33: no plan received in time, plan rejected under section 31, CoC decision to liquidate, or contravention of an approved plan. For a pre-pack, check section 54L(4).
3Check the exact conditions: timing (before the period expires or before confirmation), the 66% voting share for a CoC decision, and for contravention, who is applying.
4Apply the facts: compute the voting percentage, check dates against the permitted period, and check whether the applicant is the corporate debtor itself.
5State the conclusion: the Adjudicating Authority shall pass the liquidation order, issue a public announcement and send the order to the registering authority.
6Add the consequences: bar on suits, the liquidator's right to sue with approval, and discharge of employees unless business continues.

Quickest way: Four triggers checklist

When to use it: When a short fact pattern asks whether liquidation can be ordered.

Ask: was a plan received in time? If not, ground 1.
Ask: did the AA reject the plan for non-compliance? If yes, ground 2.
Ask: did the CoC vote 66% or more to liquidate before confirmation? If yes, ground 3.
Ask: was an approved plan contravened and did an eligible person (not the debtor) apply? If yes, ground 4.
Write the three-part order and the section 33(5) and (7) effects.

Common mistakes in Grounds for Liquidation under IBC

Writing that the CoC needs a simple majority, or 51%, to liquidate.
Students mix this with older provisions or ordinary resolutions.
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.
Students assume liquidation must follow a full attempt at resolution.
Fix: The Explanation allows the decision any time after constitution of the CoC and before confirmation of the plan, even before the information memorandum.
Allowing the corporate debtor to apply for liquidation after contravening its own plan.
Students read section 33(3) loosely.
Fix: The application is by any person other than the corporate debtor whose interests are prejudicially affected.
Treating any rejection of a plan as a ground for liquidation.
Students skip the condition in section 33(1)(b).
Fix: The rejection must be under section 31 for non-compliance with the requirements.
Forgetting that the AA has no discretion and must order liquidation once a ground is established.
Students think the NCLT weighs the viability of the business.
Fix: Use the words 'it shall' and cite the three parts of the order.
Ignoring the pre-pack route and section 54L(4).
Pre-pack is studied separately from liquidation.
Fix: Add a line that rejection for no change in management or control leads to liquidation, with pre-pack costs treated as liquidation costs.

Worked examples

Example 1

Sunrise Textiles Ltd is in CIRP. The CoC has 100% voting share held as follows: Bank A 40%, Bank B 30%, Financial Institution C 20%, NBFC D 10%. Before any plan is approved, the RP receives a proposal to liquidate. Banks A and B and NBFC D vote in favour. Can the NCLT order liquidation?

Show the solution

Identify the ground: section 33(2), a CoC decision to liquidate before confirmation of a plan.
Check the threshold: not less than 66% of the voting share.
Compute votes in favour: 40% + 30% + 10% = 80%.
Compare: 80% is at least 66%, so the decision is validly approved.
Timing: the decision is taken during CIRP before confirmation of a plan, which is permitted at any stage after constitution of the CoC.
Consequence: on the RP's intimation, the AA shall pass the liquidation order.

Answer: Yes. The decision has 80% of the voting share, above the 66% minimum. On the RP's intimation, the NCLT shall order liquidation, issue a public announcement and send the order to the authority where the company is registered.

Example 2

The NCLT approved the resolution plan for Gangotri Steels Ltd under section 31. The corporate debtor later fails to follow the plan. A group of workmen whose dues were to be paid under the plan complain. Advise on whether liquidation can be ordered and who may apply.

Show the solution

Identify the stage: post-approval implementation, so section 33(3) and (4) applies.
Check who can apply: any person other than the corporate debtor whose interests are prejudicially affected by the contravention.
Apply: workmen whose plan dues are unpaid are prejudicially affected, so they may apply. The corporate debtor itself cannot.
Test: on application, the AA decides whether the corporate debtor has contravened the plan.
Conclusion: if contravention is established, the AA shall pass a liquidation order.
Add the order's contents: a direction to liquidate, a public announcement and transmission of the order to the registering authority.

Answer: Yes. The workmen, being persons prejudicially affected, may apply under section 33(3). If the NCLT finds contravention, it shall pass a liquidation order with a public announcement and send the order to the registering authority.

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.

Practice questions from Liquidation on or after Failing of Resolution Plan

Grounds for Liquidation under IBC in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalLiquidation Process and Distribution of Assets

Grounds for Liquidation under IBC: frequently asked questions

What are the grounds for liquidation under IBC?

Under section 33, the grounds are: no resolution plan received in time, rejection of the plan under section 31 for non-compliance, a CoC decision approved by at least 66% of the voting share to liquidate, and contravention of an approved plan. Section 54L(4) adds a pre-pack ground.

Can the CoC decide to liquidate before the information memorandum is ready?

Yes. The Explanation to section 33(2) says the CoC may decide to liquidate any time after it is constituted under section 21(1) and before the plan is confirmed, including before the information memorandum is prepared.

Can the NCLT refuse a liquidation order once a ground is established?

The section says the Adjudicating Authority shall pass the order. Once the ground is made out, the Code does not give it discretion to refuse.

What happens to employees when liquidation is ordered?

Under section 33(7), the liquidation order is deemed a notice of discharge to officers, employees and workmen. This does not apply when the liquidator continues the business during liquidation.