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Insolvency and Bankruptcy - Law and Practice · Liquidation of Corporate Person

Liquidation Under IBC: Overview and Grounds

Updated 11 October 2026 · Fact-checked

Liquidation under the IBC is the process of ending a corporate debtor, selling its assets and paying creditors by priority. Under section 33, the Adjudicating Authority orders it if no plan is received, a plan is rejected, the committee of creditors resolves it, or an approved plan is contravened.

Understand Liquidation Under IBC: Overview and Grounds

A corporate insolvency resolution process (CIRP) tries to rescue the company. Liquidation is what happens when rescue fails or is not wanted. The company's assets are sold, the proceeds are paid out by the section 53 priority order, and the company is dissolved.

Section 33 sets out the routes to a liquidation order. There are four triggers, and you should be able to name each one with its sub-section.

Route 1: no plan received (s 33(1)(a)). Before the CIRP period or the maximum permitted period under section 12 (or the fast track period under section 56) ends, the Adjudicating Authority has not received a resolution plan under section 30(6). It must pass a liquidation order.

Route 2: plan rejected (s 33(1)(b)). The Adjudicating Authority rejects the plan under section 31 for non-compliance with the requirements stated there. Liquidation follows.

Route 3: committee of creditors decision (s 33(2)). At any time during CIRP but before the resolution plan is confirmed, the resolution professional intimates the Adjudicating Authority of a CoC decision, approved by not less than sixty-six per cent of the voting share, to liquidate. The Adjudicating Authority then passes the liquidation order. The Explanation says the CoC may decide this at any time after it is constituted under section 21(1), even before the information memorandum is prepared.

Route 4: contravention of an approved plan (s 33(3) and (4)). If the corporate debtor contravenes a plan approved under section 31 (or section 54L), any person other than the corporate debtor whose interests are prejudicially affected may apply for liquidation. If the Adjudicating Authority finds the contravention, it passes the order.

There is also a separate voluntary route. A corporate person may start voluntary liquidation under section 59. That route is covered in its own topic and is not a section 33 order.

Once an order is passed, the Adjudicating Authority must also issue a public announcement that the corporate debtor is in liquidation, and send the order to the authority where the debtor is registered.

Key rules to remember

Triggers under section 33
Liquidation order if: (a) no plan received by end of period; (b) plan rejected under s 31; (c) CoC resolves by ≥ 66% voting share; (d) approved plan contravened
Sections 33(1)(a), 33(1)(b), 33(2) and 33(3)-(4) respectively.
CoC vote to liquidate
Not less than 66% of the voting share (s 33(2))
Decision may be taken any time after constitution of the CoC and before confirmation of the plan.
Contents of every liquidation order
Order to liquidate + public announcement + copy to the registering authority (s 33(1)(b)(i)-(iii))
Section 33(2), (3) and (4) refer back to these three actions.
Who may apply on plan contravention
Any person other than the corporate debtor, whose interests are prejudicially affected (s 33(3))
The corporate debtor itself cannot apply.
Plan approval vote (contrast)
CoC approves a plan by ≥ 66% of voting share (s 30(4))
The same threshold applies to approving a plan and to resolving to liquidate.

How to solve Liquidation Under IBC: Overview and Grounds questions

Use this method for any question asking whether, why or how a corporate debtor goes into liquidation.

  1. 1Identify the stage: is the company in CIRP, after plan approval, or not in CIRP at all?
  2. 2Match the facts to a route: time lapsed with no plan, plan rejected, CoC resolution, plan contravened, or voluntary.
  3. 3Check the conditions of that route, such as the 66% voting share for a CoC decision or the timing before plan confirmation.
  4. 4Check who acts: the resolution professional intimates the CoC decision; the Adjudicating Authority passes the order; an affected person applies in a contravention case.
  5. 5State the consequences: public announcement, order sent to the registering authority, and the bar on suits under section 33(5).
  6. 6Conclude clearly with the section number and the order that follows.

Quickest way: Four-trigger checklist

When to use it: Use for short case questions that ask why liquidation arises on given facts.

  1. Underline the fact that signals failure: deadline, rejection, CoC vote or breach.
  2. Tag it to s 33(1)(a), 33(1)(b), 33(2) or 33(3)-(4).
  3. Write the one-line rule with the condition.
  4. Add the three actions of the order and the conclusion.

Common mistakes in Liquidation Under IBC: Overview and Grounds

  • Saying the CoC needs 75% to liquidate.

    Older text used seventy-five per cent.

    Fix: The text supplied says sixty-six per cent for both plan approval and the liquidation decision.

  • Thinking the CoC can resolve liquidation only after the information memorandum is ready.

    Students assume the CoC must first try resolution.

    Fix: The Explanation to section 33(2) allows the decision at any time after constitution and before plan confirmation, including before the information memorandum.

  • Letting the corporate debtor apply for liquidation after a plan breach.

    Confusing this with voluntary liquidation.

    Fix: Section 33(3) allows any person other than the corporate debtor whose interests are prejudicially affected.

  • Treating liquidation as automatic whenever CIRP is not completed.

    Skipping the condition in section 33(1)(a).

    Fix: It follows only if no plan is received under section 30(6) before the period ends, or a plan is rejected under section 31.

  • Forgetting the public announcement and notice to the registering authority.

    Focus on the order alone.

    Fix: List all three actions every time.

Worked examples

Example 1

The CIRP of Sundaram Textiles Ltd reached its maximum permitted period and the resolution professional had not submitted any approved plan to the Adjudicating Authority. What follows?

Show the solution
  1. Stage: CIRP, with the maximum period under section 12 expired.
  2. Fact: the Adjudicating Authority did not receive a resolution plan under section 30(6).
  3. Rule: section 33(1)(a) requires a liquidation order.
  4. Actions: order to liquidate, public announcement that the company is in liquidation, and the order sent to the authority with which it is registered.

Answer: The Adjudicating Authority must order liquidation of Sundaram Textiles Ltd under section 33(1)(a), issue a public announcement and send the order to its registering authority.

Example 2

During CIRP of Bharat Metals Ltd, before any plan is approved, creditors holding 70% of the voting share want liquidation. Can they do so, and how?

Show the solution
  1. Stage: during CIRP, before confirmation of a plan.
  2. Rule: section 33(2) permits a CoC decision approved by not less than sixty-six per cent of the voting share.
  3. 70% is above 66%, so the vote is valid.
  4. Procedure: the resolution professional intimates the Adjudicating Authority of the decision.
  5. The Adjudicating Authority then passes the liquidation order, with public announcement and notice to the registering authority.

Answer: Yes. Under section 33(2), the 70% decision is valid; the resolution professional intimates it and the Adjudicating Authority must pass the liquidation order.

Exam tips

  • Write the section number next to each ground; examiners reward this.
  • In case questions, state the condition (66%, timing, who applies) before your conclusion.
  • Keep the contrast with CIRP ready: resolution aims to rescue, liquidation realises assets and distributes proceeds.
  • Mention the three actions in every liquidation order answer.
  • Cover the voluntary route briefly and point to section 59 as separate.

Practice questions from Liquidation of Corporate Person

Liquidation Under IBC: Overview and Grounds in other exams

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

Liquidation Under IBC: Overview and Grounds: frequently asked questions

What are the grounds for liquidation under IBC?

Under section 33, no plan is received in time, a plan is rejected under section 31, the CoC resolves by at least 66% to liquidate, or an approved plan is contravened. Voluntary liquidation under section 59 is a separate route.

Can the CoC choose liquidation at the start of CIRP?

Yes. The Explanation to section 33(2) allows the decision any time after the CoC is constituted and before the plan is confirmed, even before the information memorandum is prepared.

How is liquidation different from CIRP?

CIRP seeks a resolution plan to revive the corporate debtor. Liquidation follows when resolution fails or is not pursued, and assets are sold to pay creditors by priority.

What happens to legal proceedings once a liquidation order is passed?

Subject to section 52, no suit or legal proceeding can be instituted by or against the corporate debtor. The liquidator may sue on its behalf with prior approval of the Adjudicating Authority.