Answer By law4u team
The liquidator plays a pivotal role in ensuring that the liquidation process is carried out lawfully, efficiently, and fairly. To fulfill this responsibility, the Insolvency and Bankruptcy Code (IBC), 2016 grants the liquidator several powers under Section 35, empowering them to manage, protect, and realize the value of the corporate debtor’s assets. These powers enable the liquidator to act as a quasi-judicial authority in some aspects, especially when dealing with company records, legal proceedings, and recovery of assets.
Key Powers of the Liquidator (Under Section 35 of IBC)
Custody and Control of Assets
The liquidator has the right to take full custody and control of all the assets, properties, and actionable claims of the corporate debtor.
Verification and Settlement of Claims
The liquidator can admit or reject creditor claims after due verification, based on the documents and evidence provided.
Access to Company Records
The liquidator can access books of accounts, registers, minutes, documents, and electronic records from the corporate debtor, auditors, or former officers.
Sale of Assets
The liquidator is empowered to sell the corporate debtor’s assets via auction or private sale to maximize returns for creditors.
Institution or Defense of Legal Proceedings
The liquidator can initiate or defend any legal actions on behalf of the corporate debtor, including recovery of dues and property.
Investigation of Transactions
The liquidator has authority to scrutinize past transactions to identify and report preferential, undervalued, fraudulent, or extortionate credit transactions for reversal through NCLT.
Examine Promoters and Directors
If required, the liquidator can summon and examine the promoters, directors, or key personnel of the company under oath.
Disclaim Onerous Property
The liquidator can disclaim assets or contracts that are burdensome or not commercially viable, subject to approval.
Distribution of Proceeds
After realizing the assets, the liquidator distributes proceeds in accordance with the order of priority laid out in Section 53 of the IBC.
Maintain Reports and Registers
The liquidator must maintain proper books, asset sale records, and progress reports for submission to the NCLT.
Legal Framework Supporting Liquidator’s Powers
- Section 35, IBC – Enumerates powers and duties of the liquidator
- IBBI (Liquidation Process) Regulations, 2016 – Provides detailed operational framework
- NCLT Supervision – All critical decisions are subject to approval by the Adjudicating Authority
Example
During the liquidation of ABC Pvt. Ltd., the liquidator finds that certain machinery was sold at a very low price to a related party six months before the insolvency began.
Steps and Outcome:
- The liquidator investigates the transaction and classifies it as undervalued and preferential.
- A petition is filed before NCLT to reverse the sale and recover the asset or its value.
- Meanwhile, the liquidator takes control of the company’s premises and inventories.
- Assets are auctioned, claims verified, and proceeds are distributed to creditors according to Section 53.
