Answer By law4u team
The Adjudicating Authority (AA) plays a central role in the liquidation process under the Insolvency and Bankruptcy Code (IBC), 2016 in India. Typically, this refers to the National Company Law Tribunal (NCLT). Its primary role is to oversee and ensure that the liquidation of a corporate debtor is carried out in a legally sound, fair, and transparent manner, safeguarding the interests of creditors, employees, and other stakeholders.
Key Roles of the Adjudicating Authority in Liquidation
Initiation of Liquidation
The AA passes the liquidation order if the Corporate Insolvency Resolution Process (CIRP) fails or if the Committee of Creditors (CoC) decides to liquidate the company.
Appoints a liquidator, usually the existing Resolution Professional (RP).
Oversight and Supervision
Supervises the actions of the liquidator to ensure they are in line with IBC provisions.
Ensures timelines are followed, reports are filed, and stakeholders’ interests are protected.
Approval of Key Decisions
Approves or rejects the sale of assets or business as a going concern.
Authorizes actions like disclaimer of onerous property, assignment of contracts, and compromise or arrangement with creditors.
Resolution of Disputes
Hears applications and objections related to claim admission, stakeholder disputes, fraudulent transactions, or mismanagement.
Settles grievances raised by creditors, employees, or shareholders during liquidation.
Direction to the Liquidator
Provides guidance and instructions to the liquidator in complex matters.
May remove or replace the liquidator if misconduct or inefficiency is found.
Approval of Final Report
Reviews and approves the final report submitted by the liquidator before dissolution.
Ensures all distributions, recoveries, and settlements are legally compliant.
Dissolution of Corporate Debtor
Upon successful completion of liquidation, the AA passes the order to dissolve the company, officially ending its existence.
Legal Framework Supporting the Role
Section 33 to 54 of the IBC, 2016 defines the scope and duties of the Adjudicating Authority during liquidation.
NCLT Rules and Liquidation Regulations provide procedural clarity and timelines.
Impact of Adjudicating Authority’s Role
Maintains judicial balance and prevents arbitrary actions.
Provides a forum for resolving conflicts among stakeholders.
Ensures maximization of asset value and fair distribution of proceeds.
Builds public and investor confidence in the insolvency process.
Consumer Safety Tips (for creditors and stakeholders)
Stay informed about liquidation proceedings through official NCLT portals.
Submit claims on time and respond to notices from the liquidator or AA.
Raise objections if you notice unfair preference or fraudulent transfers.
Attend hearings if summoned and keep records of communications.
Seek legal advice before contesting AA decisions.
Example
A construction company undergoing insolvency failed to receive resolution plans within the specified 180+90 day CIRP period. The CoC votes for liquidation, and the RP files an application to NCLT for liquidation.
Steps taken:
The NCLT (Adjudicating Authority) reviews the case and passes a liquidation order, appointing the RP as the liquidator.
During liquidation, a dispute arises between two creditors over claim priority.
Both parties file applications with the NCLT.
The NCLT hears both sides and issues a ruling clarifying the correct interpretation of the IBC’s distribution waterfall.
After assets are sold and dues settled, the liquidator submits a final report.
The NCLT reviews and passes an order of dissolution, formally closing the company.
