The year 2016 witnessed the enactment of the Insolvency and Bankruptcy Code, 2016; a legislation which was much needed. The Code was passed mainly with the view to consolidate and amend the existing legal framework of reorganization and resolution of insolvent and bankrupt persons. It made it a point to improve on the previous legislations dealing with insolvency and bankruptcy by including characteristics of lesser time; comparatively lesser loss during recoveries and higher levels of financing.

The first step in a corporate insolvency resolution process is to make all possible efforts to revive and restart the corporate person[1]. This is usually done by preparing and enforcing a 'resolution plan'. However, if that does not work out, the process that follows is  liquidation .

The Hon ble Supreme Court in the matter of Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors.[2], observed:
 What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern .

When is an order for Liquidation passed by the Adjudicating Authority?
Following are the situations where an order for liquidation is passed by the Adjudicating Authority:
(a) When a Resolution plan which is required under Section 30(6) of Insolvency Code, 2016 is not received before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 of Insolvency Code, 2016 or
the fast track corporate insolvency resolution process under section 56 of Insolvency Code, 2016, as the case may be (section 33(1)(a) of Insolvency Code, 2016)
(b) When the Adjudicating Authority (NCLT) rejects the resolution plan submitted to it under section 31 for the non-compliance of the requirements specified.
(c) Where before the approval of a resolution plan, the resolution professional intimates to the NCLT the decision of Committee of Creditors (CoC) approved by not less than sixty-six per cent of the voting share to liquidate the corporate debtor.
(d) Where a resolution plan approved by the Adjudicating Authority is contravened by the corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order. If the adjudicating authority determines that the corporate debtor has indeed contravened the resolution plan, it shall pass a liquidation order.

In Innoventive Industries v. ICICI Bank Ltd[3], it was held that from the date of an order for liquidation of corporate debtor under Section 33, the moratorium shall cease to have effect.

Appointment of A Liquidator

After the adjudicating authority passes an order for liquidation under section 33 of Insolvency Code, the resolution professional who was appointed for the corporate insolvency resolution process shall, subject to submission of a written consent by the resolution professional to the Adjudicatory Authority in a specified form, act as the liquidator for the purposes of liquidation, unless replaced by the Adjudicating Authority under section 34(4) of the Code.

Eligibility
· An Insolvency Professional shall be eligible to be appointed as a liquidator only if he/she and every partner or director of the insolvency professional entity of which he/she is a part of, is independent of the corporate debtor.
· In addition to this, he/she should be eligible to be appointed as independent director of corporate debtor under section 149 of Companies Act, 2013.
· He/She should not have been an employee or proprietor or partner of auditors, secretarial auditors or cost auditors of corporate debtor in last three financial years or legal or consulting firm of corporate debtor contributing to more than 10% of gross turnover of such firm in last three financial years.[Regulation 3(1) of IBBI (Liquidation Process) Regulations, 2016]
· It is important for the person who is supposed to be appointed as a liquidator to disclose any pecuniary or personal relationship with the corporate debtor. It is also pertinent to note that he/she should not represent any other stakeholder in the same liquidation process.
There might be instances where the person acting as the Resolution Professional is not appointed as the liquidator. This is usually done where:-
· the resolution plan submitted by the resolution professional under section 30 was rejected for failure to meet the requirements mentioned in section 30(2) of section 30; or
· the IBBI recommends the replacement of a resolution professional to the Adjudicating Authority for reasons to be recorded in writing, or
· the resolution professional fails to submit written consent under section 34(1) – section 34(4) of Insolvency Code, 2016

In Sahara Fincon v. Tirupati Ceramics[4], it was held that replacement of a Resolution Professional as a liquidator can be only as per provisions of section 34(4) of the Code[5]. In this case, the Committee of Creditors had resolved to replace RP even before rejection of resolution plan to be submitted by the RP.

Section 34(2) of the Code states that on the appointment of a liquidator, all powers of the board of directors, key managerial personnel and the partners of the corporate debtor, as the case may be, shall cease to have effect and shall be vested in the liquidator.

Soon after the appointment of a liquidator, there is a public announcement of the same in the local newspaper, website of the corporate debtor and website of IBBI. The public announcement calls upon stakeholders to submit their claims within 30 days from liquidation commencement date "Liquidation commencement date" basically means the date on which the proceedings for liquidation commence in accordance with section 33 or section 59 of the Code as the case may be.

Duties of A Liquidator

Some of the main duties of a liquidator are[6]:-
· to verify claims of all the creditors;
· to take into his custody or control all the assets, property, effects and actionable claims of the corporate debtor;
· to evaluate the assets and property of the corporate debtor in the manner as may be specified by the Board and prepare a report;
· to take such measures to protect and preserve the assets and properties of the corporate debtor as he considers necessary;
· to carry on the business of the corporate debtor for its beneficial liquidation as he considers necessary;
· to invite and settle claims of creditors and claimants and distribute proceeds in accordance with the provisions of this Code;
· to perform such other functions as may be specified by the Board.

For the purposes of liquidation, the liquidator shall form an estate of the assets which will be called the liquidation estate in relation to the corporate debtor[7]. The liquidator shall hold the liquidation estate as a fiduciary for the benefit of all the creditors. Section 38 of the Code provides that the liquidator shall receive or collect the claims of creditors within a period of thirty days from the date of the commencement of the liquidation process and a creditor may withdraw or vary his claim under this section within fourteen days of its submission.

Thereafter, the liquidator shall verify the claims submitted within such time period as may be prescribed by the IBBI. Section 40 of the Code provides that the liquidator may, after verification of claims under Section 39, either admit or reject the claim, in whole or in part, as the case may be. It is further provided that where the liquidator rejects a claim, he shall record in writing the reasons for such rejection. It is mandatory for the liquidator to communicate his decision of admission or rejection of claims to the creditor and corporate debtor within seven days of such admission or rejection of claims.

The Hon ble NCLAT, in the matter of S. C. Sekaran v. Amit Gupta & Ors., directed as under:
 We direct the  Liquidator  to proceed in accordance with law. He will verify claims of all the creditors; take into custody and control of all the assets, property, effects and actionable claims of the  corporate debtor , carry on the business of the  corporate debtor  for its beneficial liquidation etc. as prescribed under Section 35 of the I&B Code

List of Stakeholders

The liquidator prepares a list of stakeholders, category-wise, on the basis of proofs of claims submitted and accepted[8] with-
· the amounts of claim admitted, if applicable,
· the extent to which the debts or dues are secured or unsecured, if applicable,
· the details of the stakeholders, and
· the proofs admitted or rejected in part, and the proofs wholly rejected.

The liquidator then files the list of stakeholders with the Adjudicating Authority within forty-five days from the last date for receipt of claims. The filing of the list shall be announced to the public in the manner specified.

The list of stakeholders, as modified from time to time, shall be-
· available for inspection by the persons who submitted proofs of claim;
· available for inspection by members, partners, directors and guarantors of the corporate debtor;
· displayed on the website, if any, of the corporate debtor.

Asset Memorandum

Upon forming the liquidation estate under section 36 of the Code, the liquidator shall prepare an asset memorandum in accordance with the Liquidation Regulations within seventy-five days from the liquidation commencement date[9].

The asset memorandum shall provide the following details in respect of the assets which are intended to be realized by way of sale-
· value of the asset, valued in accordance with Regulation 35 of Insolvency and Bankruptcy Board of India (liquidation process) Regulations, 2016.
· value of the assets or business(s) under clauses (b) to (f) of regulation 32, valued in accordance with regulation 35, if intended to be sold under those clauses;
· intended manner of sale in accordance with Regulation 32, and reasons for the same;
· the intended mode of sale and reasons for the same in accordance with Regulation 33;
· expected amount of realization from sale; and
· any other information that may be relevant for the sale of the asset
The liquidator shall file the asset memorandum along with the preliminary report to the Adjudicating Authority. The asset memorandum shall not be accessible to any person during the course of liquidation, unless permitted by the Adjudicating Authority.

Priority of Distribution

Section 53 of the Code has established an ordered of priority among creditors, which will determine the sequence in which outstanding debts will be repaid. This is:-
1. IRP and liquidation costs;
2. Workmen s dues (for 24 months), and secured dues, if the security has been relinquished;
3. Employees  dues (for 12 months);
4. Unsecured financial creditors;
5. Government dues, and unpaid dues to secured creditor, if the security has been realized;
6. Remaining debts and dues (which include, unsecured operational debts);
7. Preference shareholders;
8. Equity shareholders.

Once the creditors committee chooses to liquidate the company s assets, there are two paths available to the secured creditor – they may choose to opt out of the resolution process and enforce their security to recover debts owed to them; or they may participate in the resolution process, thereby giving up all rights over the collateral. The latter option will prioritise the secured creditor ahead of all except the dues owed to workmen. Another unique feature of the Code is the low priority accorded to government dues, unlike the Companies Act, 2013 where they are paid alongside employees and unsecured financial creditors. Now, they are paid after secured creditors, unsecured creditors, employees, and workmen. This undoubtedly signals the business-first principle that is guiding the Code, where the government is viewed only as a facilitator and regulator, and not an active participant in the affairs of commercial entities. This is a positive step, as government agencies have unrivalled resources at their disposal to collect their dues, and do not need to burden the insolvency resolution process, especially in its early stages.

Distribution of Assets

Subject to the provisions of section 53, the liquidator shall not commence distribution before the list of stakeholders and the asset memorandum has been filed with the Adjudicating Authority. The liquidator shall distribute the proceeds from realization within ninety days from the receipt of the amount to the stakeholders. The insolvency resolution process costs, if any, and the liquidation costs shall be deducted before such distribution is made.

Unclaimed Proceeds of Liquidation Or Undistributed Assets

Regulation 46[10] states that before the order of dissolution is passed under section 54(2), the liquidator shall apply to the Adjudicating Authority for an order to pay into the Companies Liquidation Account in the Public Account of India any unclaimed proceeds of liquidation or undistributed assets or any other balance payable to the stakeholders in his hands on the date of the order of dissolution. It is further provided that any liquidator who retains any money which should have been paid by him into the Companies Liquidation Account under this Regulation shall pay interest on the amount retained at the rate of twelve per cent per annum, and also pay such penalty as may be determined by the Board.

A person claiming to be entitled to any money paid into the Companies Liquidation Account may apply to the Board for an order for payment of the money claimed; which may, if satisfied that such person is entitled to the whole or any part of the money claimed, make an order for the payment to that person of the sum due to him, after taking such security from him as it may think fit.

Conclusion
The Supreme Court, NCLTs and NCLATS have time and again reiterated that  The first order objective is  resolution . The second order objective is  maximisation of value of assets of the  Corporate Debtor  and the third order objective is  promoting entrepreneurship, availability of credit and balancing the interests . This order of objective is sacrosanct.

In Swiss Ribbons Case the Supreme Court observed:
 What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern . It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. Liquidation should be availed only as the last resort and every effort should be made to revive the corporate entity.

Bibliography
1. Insolvency And Bankruptcy Code, 2016
2. Insolvency And Bankruptcy Board of India (Liquidation Process) Regulations, 2016
1. A Primer On The Insolvency And Bankruptcy Code, 2016- Nishith Desai Associates
2. The Insolvency & Bankruptcy Code (Ibc)- Harshul Shah
3. Discussion Paper On Corporate Liquidation Process Along With Draft Regulations, 2019

End-Notes
[1] Binani Industries Limited v. Bank of Baroda & Anr. (IB) No. 175/KB/2018 in C.P. (IB) No. 359/KB/2017)
[2] Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors, 2019 SCC OnLine SC 73.
[3] Innoventive Industries v. ICICI Bank Ltd., AIR 2017 SC 4084
[4]Sahara Fincon v. Tirupati Ceramics, (2018) 147 SCL 123
[5] Insolvency and Bankruptcy Code, 2016
[6] Section 35, Insolvency and Bankruptcy Code, 2016
[7] Section 36, Insolvency and Bankruptcy Code, 2016
[8] Regulation 31, Insolvency And Bankruptcy Board of India (Liquidation Process) Regulations, 2016.
[9] Regulation 34, Insolvency And Bankruptcy Board of India (Liquidation Process) Regulations, 2016.
[10] Insolvency And Bankruptcy Board of India (Liquidation Process) Regulations, 2016.