Liquidation Process Under the Insolvency and Bankruptcy Code
From the section 33 order to dissolution, with the exam's version of each rule and what changed in 2026.
Liquidation under Chapter III of Part II of the Code begins with an NCLT order under section 33 and ends with a dissolution order under section 54. In between, a liquidator takes control of the company, forms the liquidation estate, settles claims, sells the assets and distributes the money in the order fixed by section 53.
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 and IBBI's June 2026 amendments rewrote much of this chapter. The exam, though, tests the law as it stood on 4 February 2025. This page gives that version first and marks each later change, so you know which rule to apply in the exam hall and which one applies in practice today.
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When the NCLT Orders Liquidation
Section 33 has four routes into liquidation.
- No plan in time (s. 33(1)(a))
- The NCLT receives no resolution plan before the CIRP period, or the maximum period allowed, runs out.
- Plan rejected (s. 33(1)(b))
- The NCLT rejects the plan under section 31 for not meeting its requirements.
- CoC decides (s. 33(2))
- The CoC resolves with at least 66% of the voting share to liquidate. It can do so any time after it is constituted and before the plan is confirmed, even before the information memorandum is ready.
- Plan contravened (s. 33(3)-(4))
- A person whose interests are prejudiced by the corporate debtor's breach of an approved plan applies, and the NCLT finds the breach.
The Process at the Exam Cut-off
As the Code and the Liquidation Process Regulations stood on 4 February 2025. LCD means liquidation commencement date.
- 1
1. Liquidator takes over
The resolution professional acts as liquidator unless replaced (s. 34(1)). The powers of the board, key managerial personnel and partners vest in the liquidator (s. 34(2)). The order is deemed a notice of discharge to officers, employees and workmen unless the business is carried on (s. 33(7)).
- 2
2. Public announcement and claims
Announcement within 5 days of appointment (reg. 12). Claims are submitted, or claims filed in the CIRP updated, by the 30th day from the LCD. A creditor can appeal the liquidator's decision on a claim to the NCLT within 14 days (s. 42).
- 3
3. Secured creditors choose
Each secured creditor either relinquishes its security to the estate or realises it outside (s. 52). It must tell the liquidator within 30 days of the LCD, or the asset is presumed part of the estate (reg. 21A). One that realises must still pay in its share of CIRP costs, liquidation costs and workmen's dues within 90 days.
- 4
4. Stakeholders' consultation committee
Constituted within 60 days of the LCD to advise on sale, fees and legal proceedings (reg. 31A). Its advice is not binding, but the liquidator must record reasons for departing from it.
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5. Sale of assets
Ordinarily by auction (reg. 33). Regulation 32 allowed sale of an asset on its own, a slump sale, a set of assets, parcels, or the company or its business as a going concern. No sale to a person ineligible under section 29A (proviso to s. 35(1)(f)).
- 6
6. Distribution
Proceeds go out under section 53 within 90 days of receipt (reg. 42).
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7. Completion and dissolution
The liquidator must finish within one year of the LCD (reg. 44), then apply under section 54. The NCLT's dissolution order is sent to the registering authority within 7 days.
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What Changed After the Cut-off
Code changes in force from 26 May 2026; regulation changes from 2 June 2026 unless stated. None of this is in the exam's version of the law.
Who becomes liquidator
At the exam cut-off
The RP, by default (s. 34(1))
Now
NCLT refers to IBBI for a recommendation; the CIRP's RP cannot be appointed liquidator (new s. 34(1), (4)). The CoC recommends a name from IBBI's panel by 66% (reg. 3A)
Replacing the liquidator
At the exam cut-off
Only on grounds in s. 34(4)
Now
CoC may replace by 66% vote (new s. 34A)
Creditor body
At the exam cut-off
Stakeholders' consultation committee (reg. 31A)
Now
The CoC continues and supervises the liquidation (new s. 35(2), reg. 8); reg. 31A omitted
Claims
At the exam cut-off
Fresh round, 30 days from LCD; ss. 38-42
Now
Ss. 38-42 omitted; claims not filed in the CIRP are due within 14 days of the LCD (reg. 16)
Secured creditor's election
At the exam cut-off
30 days (reg. 21A)
Now
14 days, else deemed relinquished (new s. 52(2), reg. 21A)
Going-concern sale
At the exam cut-off
Allowed (reg. 32)
Now
Removed from reg. 32 with effect from 14 October 2025
Time limit
At the exam cut-off
One year (reg. 44)
Now
180 days plus up to 90 days (new s. 54(1))
NCLT's own deadline
At the exam cut-off
None for the liquidation order
Now
30 days to pass a liquidation or dissolution order, with reasons recorded for delay (new ss. 33(2A), 54(4))
| Point | At the exam cut-off | Now |
|---|---|---|
| Who becomes liquidator | The RP, by default (s. 34(1)) | NCLT refers to IBBI for a recommendation; the CIRP's RP cannot be appointed liquidator (new s. 34(1), (4)). The CoC recommends a name from IBBI's panel by 66% (reg. 3A) |
| Replacing the liquidator | Only on grounds in s. 34(4) | CoC may replace by 66% vote (new s. 34A) |
| Creditor body | Stakeholders' consultation committee (reg. 31A) | The CoC continues and supervises the liquidation (new s. 35(2), reg. 8); reg. 31A omitted |
| Claims | Fresh round, 30 days from LCD; ss. 38-42 | Ss. 38-42 omitted; claims not filed in the CIRP are due within 14 days of the LCD (reg. 16) |
| Secured creditor's election | 30 days (reg. 21A) | 14 days, else deemed relinquished (new s. 52(2), reg. 21A) |
| Going-concern sale | Allowed (reg. 32) | Removed from reg. 32 with effect from 14 October 2025 |
| Time limit | One year (reg. 44) | 180 days plus up to 90 days (new s. 54(1)) |
| NCLT's own deadline | None for the liquidation order | 30 days to pass a liquidation or dissolution order, with reasons recorded for delay (new ss. 33(2A), 54(4)) |
How the Limited Insolvency Examination Tests This
Liquidation sits inside the two CIRP and liquidation case studies, which carry 40 of the 70 case-study marks. Expect a fact pattern with an LCD and a set of dates, then questions on who acts as liquidator, whether a secured creditor's election was in time, or whether an asset belongs in the estate. The common trap is answering with the 2026 rule. In the exam's version the RP becomes liquidator, the election window is 30 days, and a consultation committee advises.
FAQs
What is the time limit for liquidation under IBC?expand_more
At the exam cut-off (4 February 2025), regulation 44 of the Liquidation Process Regulations required completion within one year of the liquidation commencement date. Since 26 May 2026 the Code itself allows 180 days, extendable by up to 90 days on the liquidator's application (section 54(1)).
Can the resolution professional become the liquidator?expand_more
Under the law tested in the exam, yes: section 34(1) made the RP the liquidator unless the NCLT replaced them. Since 26 May 2026, section 34(4) bars the RP of that CIRP from being appointed liquidator of the same company.
What happens if a secured creditor does not say whether it will relinquish its security?expand_more
At the exam cut-off, if it did not tell the liquidator within 30 days of the liquidation commencement date, the secured asset was presumed part of the liquidation estate (regulation 21A). For liquidations starting after 26 May 2026, the window is 14 days and the security is deemed relinquished.
Next steps
- Section 53 Waterfallarrow_forward
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