Answer By law4u team
The liquidator plays a crucial role in the liquidation process under the Insolvency and Bankruptcy Code (IBC). Appointed after the commencement of liquidation, the liquidator is responsible for managing and winding up the affairs of the corporate debtor, ensuring fair and transparent realization and distribution of assets to repay creditors as per the legal framework.
Role and Responsibilities of the Liquidator
Taking Custody of Assets:
On appointment, the liquidator takes possession and control of the corporate debtor’s assets and books of accounts.
Public Announcement and Claims Invitation:
The liquidator publicly announces the commencement of liquidation, inviting claims from creditors, employees, and other stakeholders.
Verification of Claims:
Receives and verifies the claims submitted by creditors and stakeholders, preparing a list of admitted claims for distribution.
Asset Management and Realization:
Manages the corporate debtor’s assets to prevent loss or damage. The liquidator sells assets through public auction, tender, or private sale, aiming to maximize value.
Distribution of Proceeds:
Distributes the realized proceeds among creditors in the order of priority prescribed under the IBC — secured creditors, operational creditors, government dues, and unsecured creditors.
Maintaining Records and Reporting:
Maintains detailed records of assets, claims, sales, and distributions. Provides regular reports to the National Company Law Tribunal (NCLT) and the Committee of Creditors (CoC).
Legal Compliance:
Ensures that all liquidation activities comply with the provisions of the IBC, related laws, and NCLT orders.
Handling Litigation:
Represents the corporate debtor in any legal proceedings related to the liquidation, including avoiding transactions that unfairly diminish the liquidation estate.
Termination of Liquidation:
After distributing all assets, the liquidator files an application with the NCLT for the dissolution of the corporate debtor.
Important Points to Note:
- The liquidator acts as a fiduciary, protecting the interests of all creditors.
- Must act impartially and transparently.
- Has powers to investigate the company’s affairs and transactions before liquidation.
- Ensures the moratorium imposed during liquidation is enforced.
Example:
A company undergoing liquidation appoints Mr. Sharma as the liquidator. Mr. Sharma first takes control of the company’s assets and publicly announces the liquidation. He invites all creditors to submit their claims and verifies them. He then organizes the sale of machinery and property through auction. The proceeds from sales are distributed fairly among secured and unsecured creditors following the IBC priority. Throughout the process, Mr. Sharma files progress reports to the NCLT and, upon completing asset realization and distribution, applies to dissolve the company officially.
