NCLT disallowed appointment of a resolution professional as liquidator for the same corporate debtor under Section 34(4) of IBC, citing conflict of interest and legislative intent post-amendment.
NCLT Bars RP’s Appointment as Liquidator Under Section 34(4)
The National Company Law Tribunal (NCLT) has ruled that a Resolution Professional (RP) cannot be appointed as the liquidator for the same corporate debtor under the amended Section 34(4) of the Insolvency and Bankruptcy Code (IBC). The decision came in a case where the Committee of Creditors (CoC) failed to secure an approved resolution plan, triggering liquidation.
The Tribunal held that the amendment to Section 34(4) was intended to prevent conflicts of interest and maintain institutional integrity during the shift from resolution to liquidation. Allowing the RP, who played a role in managing the resolution process, to assume control during liquidation undermines transparency and accountability.
The legislative intent behind Section 34(4), as amended, is to ensure a clear separation between resolution and liquidation functions to safeguard stakeholder interests.
Implication for practitioners: In liquidation proceedings, separate professionals must be considered for liquidator appointments. Firms advising on CoC strategies must plan for succession planning in case resolution fails.
Citations
- Section 34(4), Insolvency and Bankruptcy Code
