Published On: February 23rd 2026
Authored By: Saumya Mishra
NALSAR University of Law, Hyderabad
Abstract
The Insolvency and Bankruptcy Code, 2016 (IBC) has conferred significant authority on the Committee of Creditors (CoC) in making critical decisions regarding the corporate debtor’s future, including whether to proceed through the resolution process or to opt for liquidation. Section 33(2) of the IBC permits the CoC to elect liquidation prior to approving any resolution plan, provided the requisite voting threshold has been met. However, some adjudicating authorities have required the CoC to complete steps ordinarily associated with the resolution process (such as publishing Form-G and inviting expressions of interest) before permitting a liquidation order. This article examines the statutory construction of Section 33(2), the scope of the CoC’s discretion in this regard, and the limited supervisory role available to Adjudicating Authorities in reviewing CoC liquidation decisions. The analysis draws on the facts and legal reasoning in ACRE-81 Trust and Ors. v. Pawan Kumar Goyal, IRP and Ors.[1] (NCLAT, 2024). The article demonstrates that the NCLT’s reliance on Section 65 against CoC members who voted for liquidation was based on a misreading of the statute, and that the Appellate Tribunal correctly held that the CoC had acted within the bounds of the IBC in electing liquidation.
I. Introduction
The Insolvency and Bankruptcy Code, 2016 establishes a structured process for managing corporate entities in financial distress, with the Committee of Creditors occupying a central role in the corporate insolvency resolution process (CIRP). The Code identifies two statutory outcomes to the CIRP: the approval of a resolution plan or the liquidation of the corporate debtor. Although resolution is generally regarded as the preferred outcome under the Code, liquidation is equally recognised as a legitimate conclusion. Both outcomes are provided for in distinct statutory provisions, each carrying its own requirements.
Disputes have, however, arisen over the precise circumstances in which liquidation may be initiated. A key question is whether the CoC possesses the authority to elect liquidation before completing the procedural steps associated with the resolution process, such as advertising for resolution applicants through Form-G. The analysis of this question turns on the proper interpretation of Section 33(2) of the Code and sheds light on the degree of scrutiny that an adjudicating authority may exercise over the CoC’s commercial decisions.
The NCLAT’s ruling in ACRE-81 Trust and Ors. v. Pawan Kumar Goyal, IRP and Ors. addresses these issues directly. This article reviews the statutory interpretation adopted by the NCLAT, identifies the errors in the Adjudicating Authority’s approach, and examines how Section 65 of the Code should be correctly applied in the context of a liquidation decision.
II. Statutory Framework Governing Liquidation Under the Code
Section 33 of the Insolvency and Bankruptcy Code, 2016 provides for the liquidation of a corporate debtor. Under Section 33(2), the Resolution Professional is required to notify the Adjudicating Authority of the CoC’s decision to liquidate the corporate debtor, provided that the decision has been approved by at least sixty-six percent of the voting share and has been made prior to the confirmation of a resolution plan.[2]
The Explanation to Section 33(2) clarifies the timeframe within which this decision may be taken. Specifically, the CoC may decide to liquidate the corporate debtor “at any time” after the formation of the CoC, so long as this occurs before confirmation of a resolution plan, including before the preparation of the information memorandum.[3] The statutory language expressly contemplates that a liquidation decision may precede many of the steps commonly associated with the resolution process.
The proper interpretation of this provision formed the central contested issue in the ACRE-81 case, including whether the absence of a Form-G publication could invalidate an otherwise valid liquidation decision under Section 33(2).
III. Background of the CIRP and the CoC’s Decision
On 5 March 2021, the Interim Resolution Professional (IRP) initiated the corporate insolvency resolution process pursuant to an application filed by an operational creditor under Section 9 of the Code. The corporate debtor failed to appear in the proceedings and was proceeded against ex parte. The court granted a moratorium and appointed the IRP to represent the corporate debtor during the CIRP.[4]
Following the public announcement, the IRP convened the first meeting of the CoC on 6 April 2021, at which he apprised the CoC of the following significant facts: that the corporate debtor’s offices had been closed for over a year prior to the commencement of the CIRP; that all directors had resigned before the CIRP commenced; that the company’s last audited financial statements (as required under the Companies Act) were for the period ending 31 March 2017; and that secured financial creditors had already initiated enforcement proceedings under the SARFAESI Act and had taken possession of the corporate debtor’s project assets.[5]
The CoC conducted five meetings between April and August 2021 to consider the question of early liquidation. During this period, the CoC resolved to defer the publication of Form-G pending its assessment of the liquidation option. The IRP placed before the CoC information regarding the financial costs of maintaining the CIRP. An e-voting exercise was conducted from 16 to 18 August 2021, at which 88.48% of the voting share, including financial creditors in class, voted in favour of liquidating the corporate debtor.[6]
The IRP thereafter filed an application under Section 33(2) seeking an order of liquidation and his own appointment as liquidator.
IV. The Adjudicating Authority’s Objection to Early Liquidation
The National Company Law Tribunal, New Delhi Bench, declined to pass the liquidation order and instead issued a show cause notice under Section 65 of the Code to the CoC members who had voted in favour of liquidation. The Adjudicating Authority’s reasoning was that the CoC was obligated to publish Form-G before it could evaluate the availability of potential resolution applicants, and that this had not been done.[7]
The Tribunal took the view that the IBC process is designed to afford every corporate debtor an opportunity to resolve its insolvency, and that entry into liquidation is permissible only after the resolution search required under the CIRP has been completed. In the Adjudicating Authority’s view, the CoC had acted in breach of the Code’s provisions by electing liquidation without first making a genuine attempt to identify an alternative resolution path. On this basis, the Adjudicating Authority treated the liquidation application as one filed with malicious intent and invoked Section 65 against the CoC members who had supported it.[8]
This reasoning squarely raised the question of whether the completion of resolution-stage procedures constitutes a statutory prerequisite for liquidation under Section 33(2).
V. Interpretation of Section 33(2) by the NCLAT
The NCLAT rejected the approach adopted by the Adjudicating Authority. The Appellate Tribunal held that requiring the CoC to complete all resolution-related activities before initiating liquidation proceedings was inconsistent with both the text and the purpose of Section 33(2) and its Explanation.[9]
The Tribunal noted that the legislature had used the phrase “at any time” twice, in both the main provision and the Explanation, to signal the CoC’s authority to decide on liquidation at any point after its constitution, subject only to the conditions that the decision precede the approval of a resolution plan and satisfy the prescribed voting threshold. The NCLAT concluded that the requirement of mandatory Form-G publication before a liquidation decision is a judicially imposed condition that finds no basis in the statutory text. The CoC’s decision, having been taken during the CIRP before any resolution plan was approved and with the support of over sixty-six percent of the voting share, was valid. The absence of Form-G publication did not, by itself, invalidate the liquidation decision.
VI. Reliance on Sunil S. Kakkad v. Atrium Infocom Pvt. Ltd.
In support of its interpretation of Section 33(2), the NCLAT placed reliance on its earlier decision in Sunil S. Kakkad v. Atrium Infocom Pvt. Ltd.,[10] which addressed the same legal issue. The question before the Tribunal in that case was whether the Resolution Professional could proceed with liquidation once the CoC had passed the requisite vote, without first seeking expressions of interest from potential resolution applicants. In Sunil S. Kakkad, the CoC had held three meetings and then voted for liquidation without having called for expressions of interest. The NCLAT ruled that the decision to liquidate prior to the approval of a resolution plan fell squarely within the framework of Section 33(2), and the Supreme Court declined to interfere with that ruling, thereby affirming the Appellate Tribunal’s interpretation.[11]
In ACRE-81 Trust, the NCLAT treated Sunil S. Kakkad as binding precedent and noted that the Adjudicating Authority had erred by failing to follow this established position.
VII. Distinguishing Swiss Ribbons Pvt. Ltd. v. Union of India
The Adjudicating Authority had relied on Swiss Ribbons Pvt. Ltd. v. Union of India[12] for the proposition that liquidation should be resorted to only after resolution efforts have been exhausted. The NCLAT rejected this reliance, observing that Swiss Ribbons was decided before the amendment that introduced the Explanation to Section 33(2).
The Appellate Tribunal noted that the statutory framework governing liquidation had evolved since Swiss Ribbons, and that the express language of the Explanation now clearly empowers the CoC to decide on liquidation even before the preparation of the information memorandum. The revised statutory text does not permit Swiss Ribbons to be read as imposing requirements that are inconsistent with the current provisions of the Code.
VIII. Section 65 and the Requirement of Malicious Intent
A further issue that arose in the appeal was the invocation of Section 65 of the Code, which provides for penalties against parties who initiate insolvency proceedings fraudulently or with a purpose other than resolution or liquidation.[13]
The NCLAT held that Section 65 had been improperly invoked in this case. The Appellate Tribunal observed that the Adjudicating Authority had not established any finding of malicious intent on the part of the CoC members. Since liquidation is a recognised and legitimate outcome under the Code, the initiation of proceedings aimed at liquidation cannot, without more, be characterised as fraudulent or malicious. The Tribunal further relied on Unigreen Global Pvt. Ltd. v. Punjab National Bank,[14] in which it had been held that Section 65 penalties require proof of a fraudulent application or malicious intent directed at achieving a purpose other than that contemplated by the Code. No such finding had been made in the present case, and the invocation of Section 65 was accordingly set aside.
IX. Non-Interference with Commercial Decisions of the CoC
The NCLAT’s decision in ACRE-81 Trust reaffirms the principle that the Adjudicating Authority operates within strictly defined limits when reviewing liquidation decisions made by the CoC under Section 33(2). The Appellate Tribunal did not assess whether liquidation was preferable to resolution in the particular circumstances, nor did it substitute its own commercial judgment for that of the creditors. Its review was confined to examining whether the applicable legal and procedural conditions had been satisfied.
By setting aside the contested order, the NCLAT affirmed that the Adjudicating Authority lacks the power to direct the CoC to undertake steps that the statute does not require, and that punitive measures under the Code may not be deployed in the absence of the specific conditions prescribed for their invocation.
X. Conclusion
The Insolvency and Bankruptcy Code, 2016 establishes a framework in which the Committee of Creditors exercises primary control over the corporate insolvency resolution process. The Code provides for two possible outcomes: the approval of a resolution plan or the liquidation of the corporate debtor. Although resolution is generally treated as the preferred outcome, liquidation is equally valid within the statutory scheme and carries its own distinct legal requirements. Section 33(2), read together with its Explanation, sets out the conditions and timing for a valid liquidation decision.
Section 33(2) reflects a clear legislative intention to vest in the CoC the authority to elect liquidation at any time after its constitution and before the approval of a resolution plan, subject to the prescribed voting threshold. The provision does not require that all resolution-related steps (including the issuance of Form-G or the invitation of expressions of interest) be completed before the CoC may exercise this authority. The Explanation to Section 33(2) expressly provides that the decision may be taken even before the finalisation of the information memorandum. This statutory language makes clear that a liquidation decision need not await the completion of resolution-related processes and may validly be made during the course of a CIRP.
Attempts by certain adjudicating authorities to treat the completion of the resolution process as a mandatory precondition to liquidation effectively add a requirement to Section 33(2) that the legislature did not impose. The Adjudicating Authority’s proper function, under the Code, is to verify that a CoC decision satisfies the conditions of timing and voting threshold specified in the statute. It has no authority to direct the CoC to pursue resolution when the statute permits liquidation, nor to impose conditions beyond those expressly set out in the Code.
The limits of judicial oversight are equally illustrated by Section 65 of the Code. That provision is directed at fraudulent or malicious conduct and requires demonstration of improper intent supported by evidence. Where liquidation has been validly elected under Section 33(2), the mere absence of prior resolution steps cannot constitute evidence of malicious intent, and the penalties under Section 65 cannot be attracted simply because the adjudicating authority disagrees with the commercial decision of the CoC.
In summary, read alongside the judicial interpretation of the Code, the statutory scheme identifies liquidation under Section 33(2) as a legitimate and independent option available to the Committee of Creditors within the CIRP. The role of the Adjudicating Authority is confined to ensuring compliance with the express provisions of the Code and does not extend to directing the commercial choices of creditors. This approach preserves the balance between creditor autonomy and judicial oversight that the legislature intended, and ensures that liquidation decisions are governed by the statute as written rather than by procedural expectations that find no basis in the Code.
References
[1] ACRE-81 Trust Through Its Trustee v. Pawan Kumar Goyal (Interim Resolution Professional) and Ors., (NCLAT, 2024), available at https://indiankanoon.org/doc/195820513/
[2] Insolvency and Bankruptcy Code, No. 31 of 2016, § 33(2) (India), available at https://www.indiacode.nic.in/bitstream/123456789/15479/1/the_insolvency_and_bankruptcy_code%2C_2016.pdf
[3] Insolvency and Bankruptcy Code, No. 31 of 2016, § 33(2), Explanation (India), available at https://www.indiacode.nic.in/bitstream/123456789/15479/1/the_insolvency_and_bankruptcy_code%2C_2016.pdf
[4] ACRE-81 Trust, supra note 1.
[5] Id.
[6] Id.
[7] Id.
[8] Id.
[9] Id.
[10] Sunil S. Kakkad v. Atrium Infocomm Pvt. Ltd. and Anr., Appeal (AT) (Insolvency) No. 194 of 2020 (NCLAT, 2020), available at https://indiankanoon.org/doc/118448950/
[11] Id.
[12] Swiss Ribbons Pvt. Ltd. v. Union of India, AIR 2019 SC 739.
[13] Insolvency and Bankruptcy Code, No. 31 of 2016, § 65 (India), available at https://www.indiacode.nic.in/bitstream/123456789/15479/1/the_insolvency_and_bankruptcy_code%2C_2016.pdf
[14] Unigreen Global Pvt. Ltd. v. Punjab National Bank, CA (AT) (Ins) No. 81 of 2017 (NCLAT), available at https://ibbi.gov.in/webadmin/pdf/order/2018/Jan/1st%20Dec%202017%20in%20the%20matter%20of%20Unigreen%20Global%20Private%20Limited%20Vs.%20Punjab%20National%20Bank%20%26%20Ors.%20No.%2081-2017_2018-01-03%2010:28:32.pdf
