Liquidator's Claims Decisions, Asset Sales and Dissolution

Liquidation is no longer a slow, open-ended process run by the former resolution professional. After 2026, a new liquidator works under the committee's supervision, must finish within 180 days plus 90, and has fewer ways to sell. Questions test the creditor's remedy against a rejected claim, who may buy and how, whether a going concern sale or scheme is still possible, and what happens to pending claims on dissolution.

1. The Law in Brief

Figure 1: Key time limits in liquidation

• Claims. Collected within thirty days (section 38), verified (section 39), admitted or rejected with reasons communicated within seven days (section 40), valued (section 41), with an appeal to the NCLT within fourteen days (section 42)
• Sales. Ordinarily by auction; private sale only in urgent cases or with the NCLT's permission and, after 2026, with 66 per cent approval of the committee; no sale to section 29A ineligibles, and related party sales need the NCLT's permission; going concern sales omitted from 14 October 2025.
• Completion. Apply for dissolution within 180 days of the liquidation commencement date, extendable by up to 90 days (section 54(1) as amended in 2026)

2. How Is a Liquidator's Rejection of a Claim Challenged?

• Issue. The remedy against the liquidator's rejection of a claim and the time limit.
• Law. Unlike the resolution professional, the liquidator decides claims under section 40 in a quasi-judicial capacity. Under section 42, a creditor may appeal to the NCLT within fourteen days of receiving the decision. Section 63 bars civil courts, and the liquidation moratorium and section 33(6) also restrict suits against the debtor.
• Application. CD Ltd received the decision on 10 September; fourteen days ended on 24 September. It went to a civil court instead, on 5 October.
• Conclusion. The suit is not maintainable. CD Ltd should appeal to the NCLT under section 42 and seek condonation of the delay, if the NCLT is willing to entertain it; otherwise the rejection stands.

3. When Is a Private Sale in Liquidation Valid?

• Issue. Whether the private sale is valid.
• Law. Sales are ordinarily by auction. A private sale is permitted only where the asset is perishable, likely to lose value significantly if not sold promptly, or the NCLT permits it, and, after 2026, with the prior approval of 66 per cent of the committee except in urgent cases. A person ineligible under section 29A cannot buy assets in liquidation, and a sale to a related party needs the NCLT's permission.
• Application. None of the grounds for a private sale exists, and the committee did not approve it. GH Ltd is likely ineligible as a connected person of a promoter linked to an NPA account, and is in any case a related party.
• Conclusion. The sale is invalid and should be set aside on the committee's application to the NCLT. The liquidator should sell by auction, excluding ineligible bidders. The committee may also consider replacing the liquidator by 66 per cent under section 34A.

Figure 2: Sales, schemes and claims in liquidation

4. Is a Going Concern Sale or Scheme Still Possible?

• Issue. Whether a going concern sale or a promoter's scheme is available in liquidation.
• Law. The IBBI omitted going concern sales from the Liquidation Regulations with effect from 14 October 2025 for cases where such a sale had not begun. In Arun Kumar Jagatramka v Jindal Steel and Power (2021), the Supreme Court held that a person ineligible under section 29A cannot propose a scheme under section 230 for a company in liquidation under the Code. After 2026, a scheme may be filed by the liquidator only if approved by the majority required under section 230(6) and if the amount realisable by creditors exceeds the liquidation value.
• Application. The liquidation began after 14 October 2025, so a going concern sale is not available. The promoter, as the person in control of a company that defaulted, is likely ineligible under section 29A, and so cannot propose a scheme, even one that exceeds liquidation value.
• Conclusion. Neither route is open as proposed. The buyer may bid for the assets in an auction, and an eligible third party could propose a scheme meeting the 2026 conditions. Rescue of the business as a whole should have been pursued in the CIRP or through restoration under section 33(1A)

5. When Must Liquidation Be Completed?

• Issue. The time limit for completing liquidation, the fate of pending proceedings on dissolution, and early dissolution.
• Law. Section 54(1), as amended in 2026, requires the liquidator to apply for dissolution within 180 days, extendable by the NCLT by up to 90 days. Under section 54(1A), (1B) and (2B), pending avoidance, section 66 and section 47 proceedings and suits relating to distributable proceeds continue after dissolution in the manner the committee decides, which also decides how their proceeds are distributed. Early dissolution, where assets do not cover costs, needs a decision of 66 per cent of the committee.
• Application. LM Ltd's liquidator cannot wait for the pending proceedings to end. NO Ltd's assets do not justify a full process.
• Conclusion. LM Ltd's liquidator should seek an extension of up to 90 days if needed to sell the litigated property, and then apply for dissolution, with the committee deciding how the pending proceedings will be continued and their proceeds distributed. NO Ltd's liquidator should seek the committee's 66 per cent approval for early dissolution.

6. Frequently Asked Questions

Who supervises the liquidator after 2026?

The committee of creditors, under section 21(11) and the substituted section 35(2); it may replace him by 66 per cent under section 34A.

Can the liquidator disclaim onerous property?

Yes. The liquidator may disclaim onerous property, with the approval of the committee of creditors (Topic 59).

Where does a surplus after direct dissolution go?

To the Insolvency and Bankruptcy Fund under section 224.

7. Related Topics

• Topic 54: The Liquidator. Appointment, powers and duties.
• Topic 59: Sale of Assets, Schemes and Dissolution. How liquidation ends.
• Topic 130: Voluntary Liquidation Case Studies. Section 59.