March 10, 2026 : The National Company Law Appellate Tribunal (NCLAT), New Delhi has held that a liquidator cannot maintain an appeal against his replacement under the Insolvency and Bankruptcy Code (IBC), observing that removal from a statutory assignment does not confer any vested right to continue in office.
A Bench comprising Justice Ashok Bhushan (Chairperson) and Indevar Pandey (Technical Member) dismissed an appeal filed by the erstwhile liquidator of Tecpro Systems Limited, ruling that an insolvency professional cannot be treated as a “person aggrieved” under Section 61 of the IBC merely because he has been replaced.
The appeal was filed by Ramachandran Subramanian, who had been appointed liquidator of Tecpro Systems Limited after the company was ordered into liquidation on 16 January 2020 following the failure of an approved resolution plan. The National Company Law Tribunal (NCLT), Delhi Bench had later replaced him with another insolvency professional, Anil Kohli, by order dated 9 January 2026.
The corporate debtor had earlier undergone Corporate Insolvency Resolution Process (CIRP) after a petition filed by Edelweiss Asset Reconstruction Company Limited (EARCL), which had acquired stressed assets of the company from State Bank of India and became the dominant financial creditor. Although a resolution plan submitted by Kridhan Infrastructures Private Limited was approved during CIRP, it was not implemented, leading the adjudicating authority to order liquidation.
During the liquidation process, EARCL repeatedly sought the replacement of the liquidator. In October 2024, the Stakeholders’ Consultation Committee (SCC) considered an agenda for replacing the liquidator, and voting conducted between 17 and 18 October 2024 resulted in more than 92 percent of the voting share supporting the proposal. Based on this outcome, an application was filed before the NCLT seeking appointment of a new liquidator.
Subramanian challenged the move, arguing that EARCL should be treated as a related party of the corporate debtor under Section 5(24) of the IBC. According to him, the asset reconstruction company had exercised significant control over the company’s affairs even before the commencement of CIRP by installing monitoring mechanisms, engaging Ernst & Young for advisory and oversight functions, and introducing escrow arrangements for financial supervision.
He contended that if EARCL were treated as a related party, it would not have been entitled to vote in the SCC. The appellant further argued that when a fresh voting exercise was conducted under the supervision of a retired judge excluding EARCL’s vote, the proposal for replacement secured only about 59 percent support, falling short of the statutory two-thirds majority required under Regulation 31A(11) of the IBBI (Liquidation Process) Regulations.
The respondents opposed the appeal, submitting that a liquidator holds a fiduciary position within the statutory framework of the IBC and does not possess any personal or proprietary right to continue in office once the adjudicating authority decides to replace him.
The appellate tribunal first examined whether the appellant had the locus to maintain the appeal. Referring to earlier decisions of the tribunal, the Bench reiterated that insolvency professionals, including resolution professionals and liquidators, do not acquire any vested legal right to continue once the competent authority decides to replace them.
The tribunal observed that a liquidator performs fiduciary functions for the benefit of all stakeholders and acts under the supervision of the adjudicating authority. Removal from such a statutory assignment, without affecting any independent civil or proprietary right, does not make the professional a “person aggrieved” within the meaning of Section 61 of the Code.
“The liquidation process remains under the supervision of the Adjudicating Authority. If the Authority, on overall consideration of stakeholder confidence, conduct of proceedings and repeated friction, forms an opinion that continuation of the liquidator is not conducive to smooth completion of liquidation, it is within its jurisdiction to direct replacement,” the Bench observed.
The tribunal also rejected the contention that EARCL was a related party of the corporate debtor. It noted that the shares referred to by the appellant were pledged shares forming part of the original security package created in favour of State Bank of India and later assigned to EARCL. Since the pledge had never been invoked, ownership and voting rights remained with the pledgor and did not confer managerial control on the asset reconstruction company.
Further, the tribunal observed that the presence of a board observer, monitoring arrangements and escrow mechanisms were common protective measures adopted by lenders in distressed accounts and could not by themselves establish management or policy control over the corporate debtor.
The appellate tribunal also took note of the chronology of events and observed that no objection regarding EARCL being a related party had been raised during CIRP or for several years during the liquidation proceedings. The allegation surfaced only after attempts were made to replace the liquidator.
On examining the statutory provisions, the tribunal held that EARCL did not fall within the definition of a related party under Section 5(24) of the IBC. It further noted that the second proviso to Section 21(2) allows regulated financial creditors, such as asset reconstruction companies, to participate in the committee of creditors even if they become related parties solely due to conversion or substitution of debt into equity prior to the insolvency commencement date.
Concluding that the NCLT had acted within its supervisory powers and that no illegality or jurisdictional error had been demonstrated, the appellate tribunal dismissed the appeal and upheld the replacement of the liquidator.
Case: Ramachandran Subramanian vs Anil Kohli & Edelweiss Asset Reconstruction Company Limited (EARCL)
Case No.: Company Appeal (AT) (Insolvency) 267 of 2026
Coram: Justice Ashok Bhushan (Chairperson) and Indevar Pandey (Technical Member)
