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NCLAT Overrules IBBI Circular: IBC's Section 34(1) Holds Final Say on Liquidator Appointment
NCLAT's Judgment dated 18-09-2025 in Company Appeal (AT) (Insolvency) No. 1165 of 2025
The National Company Law Appellate Tribunal (NCLAT) set aside the NCLT's order on the liquidator's appointment, ruling in favor of the original RP, Manish Jaju.
The NCLAT's reasoning was:
1. Statutory Mandate: Section 34(1) of the IBC entitles the existing RP to be appointed as the liquidator upon a liquidation order, provided they submit consent. Replacement can only occur under the specific, limited grounds listed in Section 34(4).
2. IBBI Overreach: The IBBI circular was a misinterpretation and overreach of its powers. The NCLAT clarified that Section 34(4)(b) allows the IBBI to recommend replacing a specific RP for "reasons to be recorded," not to issue a blanket, general directive replacing the legislative scheme for all cases.
3. Conclusion: The general circular displaced the clear legislative scheme of Section 34(1) and was therefore invalid as a basis for replacement.
Final Order: The NCLAT substituted the appointment of Ms. Smita Gupta with Manish Jaju as the liquidator. Ms. Gupta was also directed to be reimbursed for her incurred expenses.