The Insolvency and Bankruptcy Code, 2016
Part-II Insolvency Resolution and Liquidation for Corporate Persons
Chapter-III Liquidation Process
Section 33: Initiation of liquidation.
*33. (1) Where the Adjudicating AuthorityJ1, —
(a) before the expiry of the insolvency resolution process period or the maximum period permitted for completion of the corporate insolvency resolution process under section 12 or the fast track corporate insolvency resolution process under section 56, as the case may be, does not receive a resolution plan under sub-section (6) of section 30; or
(b) rejects the resolution plan under section 31 for the non-compliance of the requirements specified therein,
it shall—
(i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter;
(ii) issue a public announcement stating that the corporate debtor is in liquidation; and
(iii) require such order to be sent to the authority with which the corporate debtor is registered.
(2) Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors 1[approved by not less than sixty-six per cent. of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).
2[Explanation. – For the purpose of this sub-section, it is hereby declared that the committee of creditors may take the decision to liquidateJ2 the corporate debtor, any time after its constitution under sub-section (1) of section 21 and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum.]
(3) Where the resolution plan approved by the Adjudicating Authority 3[under section 31 or under sub-section (1) of section 54L,] is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).
(4) On receipt of an application under sub-section (3), if the Adjudicating Authority determines that the corporate debtor has contravened the provisions of the resolution plan, it shall pass a liquidation orderJ2 as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).
(5) Subject to section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor:
Provided that a suit or other legal proceedingJ3 may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the Adjudicating Authority.
(6) The provisions of sub-section (5) shall not apply to legal proceedings in relation to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
(7) The order for liquidation under this section shall be deemed to be a notice of discharge to the officers, employees and workmen of the corporate debtor, except when the business of the corporate debtor is continued during the liquidation process by the liquidator.
Reference
*Effective from 15.12.2016.
1. Ins. by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, w.e.f. 06.06.2018.
2. Ins. by the Insolvency and Bankruptcy Code (Amendment) Act, 2019, w.e.f. 16.08.2019[S.O. 2953(E)].
3. Ins. by the Insolvency and Bankruptcy Code (Amendment) Act, 2021, w.e.f. 04.04.2021.
Judicial Pronouncements:
J1. When Section 33 speaks of the “Adjudicating Authority” in sub-section (1), it is referring to both the Adjudicating Authority as well as the Appellate Authority. [Arcelormittal India Pvt. Ltd. Vs. Satish Kumar Gupta and Ors. [2018] ibclaw.in 31 SC, p82]
J2. There is an order of liquidation permissible earlier, under Section 33(4). No doubt after the introduction of the explanation to Section 33(2), an order of liquidation may be passed in terms thereof. [Manish Kumar v. Union of India and Anr. (2021) ibclaw.in 16 SC, p240]
J3. The tax demand notices to seek enforcement of custom dues during the moratorium period would clearly violate the provisions of Sections 14 or 33(5) of the IBC, as the case may be. This is because the demand notices are an initiation of legal proceedings against the Corporate Debtor. Respondent could only initiate assessment or reassessment of the duties and other levies. They cannot transgress such boundary and proceed to initiate recovery in violation of Sections 14 or 33(5) of the IBC. [Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs (2022) ibclaw.in 103 SC]
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