Liquidation under the IBC after the 2026 Amendment: Sections 33 to 54

Liquidation is where a corporate insolvency resolution process ends when no resolution plan succeeds. It is governed by Chapter III of Part II of the Insolvency and Bankruptcy Code 2016 — Sections 33 to 54 — and the Insolvency and Bankruptcy Code (Amendment) Act 2026 rewrote much of it with effect from 26 May 2026. The committee of creditors no longer disappears when liquidation begins; the liquidator is a fresh appointee recommended by the Insolvency and Bankruptcy Board of India; a moratorium accompanies the liquidation order; the CIRP can be restored once; secured creditors must elect within fourteen days; and the whole process has a 180-day statutory deadline.

Not every change applies to every pending file. The Amendment Act carries its own transitional rules, and they differ from section to section. This note follows a liquidation from the order to dissolution, flagging at each stage which liquidations the new text governs.

Key points

• Before ordering liquidation for want of a plan, the NCLT must consider a committee application, at sixty-six per cent, to restore the CIRP once for up to 120 days.
• The liquidation order now carries a moratorium on suits and on security enforcement, subject to Section 52.
• The Board recommends the liquidator, who cannot be the CIRP's resolution professional, and the committee of creditors supervises and can replace the liquidator.
• Claims verified in the CIRP carry forward; Sections 38 to 42 are omitted for liquidations begun after 26 May 2026.
• A secured creditor has fourteen days to elect to realise its security, failing which it is deemed relinquished.
• The liquidator has 180 days, extendable by 90, to liquidate and apply for dissolution.

When is a company ordered into liquidation?

Section 33 has three routes. Under Section 33(1), the Adjudicating Authority orders liquidation where it does not receive a resolution plan before the CIRP period or the maximum period under Section 12 expires, or where it rejects the plan under Section 31 for non-compliance. The reference to the fast-track process has been deleted, since Chapter IV of Part II is omitted.

Under Section 33(2), the committee of creditors may decide, by sixty-six per cent of the voting share, to liquidate the corporate debtor — and, since 26 May 2026, alternatively to dissolve it — at any time after its constitution and before the plan is confirmed, including before the information memorandum is prepared. A new proviso requires the committee to comply with specified conditions before deciding to dissolve. A dissolution decision leads to a dissolution order under the new Section 54(2A) instead of a liquidation order.

Under Section 33(3) and (4), a person prejudicially affected by contravention of an approved plan may apply for a liquidation order. The Authority may now also pass any other order it considers fit, and a new proviso lets it reinstate the CIRP instead.

New Section 33(2A) requires the liquidation order within thirty days of the intimation or application, with reasons recorded for any delay.

Can the CIRP be restored instead of liquidating?

Yes, once. New Section 33(1A) requires the Adjudicating Authority, where it is satisfied that a Section 33(1) ground exists, to consider — before passing the liquidation order — an application by the committee of creditors, made with not less than sixty-six per cent of the voting share, for restoring the CIRP. If no plan was received, it may restore the process to be completed within a period it fixes, not exceeding 120 days. If the plan was rejected, it may restore the process to the stage of invitation for resolution plans, again for not more than 120 days.

Section 33(1B) allows restoration only once. Its Explanation closes the loop: if no plan reaches the Authority within the restored period, or the plan received is rejected, a liquidation order must follow. By the Explanation to Section 33(1A), the restoration power applies to CIRPs that began before 26 May 2026 in which no liquidation order had been passed on that date, but not where one had.

What does the liquidation order do?

Section 33(1)(b) lists what the order must contain: an order that the corporate debtor be liquidated, a public announcement that it is in liquidation, and transmission of the order to its registering authority. Two items were added in 2026:

• (iv) a moratorium. Subject to Section 52, the order declares a moratorium for the purposes of clauses (a) and (c) of Section 14(1), read with Section 14(3), applying with necessary changes. Clause (a) covers the institution or continuation of suits and proceedings against the corporate debtor; clause (c) covers action to foreclose, recover or enforce any security interest over its property. Legal proceedings relating to transactions notified by the Central Government, in consultation with a financial sector regulator or other authority, are excluded. The CIRP version is explained in the note on the Section 14 moratorium.
• (v) appointment of a liquidator under Section 34.

The old Section 33(5), which barred suits by or against the corporate debtor once liquidation was ordered, is omitted. Substituted Section 33(6) now provides that no suit or legal proceeding may be commenced, or if pending continued, by the liquidator on behalf of the corporate debtor except with the leave of the Adjudicating Authority. Section 33(7) is unchanged: the order is deemed a notice of discharge to the officers, employees and workmen, unless the liquidator continues the business. On appointment of the liquidator, Section 34(2) vests the powers of the board, key managerial personnel and partners in the liquidator.

Who is appointed as liquidator?

Until 26 May 2026, the CIRP's resolution professional ordinarily became the liquidator. Substituted Section 34(1) now requires the Adjudicating Authority to refer the matter to the Board, which under Section 34(6) proposes an insolvency professional, with written consent, within ten days of the reference. Section 34(4) provides that the CIRP's resolution professional shall not be appointed or replaced as liquidator for that corporate debtor, and Section 34(5) requires the resolution professional to hand over all CIRP records to the liquidator.

New Section 34A allows the committee, at any time during liquidation, to resolve by sixty-six per cent to replace the liquidator with another insolvency professional who has given written consent. The committee applies to the Adjudicating Authority, which replaces the liquidator if no disciplinary proceedings are pending against the proposed appointee. The liquidator's fee, under Section 34(8) and (9), is still fixed by regulations and paid from the proceeds under Section 53.

What role does the committee of creditors play in liquidation?

New Section 21(11) provides that, where liquidation begins under Chapter III, the committee constituted under Section 21 supervises the liquidator, with Sections 21 and 24 applying as the context requires; the Board may specify other classes of creditors who may attend without a vote. Substituted Section 35(2) replaces the liquidator's old, non-binding power to consult stakeholders with the committee's supervision in the specified manner.

The IBBI (Liquidation Process) Regulations 2016, as amended with effect from 2 June 2026, fill this in. Regulation 8 keeps a secured creditor that has not relinquished its security off the committee, admits a partly secured creditor for the unsecured remainder, requires the first meeting within seven days of the liquidation commencement date, and lists matters needing prior approval, with sixty-six per cent required for the manner of sale, reserve price and auction process, among others.

The Explanation to Section 21 applies the continuing committee to liquidations begun after 26 May 2026 and to liquidations then ongoing in which the liquidator had not yet applied for dissolution under Section 54.

How are creditors' claims handled in liquidation now?

Under the old scheme, the liquidator invited, verified and admitted or rejected claims afresh under Sections 38 to 41, and a creditor could appeal to the Adjudicating Authority under Section 42. Those sections are omitted. Substituted Section 35(1)(a) requires the liquidator to maintain an updated list of claims in the specified manner, and clause (j) now speaks of settling claims and distributing proceeds, without "inviting" them.

Under Regulation 16, as amended, a stakeholder whose claim was not submitted in the CIRP files it within fourteen days of the liquidation commencement date and proves it as on the insolvency commencement date. Regulation 30 requires the liquidator to verify such claims within seven days, and to verify within seven days of the liquidation commencement date any claim received but not verified in the CIRP; claims already verified in the CIRP are not re-verified, and reasons must be recorded for any rejection. Section 60(5), which gives the NCLT jurisdiction over claims made by or against the corporate debtor and over questions of priority, law or fact arising in the liquidation, remains in place. The CIRP claim stage is explained in the note on filing claims in a CIRP.

The Explanation to Section 35(1) makes the new clauses (a) and (j), and the omission of Sections 38 to 42, inapplicable to liquidation and voluntary liquidation processes begun on or before 26 May 2026; those continue under the old claims procedure.

What are a secured creditor's options in liquidation?

Section 52(1) still offers two choices: relinquish the security interest to the liquidation estate and share in the Section 53 distribution, or realise it outside the estate. The 2026 Act changed the terms of the choice:

• A fourteen-day election. Substituted Section 52(2) requires a secured creditor that intends to realise its security to inform the liquidator and identify the asset within fourteen days of the liquidation commencement date. If it does not, the security interest is deemed relinquished.
• Shared assets. Where more than one secured creditor holds security over an asset, none may realise it unless creditors representing at least sixty-six per cent of the value of all claims secured by those interests agree.
• Deductions. Substituted Section 52(8) requires the insolvency resolution process costs, the liquidation costs and the workmen's dues ranking under Section 53(1)(a) and (b)(i) to be deducted from the realisation proceeds and transferred to the liquidator.
• Partial relinquishment. A new Explanation to Section 53(1)(b)(ii) treats a relinquishing creditor whose security is worth less than its debt as secured to the value of the security, determined as specified, and unsecured for the rest.

The Explanation to Section 52 keeps the new Section 52(2) away from liquidations begun on or before 26 May 2026. A creditor that realises its security still proceeds under the law applicable to it — commonly the SARFAESI Act, explained in SARFAESI Act Explained and, on taking possession, in symbolic and physical possession — and may seek the Tribunal's help under Section 52(5) and (6) if it meets resistance. Any surplus goes to the liquidator; any shortfall ranks under Section 53(1)(e)(ii).

How are the liquidation proceeds distributed?

Section 53(1) sets the order of priority, notwithstanding any other central or state law. Within each rank, debts are paid in full or, if the proceeds are insufficient, in equal proportion.

Two 2026 Explanations settle the place of government dues. The Explanation to Section 3(31) declares that a security interest exists only where it arises from an agreement or arrangement between two or more parties, and not where it is created merely by operation of law. The Explanation to Section 53(1)(e)(i) then provides that amounts due to the Central and State Governments for the two years before the liquidation commencement date rank under clause (e)(i) whether or not secured, by agreement or by law, and the balance under clause (f). New Illustrations to Section 53(2) show the limit of private ordering: an agreement subordinating workmen to secured creditors is disregarded, while an inter-creditor agreement ranking one secured creditor ahead of another is not. The liquidator's fee is deducted proportionately from each class under Section 53(3).

How long does liquidation take, and how does it end?

Substituted Section 54(1) requires the liquidator to completely liquidate the assets and apply for dissolution within 180 days of the liquidation commencement date; the Adjudicating Authority may extend this by up to 90 days on an application giving sufficient reasons. New Section 54(4) requires the dissolution order within thirty days of the application or of the committee's dissolution decision.

Loose ends no longer hold the company open. Where avoidance, fraudulent or wrongful trading or Section 47 proceedings are pending, Section 54(1A) lets the committee decide how they are pursued and how their proceeds are distributed; Section 54(1B) does the same for pending suits concerning proceeds. Section 54(2B) provides that dissolution does not affect those proceedings, consistent with the Explanation to Section 26. Where the committee decided to dissolve under Section 33(2), Section 54(2A) allows a dissolution order directly, with any remaining asset disposed of in the specified manner, the proceeds applied to the insolvency resolution process costs, and any surplus credited to the Insolvency and Bankruptcy Fund.

An appeal against a liquidation order lies to the NCLAT under Section 61(4) on grounds of material irregularity or fraud, and Section 61(6) now directs the NCLAT to dispose of appeals within three months.

What changed in voluntary liquidation?

Section 59(2) now requires a voluntary liquidation to be completed within a specified period not exceeding one year. New Section 59(5A) to (5C) allows it to be terminated, before the application for dissolution, by a special resolution of members approved within seven days by creditors holding two-thirds in value of the company's debt, with the termination taking effect when the liquidator intimates the Registrar of Companies.

A note on scope

This article is general information on liquidation under the Insolvency and Bankruptcy Code 2016 as amended, and is not legal advice. Whether a given liquidation runs on the old or the new text depends on its commencement date and on the transitional Explanations noted above, and much of the procedure is in regulations amended in 2026. The full set of amendments is mapped in IBC (Amendment) Act 2026: What Changed; the alternatives to liquidation are in Pre-Packaged Insolvency for MSMEs and the not-yet-operative creditor-initiated process.

The related practice areas are NPA resolution and debt recovery and SARFAESI. Enquiries may be directed through the contact page.

Related reading: IBC Guide | Personal Guarantees after Plan Approval | For Banks and NBFCs | Courts and Tribunals