Locus standi, limitation and liquidation conduct: appellate tribunal upheld maintainability but refused to replace the liquidator.
Unsecured creditors were treated as having locus to appeal in the liquidation proceedings, and exclusion of the COVID-19 period made the delayed filing within limitation, so the appeal was maintainable. On liquidation conduct, the record showed constitution of the Stakeholders' Consultation Committee and approvals for sale, but also communication gaps, unclear asset-grouping strategy, and delay between SCC decisions and auctions. Those concerns justified corrective scrutiny, yet not the exceptional step of replacing the liquidator or cancelling completed sales. The Tribunal instead directed expeditious completion of liquidation and restriction of liquidation costs to actual expenses.
Issues: (i) Whether the appeal was maintainable despite the objection on locus standi and limitation. (ii) Whether the liquidator's conduct in conducting the liquidation and e-auction process justified replacement of the liquidator or quashing of the auction process.
Issue (i): Whether the appeal was maintainable despite the objection on locus standi and limitation.
Analysis: The appellants were unsecured creditors with a stake in the liquidation proceedings, and the fact that only one of them was a member of the Stakeholders' Consultation Committee did not take away their entitlement to prefer an appeal under the insolvency law. On limitation, the appeal was filed beyond the ordinary 30-day period, but the period excluded during the COVID-19 regime applied to the computation of limitation. The delay was therefore liable to be condoned.
Conclusion: The appeal was held maintainable, the objection on locus standi failed, and the delay was condoned.
Issue (ii): Whether the liquidator's conduct in conducting the liquidation and e-auction process justified replacement of the liquidator or quashing of the auction process.
Analysis: The liquidation regulations require constitution of a Stakeholders' Consultation Committee and consultation on sale-related matters, including sale of the corporate debtor as a going concern and other modes of sale. The record showed that the committee was constituted and approvals were obtained for the sale process. At the same time, the minutes and sale notices reflected gaps in communication, absence of a clear recorded strategy for grouping assets, and substantial delay between SCC decisions and the actual auctions. These circumstances justified concern about the pace and conduct of liquidation, but the material did not establish such irregularity as would warrant replacement of the liquidator or cancellation of the completed sales.
Conclusion: The prayer for replacement of the liquidator and quashing of the auctions was rejected, but directions were issued for expeditious completion of liquidation and for restricting liquidation costs to actual expenses.
Final Conclusion: The appeal resulted in partial relief only: the liquidation process was not interfered with by replacing the liquidator or cancelling the auctions, but the Tribunal directed that the liquidation be completed without further avoidable delay and that liquidation expenses be kept to actual costs.
Ratio Decidendi: Replacement of a liquidator in liquidation proceedings requires material irregularity or exceptional circumstances, but the appellate forum may still issue corrective directions where the liquidation process shows unexplained delay and avoidable escalation of costs.
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