Liquidator removal for lack of authorisation and due diligence upheld after misconduct and conflict concerns in the liquidation process.

The Tribunal held that the Adjudicating Authority, having power to appoint a liquidator under the Insolvency and Bankruptcy Code, also had corresponding power to suspend or remove him under Section 16 of the General Clauses Act, 1897. In the absence of an express removal provision in the Code, it relied on Section 276 of the Companies Act, 2013 to recognise misconduct, fraud, misfeasance, professional incompetence, inability to act, and conflict of interest or lack of independence as grounds for removal. The liquidator was found to have acted without valid authorisation for assignment and to have shared the valuation report with prospective scheme proponents, showing lack of due care and diligence. He was replaced by a new liquidator.

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Issues: Whether the liquidator could be replaced for acting without a valid authorisation for assignment and for conduct amounting to failure to exercise due care and diligence in the liquidation process.

Analysis: The Tribunal held that the Adjudicating Authority, being empowered to appoint a liquidator under the Insolvency and Bankruptcy Code, also had the corresponding power to suspend or dismiss him by virtue of Section 16 of the General Clauses Act, 1897. In the absence of an express removal mechanism under the Insolvency and Bankruptcy Code, the Tribunal applied Section 276 of the Companies Act, 2013 and treated misconduct, fraud or misfeasance, professional incompetence, inability to act, and conflict of interest or lack of independence as recognised grounds for removal. It found that the liquidator had accepted the assignment without a valid authorisation for assignment under Regulation 7A of the Insolvency and Bankruptcy Board of India (Resolution Professionals) Regulations, 2016, and had also shared the valuation report with prospective scheme proponents, which was viewed as a serious lapse showing lack of due care and diligence.

Conclusion: The liquidator was liable to be replaced, and a new liquidator was appointed in his place.

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