Section 42: Appeal Against the Decision of Liquidator under IBC 2016
Section 42 of the Insolvency and Bankruptcy Code, 2016 provides a statutory remedy to a creditor who is aggrieved by the liquidator's decision on a claim during the liquidation process. The appeal lies to the Adjudicating Authority, which for a corporate person is ordinarily the National Company Law Tribunal having territorial jurisdiction.
A creditor may appeal to the Adjudicating Authority against the decision of the liquidator accepting or rejecting the claims within fourteen days of the receipt of such decision.
Meaning and Scope of Section 42
During liquidation, creditors submit their claims to the liquidator. The liquidator verifies those claims and may admit or reject them, wholly or partly. Section 42 gives a creditor a direct appellate remedy where the creditor disputes the liquidator's decision accepting or rejecting a claim.
The expression Adjudicating Authority is defined in Section 5(1) of the Code, in relation to insolvency resolution and liquidation of corporate persons, as the National Company Law Tribunal constituted under Section 408 of the Companies Act, 2013.
Who Can File an Appeal under Section 42?
The statutory right of appeal is available to a creditor aggrieved by the liquidator's decision on a claim. Section 3(10) of the Code broadly defines a creditor as a person to whom a debt is owed and includes a financial creditor, operational creditor, secured creditor, unsecured creditor and decree-holder.
An appeal may concern rejection of the whole claim, rejection of part of a claim, or a decision accepting a claim in a manner that adversely affects the appellant creditor.
Time Limit: Fourteen Days from Receipt of Decision
Section 42 prescribes a period of fourteen days from receipt of the liquidator's decision. The date on which the creditor receives the decision is therefore important for computing limitation. A creditor proposing to challenge the decision should preserve the email, letter, portal record or other material showing the date of receipt.
How Claims Reach the Section 42 Appeal Stage
| Provision | Subject | Relevance |
|---|---|---|
| Section 38 | Consolidation of claims | Deals with submission of claims by creditors during liquidation. |
| Section 39 | Verification of claims | Requires the liquidator to verify submitted claims and permits calling for further documents or evidence. |
| Section 40 | Admission or rejection of claims | Allows the liquidator, after verification, to admit or reject a claim in whole or in part. Reasons must be recorded in writing where a claim is rejected. |
| Section 41 | Determination of valuation of claims | Requires the liquidator to determine the value of admitted claims in the manner specified by the Board. |
| Section 42 | Appeal against liquidator's decision | Permits a creditor to appeal to the Adjudicating Authority within fourteen days of receiving the decision. |
Practical Steps for a Section 42 Appeal
- Identify the liquidator's decision being challenged and the date on which it was received.
- Set out the claim originally submitted, the amount admitted or rejected, and the precise part of the liquidator's decision under challenge.
- Attach the claim form, supporting documents, correspondence, the liquidator's written decision and proof of receipt.
- Explain the legal and factual grounds on which the admission or rejection is challenged.
- File before the appropriate NCLT Bench in accordance with the Code, applicable rules, regulations, filing requirements and current NCLT practice.
- If filing after the prescribed period, address limitation and any request for condonation with supporting facts and documents.
Liquidation Regulations and Claim Procedure
The Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 supplement the Code and prescribe the procedural framework for liquidation, including forms and requirements relating to claims. The official IBBI legal framework currently lists the Liquidation Process Regulations as amended up to 2 June 2026. Users should verify the latest regulations, circulars and prescribed forms before filing or advising on a claim or appeal.
Important Points for Creditors
- The fourteen-day period is linked to receipt of the decision, not merely the date printed on the liquidator's communication.
- A rejection under Section 40 must be supported by reasons recorded in writing.
- The appeal should clearly identify the evidence and legal basis supporting the creditor's claim.
- Section 42 should be read with Sections 38 to 41, Section 238A, the applicable Liquidation Process Regulations and relevant NCLT/NCLAT decisions.
- Because insolvency law and procedural regulations are amended periodically, the current official text and filing requirements should be checked before action is taken.
Frequently Asked Questions
What is Section 42 of the Insolvency and Bankruptcy Code?
Section 42 provides a creditor with a right to appeal to the Adjudicating Authority against the liquidator's decision accepting or rejecting claims.
What is the limitation period for a Section 42 appeal?
The statutory period is fourteen days from the date the creditor receives the liquidator's decision.
Which authority hears a Section 42 appeal in corporate liquidation?
For corporate persons, the Adjudicating Authority under the Code is the National Company Law Tribunal.
Can a creditor challenge partial rejection of a claim?
Section 40 permits admission or rejection of a claim in whole or in part. A creditor aggrieved by the liquidator's decision may invoke Section 42, subject to limitation and applicable procedure.
Legal position reviewed with reference to official IBBI materials available as of 30 September 2026. This page is a general legal information resource and should be read with the current statutory text, regulations and applicable judicial decisions.