The Liquidation Waterfall under Section 53 of the Insolvency and Bankruptcy Code (IBC), 2016 establishes the order in which proceeds from the sale of a corporate debtor’s assets are distributed during liquidation. This statutory framework ensures a transparent and equitable allocation of funds by defining the priority of claims among stakeholders.
This article explains the hierarchy of payments under Section 53, including insolvency resolution costs, secured creditors, employee dues, government dues, unsecured financial creditors, and shareholders. It also discusses key judicial interpretations, practical implications for creditors, and common challenges encountered during the liquidation process, helping professionals understand how liquidation proceeds are distributed in accordance with the IBC.