'Clean Slate' Protection U/S 32A IBC Extends To Going Concern Buyers During Liquidation: NCLAT Delhi
The Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) on 9 September held that the “clean slate” protection under Section 32A of the Insolvency and Bankruptcy Code, 2016 (IBC) extends to buyers who purchase a corporate debtor as a going concern during liquidation.
A Bench comprising Judicial Member Justice N Seshasayee and Technical Member Arun Baroka allowed an appeal filed by Amitkumar Rishi Kumar Bhabhda, who had purchased Seam Industries Ltd. (corporate debtor) as a going concern, and set aside the Mumbai Bench of the National Company Law Tribunal's (NCLT) refusal to extend Section 32A protection to liabilities arising during the liquidation period. It observed:
“the clean slate theory implies that past liability, if any, of the corporate debtor, if remained unclaimed during CIRP or the liquidation cannot survive post successful completion of the CIRP or where the CD is sold as a going concern during liquidation.”
Seam Industries Ltd. entered liquidation on 30 June 2021. The appellants purchased the company as a going concern through an auction, following which a sale certificate was issued on 7 August 2023. They subsequently sought various reliefs and concessions, including immunity under Section 32A.
In its order dated 12 December 2025, the NCLT Mumbai extended the clean-slate principle to certain past liabilities but declined relief in respect of two categories, particularly those concerning pending or future proceedings against the corporate debtor and governmental actions.
The appellants, relying on judicial precedents, submitted that Section 32A protection was available even during the liquidation period and that the NCLT ought to have extended the protection to liabilities arising during that period.
The Tribunal noted that the Supreme Court had recognised the clean-slate protection under Section 32A in Ghanshyam Mishra & Sons v. Edelweiss ARC (2021). It further observed that insolvency proceedings culminate either in approval of a resolution plan or liquidation, and that the legislative intent is to facilitate the sale of the corporate debtor as a going concern.
Further, the Bench held that immunity under Section 32A is not a discretionary concession but a legal consequence of the sale of the corporate debtor as a going concern. Accordingly, the NCLAT allowed the appeal, set aside the NCLT's refusal and extended Section 32A protection to the two disputed categories.
For Appellants: Advocates Sandeep Bajaj, Vipul Jai & Charmi Khurana