Going-Concern Sale Commences With Liquidation Order, Not Auction Notice: NCLAT

The National Company Law Appellate Tribunal (NCLAT), Delhi, has held that liquidation by sale of a corporate debtor as a going concern commences from the date of the liquidation order when the order directs the liquidator to pursue that mode of sale.

The process does not begin only when an auction notice is issued.

“Liquidation itself commences on the liquidation commencement date under Section 5(17), that is, when proceedings for liquidation commence under Section 33. Once the liquidation order is passed, the corporate debtor is in liquidation, the Liquidator is in office, and the mode of realisation is to be governed by the order and the Regulations then in force. Where that order itself directs that the going-concern route be first explored, the liquidation has commenced by that mode from the same date,” the bench of Judicial Member Justice Mohammad Faiz Alam Khan and Technical Member Naresh Salecha observed.

The bench further observed, “The issuance of an auction notice is a step in the execution of a sale process that has already commenced, and not the event which brings that process into being.”

The appeal was filed by Debashis Nanda, Liquidator of Chamber Constructions Private Limited, against the July 3, 2026 order of the Mumbai bench of the National Company Law Tribunal (NCLT). The NCLT had dismissed his application seeking extension of time and directions to undertake and complete the going-concern sale.

The corporate debtor was admitted into the corporate insolvency resolution process (CIRP) on July 16, 2019. With no viable and compliant resolution plan received, the Committee of Creditors (CoC), with 100% voting share, resolved to liquidate the company at its seventh meeting on August 31, 2020.

By Resolution No. 5, the CoC also recommended under Regulation 39C that the liquidator first explore sale of the corporate debtor as a going concern under clause (e) of Regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. It also recommended sale of its business as a going concern under clause (f).

The NCLT passed the liquidation order on February 21, 2024 and appointed Nanda as liquidator. Giving effect to the CoC's recommendation, the order directed him to endeavour to sell the company as a going concern under Regulation 32A.

If the sale could not be achieved within 90 days, the liquidator was directed to proceed under clauses (a) to (d) of Regulation 32.

The liquidator then constituted the Stakeholders' Consultation Committee (SCC). At its first meeting, the CoC's recommendation was placed before it and the assets and liabilities proposed for sale were discussed.

At its second meeting, the proposed reserve price, marketing strategy, auction process and draft sale notice were also deliberated upon.

Before an auction notice could be issued, the erstwhile management challenged the liquidation order. On May 28, 2024, the NCLAT restrained the liquidator from issuing any auction notice.

The restraint continued while the appeal was pending. The challenge was eventually dismissed on May 11, 2026, allowing the liquidation to continue.

Meanwhile, the Insolvency and Bankruptcy Board of India notified the Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2025, on October 14, 2025. The amendment omitted Regulation 32A and clauses (e) and (f) of Regulation 32, which dealt with sale of the corporate debtor or its business as a going concern. It did not affect cases where liquidation by sale as a going concern had already commenced.

After the challenge to the liquidation order was dismissed, the SCC resolved that the liquidator should approach the NCLT for directions to complete the going-concern sale. Nanda accordingly filed an application seeking extension of time and permission to carry the sale to completion.

The NCLT rejected it. It held that the going-concern sale had not commenced before the amendment because no auction notice had been issued and the Asset Sale Process Document had not been finalised.

Nanda challenged the finding before the NCLAT. He argued that the liquidation order itself had commenced the going-concern sale because it incorporated the CoC's recommendation and expressly directed him to pursue the sale.

He also pointed out that the NCLAT's restraint order had made it legally impossible to issue the auction notice. The liquidator argued that he could not be penalised for complying with a judicial direction.

The suspended director of the corporate debtor opposed the appeal and supported the NCLT's view. The SCC supported the liquidator's appeal.

The NCLAT relied on Section 5(17) of the Code and Regulation 39C. It held that the CoC's recommendation, once incorporated into the liquidation order, formed part of the liquidation process.

The bench also followed its September 10, 2026 decision in State Bank of India v. Garden Court Distilleries Pvt. Ltd. In that case, the NCLAT had held that a going-concern sale commenced with the liquidation order and that an auction was only a subsequent step.

The present bench noted that judicial discipline required it to follow the ratio of Garden Court. It independently examined the issue and reached the same conclusion.

The bench also held that even if overt acts were required to establish commencement, they were present. The liquidator had constituted the SCC, placed the CoC's recommendation before it and initiated discussions on the proposed sale before the auction notice could be issued.

The NCLAT further held that the liquidator could not be faulted for not issuing an auction notice while he was restrained from doing so. Holding otherwise would amount to penalising him for complying with a judicial order.

The bench held that the regulations applicable on February 21, 2024 continued to govern the liquidation process. It also held that the 90-day period was directory and could be extended by the NCLT.

The appeal was allowed and the NCLT's order was set aside. The parties were directed to appear before the NCLT on October 26, 2026 for further proceedings in accordance with law.