NCLAT New Delhi Clears Hurdles For ₹15-Cr Talwalkars Sale, Orders ROC To Reset Status To 'Active'

The National Company Law Appellate Tribunal (NCLAT), New Delhi, on 3 September partly allowed an appeal by Ravikumar Gaurishankar Patel, the successful auction purchaser of Talwalkars Better Value Fitness Ltd., and granted several reliefs sought by him to give effect to the Rs. 15 crore going-concern sale of the company during liquidation.

A Bench of Officiating Chairperson Justice Yogesh Khanna with Technical Members Barun Mitra and Ajai Das Mehrotra held that the National Company Law Tribunal (NCLT) had erred in refusing consequential reliefs required to operationalise the sale, including those concerning shareholding, past liabilities, financial creditors, subsisting licences and the company's status on the Ministry of Corporate Affairs (MCA) portal. The Tribunal observed:

“…jurisdiction of the Adjudicating Authority under Section 60(5) of the IBC is not confined to approving or recognising the going concern sale in isolation but extends to issuing all incidental, ancillary and consequential directions required to so as to ensure that the going concern sale process culminates in a commercially effective transfer of the Corporate Debtor as a functioning enterprise without warranting the Adjudicating Authority to exercise the statutory powers vested in other authorities.”

Talwalkars Better Value Fitness Ltd. was admitted into the Corporate Insolvency Resolution Process (CIRP) in January 2021. After the resolution process failed, the company entered liquidation in April 2022 under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 (IBC).

In July 2024, the liquidator issued an e-auction notice for sale of the corporate debtor as a going concern under Regulation 32(e) of the Liquidation Process Regulations. Patel emerged as the successful bidder with an offer of Rs. 15 crore. He received the Letter of Intent in August 2024, paid the entire consideration and was issued a Sale Certificate in January 2025.

Patel subsequently approached the NCLT seeking reliefs and concessions to operationalise the sale, including recognition of the revised shareholding, waiver of past liabilities, continuity of licences and change of the company's status on the MCA portal.

The NCLT partly allowed and partly rejected the prayers, holding that several reliefs fell outside its jurisdiction and required Patel to approach authorities including the Securities and Exchange Board of India (SEBI) and stock exchanges. Patel then challenged the order before the NCLAT.

Patel contended that the reliefs sought were not independent adjudications but consequential directions necessary to give effect to the going-concern sale. He argued that Section 60(5)(c) of the IBC gives the NCLT wide residuary jurisdiction to issue incidental and ancillary directions and that the prayers were necessary for full and effective implementation of the sale.

The liquidator supported Patel's submissions, stating that the sale was conducted on an “as is where is” basis and that the sale proceeds had been distributed to creditors in accordance with the waterfall mechanism under Section 53 of the IBC. Further that Section 35(1)(n) of the IBC empowers the liquidator to seek necessary directions from the NCLT and that the Tribunal could grant the uncontested reliefs under Section 60(5)(c).

The NCLAT examined Section 60(5)(c), which empowers the NCLT to adjudicate questions of law or fact arising from or relating to the insolvency resolution or liquidation proceedings of a corporate debtor. It held that the NCLT's jurisdiction extends to issuing incidental, ancillary and consequential directions necessary to ensure effective implementation of insolvency and liquidation processes. It observed:

“Unless the present set of reliefs/concessions are demonstrated to be such that they involve adjudication of an independent dispute which is vested under law with other statutory authorities, such a restrictive interpretation by the Adjudicating Authority cannot be countenanced as it would hamper the objectives of the IBC to resolve the indebtedness of the Corporate Debtor and its revival.”

On shareholding and SEBI compliance, the Bench held that extinguishing the existing shares and issuing fresh share capital to the new promoter to the extent of 95% of the paid-up share capital and 5% to the existing public shareholder was consistent with Rule 19A of the Securities Contracts (Regulation) Rules, 1957.

On financial creditors, it held that creditors must undertake ministerial acts necessary to give effect to the going-concern sale, while retaining their statutory powers. The Bench observed:

“We see no good reason for the Adjudicating Authority directing the Appellant to independently approach the concerned financial institutions as such a direction would cause a seed-bed of multiple, time consuming proceedings which would run contrary to the objectives of certainty, timeliness and value maximisation embodied in the IBC and therefore fails to meet our commend.”

On past liabilities, the NCLAT applied the clean-slate principle to the going-concern sale and held that the protection available under Section 32A of the IBC, which provides immunity from liability for certain offences committed before the transfer, would apply to the successful auction purchaser subject to the statutory framework. It held:

“we are of the view that in view of the “clean slate” theory which we have already discussed, subsequent to distribution of sale proceeds under Section 53 of the IBC, no entity including any Govt. entity can claim any past unpaid or outstanding dues against the Appellant who has purchased the Corporate Debtor Company as a going concern and the Appellant as the Successful Auction Purchaser shall have immunity, privileges and protection as is available in the form and manner stated in Section 32A of the IBC.”

The Tribunal further directed that all subsisting consents, approvals and licences would continue to vest with the corporate debtor as a going concern, subject to applicable renewal requirements. It also directed the Registrar of Companies to change the company's status from “liquidation” to “active”.

Accordingly, the NCLAT disposed of the appeal.