Later Amendment Cannot Retrospectively Alter Liquidation Process Already Commenced: NCLAT

The National Company Law Appellate Tribunal (NCLAT), New Delhi, has ruled that a later regulatory amendment cannot retrospectively alter a liquidation process that had already commenced.

It held that the rights and obligations arising from the process must be determined under the regulations in force when the liquidation order was passed.

A bench comprising Judicial Member Justice Yogesh Khanna, Technical Member Barun Mitra and Technical Member Ajai Das Mehrotra observed, “Thus, the subsequent amendment dated 14.10.2025 cannot retrospectively alter the legal character or foundation of a liquidation process which had already commenced and had received the imprimatur of the Adjudicating Authority on 10.10.2025.”

The ruling came in a dispute involving Garden Court Distillieries Pvt Ltd, the successful auction purchaser of Honest Derivatives Private Limited as a going concern.

The purchaser had sought reliefs and concessions from the National Company Law Tribunal (NCLT), Ahmedabad, to implement the sale. The NCLT rejected the application.

The dispute turned on two events in October 2025. On October 10, the NCLT admitted Honest Derivatives into liquidation under Section 33(2) of the Insolvency and Bankruptcy Code (IBC). Four days later, on October 14, the Insolvency and Bankruptcy Board of India (IBBI) notified the Second Amendment to the Liquidation Process Regulations.

The question before the NCLAT was whether the October 14 amendment could affect a liquidation process that had already begun on October 10.

Before liquidation, the Committee of Creditors had resolved that the liquidator should first explore selling the corporate debtor as a going concern. Regulation 39C allowed the creditors to make such a recommendation when deciding to liquidate a company. Regulation 32(e) provided for the sale of the corporate debtor as a going concern. In simple terms, this meant exploring a sale of the business as a functioning enterprise.

The Committee of Creditors' decision was placed before the NCLT and recorded in its October 10 liquidation order. The order admitted Honest Derivatives into liquidation under Section 33(2). It also stated that the liquidation would be conducted under the IBC and the Liquidation Process Regulations, effective from the date of the order.

Garden Court argued that the liquidation process had therefore commenced on October 10. It contended that the subsequent auction and sale were steps taken to implement the existing liquidation order. They could not be treated as a fresh process governed by the regulations amended on October 14. The respondents, including the liquidator, also argued along similar lines.

The NCLAT agreed. It held that the auction did not mark the beginning of liquidation. It was a subsequent step in a process that had already commenced under the October 10 order.

The bench relied on its earlier ruling in Ashok Kumar Gulla v. State Bank of India & Ors. In that case, the NCLAT held that the regulations applicable to an issue arising in liquidation had to be examined as they stood on the date of the liquidation order.

Applying that principle, the NCLAT held that the regulations prevailing on October 10, 2025 governed the rights and obligations arising from the liquidation. The later amendment of October 14 could not retrospectively change the legal character or foundation of the process.

The bench also noted the consequences of not proceeding with the going-concern sale. It observed that failure to restart the factory could affect the employment of more than 800 people.

Farmers in the area could also suffer because they relied on selling their produce locally at higher rates and with lower transport costs.

The NCLAT consequently set aside the NCLT's order. It held that liquidation by sale as a going concern had commenced on October 10, 2025, before the October 14 amendment.

The matter was remanded to the NCLT to examine the reliefs and concessions, if any, to be granted to the successful purchaser in accordance with law. The NCLAT directed the NCLT to decide the issue within two weeks of receiving the order.