Liquidator Need Not Seek Tribunal's Approval For Joint Sale Of Debtor's Assets, Guarantors' Land: NCLT Mumbai

The National Company Law Tribunal (NCLT), Mumbai Bench, has held that a liquidator does not require the tribunal's approval to conduct a proposed joint sale of a corporate debtor's assets and land owned by its corporate guarantors.

The tribunal held that its approval was not required if the liquidator decided to proceed in accordance with the Committee of Creditors' (CoC) decision.

A bench of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar was considering an application by the liquidator, who relied on Section 28A of the Insolvency and Bankruptcy Code, 2016 (IBC). The provision, inserted with effect from May 26, 2026, allows assets of personal guarantors or corporate guarantors in the possession of creditors as security interest to be dealt with in the insolvency resolution process with prior approval of the CoC.

Drawing an analogy from this provision, the liquidator sought the tribunal's approval to apply the same approach during liquidation.

The tribunal held that its approval was not required, observing, “At the outset, the provision of the Code in relation to Corporate Insolvency Resolution Process cannot be imported into the liquidation process; both are distinct. Further, even Section 28A does not contemplate approval of this Tribunal. Accordingly, we do not feel that the approval of this Tribunal is required if the liquidator decides to proceed in terms of the CoC decision. Since the Code does not contemplate this Tribunal approval for the proposed sale, we consider it appropriate to dismiss this application.”

The case concerned C. Mahendra Export Limited, which owned a factory, building, and machinery standing on land owned by three corporate guarantors. Both the land and the building were mortgaged to the corporate debtor's consortium of lenders. The order records that the property was stated to be in the lenders' possession under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

The company's liquidator, Krishna Chamadia, approached the tribunal seeking permission to conduct a joint sale or e-auction of the land along with the factory, building, and machinery. He pointed out that the land and the structures standing on it, though owned by separate entities, operated as one economic unit.

The lenders, who comprised the CoC, had also resolved to sell them together to maximise value for creditors.

The tribunal observed that it was for the CoC and the security interest holders to decide how the corporate debtor's assets and the creditors' security interests in assets owned by the guarantors should be dealt with during liquidation.

It clarified that dismissal of the application should not be construed as an expression of its opinion on the proposed sale.

Accordingly, the tribunal dismissed the application.