NCLT Ahmedabad Says It Cannot Grant Blanket Statutory Exemptions Or Override Other Enactments Under IBC

The Ahmedabad Bench of the National Company Law Tribunal (NCLT) recently observed that Section 60(5)(c) of the Insolvency and Bankruptcy Code is a residuary provision that helps the tribunal facilitate insolvency proceedings but cannot be used to grant blanket exemptions from other laws.

A bench of Judicial Member Shammi Khan and Technical Member Sanjeev Sharma observed, “It is clarified that the jurisdiction of this Adjudicating Authority under Section 60(5)(c) of the Code is residual and facilitative, and does not extend to granting blanket statutory exemptions or overriding substantive provisions of other enactments, except to the limited extent expressly recognized under Sections 31, 32A and 238 of the Code, and judicial precedents extending clean-slate principles to going concern sales under Regulation 32(e).”

Section 60(5)(c) allows the tribunal handling an insolvency case to decide issues that arise during the process. The tribunal described it as a residuary power meant to support implementation of the Code. It does not give the tribunal authority to override other statutes or grant sweeping exemptions under regulatory laws.

The case arose after Mahaveer Exim, a partnership firm, purchased Avantha Power and Infrastructure Ltd as a going concern through an e-auction conducted on September 16, 2024, during liquidation proceedings.

The company was admitted into the corporate insolvency resolution process on August 16, 2021. When the attempt to find a resolution plan failed, the tribunal ordered the company's liquidation on June 14, 2024, and appointed Tejas Shah as the liquidator. The assets were then offered for sale as a going concern, and Mahaveer Exim eventually emerged as the successful bidder.

Following the purchase, the firm moved the tribunal, seeking directions needed to run the company after the takeover. It asked for past liabilities to be extinguished, the existing share capital to be cancelled, and fresh shares to be issued. The application also sought reconstitution of the board, removal of encumbrances, protection from earlier proceedings, and continuation of the company's licences.

Mahaveer Exim argued that once the sale proceeds are distributed among creditors in accordance with Section 53 of the Insolvency and Bankruptcy Code, those creditors cannot continue to pursue old claims against the buyer.

It relied on appellate tribunal rulings in Shiv Shakti Interglobe Exports v. KTC Foods and RMY Industries v. Apple Industries, which recognised that a company sold as a going concern must be capable of revival without legacy liabilities.

The tribunal accepted that the buyer would be entitled to protection against past claims within the framework of the Code. It held that the purchaser would receive reliefs available under Section 32A, including immunity in respect of earlier liabilities, once the statutory conditions are satisfied.

At the same time, the bench declined requests seeking automatic tax exemptions and similar statutory waivers.

The tribunal observed, “This Tribunal does not exercise plenary jurisdiction over statutory authorities under special enactments, except to the limited extent recognised by the Insolvency and Bankruptcy Code and binding judicial precedents.”

It further clarified that “blanket immunity under all laws cannot be granted in such sweeping terms" and partly allowed the application.