Going-Concern Liquidation Buyer Not Entitled To Automatic Waivers Under IBC: NCLT Mumbai

The Mumbai Bench of the National Company Law Tribunal (NCLT) on 12 June held that a successful auction purchaser acquiring a corporate debtor as a going concern during liquidation is not automatically entitled to waivers, concessions, or reliefs sought through an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016.

Judicial Member Lakshmi Gurung and Technical Member Charanjeet Singh Gulati further observed that liabilities expressly attached to assets in the sale certificate would transfer along with them, while all other liabilities stand extinguished through distribution of sale proceeds under Section 53 of the IBC. The Bench noted:

“Protection of Section 32A(2) of the IBC shall be subject to fulfilment of the conditions laid down under Section 32A(2) of the IBC and shall not constitute a blanket waiver under any statute. However, Corporate Debtor and any person who is required to provide the assistance and cooperation under applicable law, to any authority investigating an offence committed prior to commencement of CIRP shall extend all assistance and cooperation to the authorities.”

The application was filed by the consortium of Maheshkumar Tejraj Inani and Space Realtors Pvt. Ltd., the successful bidder for acquisition of Warden Surgical Company Pvt. Ltd.

Following approval of the Committee of Creditors, the liquidator issued an e-auction process memorandum on 28 January 2025 for sale of the corporate debtor as a going concern under Regulation 32(e) of the IBBI (Liquidation Process) Regulations, 2016. However, certain assets were excluded from the sale, including recoveries from suspended management, tax refunds, GST claims, and cash and bank balances.

The consortium emerged as the highest bidder, and the sale certificate was subsequently issued in its favour. Thereafter, it approached the tribunal seeking 62 reliefs, concessions, and waivers to facilitate effective takeover and operation of the corporate debtor.

The Tribunal noted that the auction sale had concluded prior to the notification omitting Regulation 32A and clauses (e) and (f) of Regulation 32, and therefore the earlier framework governing sale of a corporate debtor as a going concern during liquidation continued to apply.

It further observed that the sale certificate expressly recorded that the corporate debtor was sold on an “as is where is”, “as is what is”, “whatever there is”, and “without recourse” basis.

Relying on Shiv Shakti Inter Globe Exports Pvt. Ltd. v. KTC Foods Pvt. Ltd. and Shantech International Pvt. Ltd. v. Devendra Singh, Liquidator of Venus Rolling Mills Pvt. Ltd., the Bench reiterated that liabilities and claims existing as on the liquidation commencement date stand satisfied through the statutory waterfall mechanism under Section 53.

Accordingly, the NCLT disposed of the application.

For Appellant: Advocate Manoj Kumar Mishra i/b Mishra Legals (PH)

For Liquidator: Advocate Ganesh Ramani i/b Warden Legal (PH)