Sale of Corporate Debtor as Going Concern: A New Option Available to the Liquidator under IBBI (Liquidation Process) Regulations, 2016

By: Mudit Nigam


Recently in March 2018, the Insolvency and Bankruptcy Board of India (IBBI) notified the IBBI (Liquidation Process) (Amendment) Regulations, 2018 to amend the IBBI (Liquidation Process) Regulations, 2016 (Regulations). The 2018 Amendment, which is effective from 1st April, 2018, has amended Regulation 32 of the Regulations which deals with ‘Manner of Sale’ for the Liquidator. It has introduced “sell the corporate debtor as a going concern” as a new option available to the liquidator while realizing the assets of the company in default (Corporate Debtor). After the Amendment, the Liquidator can realise the asset of corporate debtor either (a) by the sale of assets on a standalone basis; (b) via slump sale; (c) sale of assets collectively; or (d) sale of assets in parcels; (e) sale as going concern.

The meaning and scope of ‘going concern’ is still unclear under the Insolvency and Bankruptcy Code, 2016. However, the Courts have tried to interpret the meaning and scope of going concern while dealing with cases related to winding up of companies. In the landmark judgement of In Re: IndorRama Textile Limited[1] (2013), the Delhi High Court observed that a company is said to be transferred as a going concern when the assets and liabilities being transferred constitute a business activity capable of being run independently for a foreseeable future. Prior to this case, Supreme Court in case of Allahabad Bank v ARC Holding[2] (2000) held that if the company is sold off as a going concern, then along with the assets of the company, if there are any liabilities relevant to the business or undertaking, the liabilities too are transferred. One of the essential conditions for the sale of a company on going concern basis is that the company must still be in operation. Recently, Karnataka High Court in case of IAE International Aero Engines AG and Ors v United Breweries (Holdings) Limited and Ors[3] (2017) held that a company cannot be sold off as a going concern if the company in question has already stopped its operations.

The main reason for selling a company as going concern is the protection of the interest of its workmen and providing them with an opportunity to earn their livelihood.

In January 2018, prior to the Amendment, NCLT Kolkata Bench had already acknowledged the sale of a company as a going concern in the case of Gujarat NRE Coke Limited[4] (2018).  In this matter, NCLT ordered liquidation proceedings against Gujarat NRE Coke (GNCL) as a ‘going concern’, as no resolution plan was approved by the creditors of the company during the stipulated time. In order to protect the livelihood of 1178 employees of the GNCL, NCLT directed the liquidator of the Corporate Debtor to attempt to sell the Corporate Debtor as a ‘going concern’ through a slump sale, observing that a slump sale is nothing more than the transfer of the whole or part of a business concern as a going concern. However, the administrator failed to find the buyer for transfer of the business as going concern and GNCL has filed a new scheme to repay its debts.

It is generally considered that introduction of the sale of a corporate debtor as going concern is in furtherance of the objective of the Code which is to prevent liquidation and preserve the existence of the corporate debtor. However, there is a conflicting ruling of NCLT-Mumbai Bench on this matter. NCLT Mumbai in the matter of Gupta Energy Private Limited[5] (2018) observed that there is nothing in the Code which provides that the purpose of the Code is to find primacies to resolution process over liquidation. Thus, it is quite clear that the liquidation of a corporate debtor will obviously be detrimental to the interest of some stakeholders.

For sale of a company as going concern, NCLT can also exercise its power under section 35(1)(f) of the Code and vest the liquidator inter alia with the powers to sell the immovable and movable property and actionable claims of the corporate debtor in liquidation by public auction or private contract, with power to transfer such property to any person or body corporate, or to sell the same in parcels.

Amendment to Regulation 32 is one fine example of a situation where Legislature has incorporated a precedent through an amendment. Allowing a company to be sold as going concern provides an opportunity to preserve the existence of the company and protection to the workmen’s interest. However, it may also entitle stakeholders in a corporate debtor to request the Tribunal to order the sale of a corporate debtor as going concern.


[1] In Re IndorRama Textile Limited (2013) 4 CompLJ 141 (Del).

[2] Allahabad Bank v ARC Holding AIR 2000 SC 3098.

[3] IAE International Aero Engines AG v United Breweries (Holdings) Limited ILR 2017 Kar 2225.

[4] Gujarat NRE Coke Limited (Company Petition No 182/2017).

[5] Gupta Energy Private Limited MA 24, 80 & 110/2018 in CP No 43/I&BP/2017.


(Mudit is currently a student at National Law Institute University, Bhopal.)

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