Tribunal rules that auction notice or final asset sale documentation are not prerequisites for commencement; judicial restraint cannot prejudice liquidator; subsequent regulatory amendments apply prospectively only.
In a significant judgment delivered on October 7, 2026, the National Company Law Appellate Tribunal (NCLAT), Principal Bench at New Delhi, in the matter of Debashis Nanda, Liquidator of Chamber Constructions Private Limited v. Stakeholders' Consultation Committee, clarified the legal position relating to the commencement of liquidation by sale of a corporate debtor as a going concern under the Insolvency and Bankruptcy Code, 2016 (IBC).
The appeal arose from an order passed by the National Company Law Tribunal (NCLT), Mumbai Bench-I, which dismissed the liquidator's application seeking extension of time and permission to complete the sale of the corporate debtor as a going concern. The NCLT had held that the process of such sale had not commenced prior to the notification of the Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2025, which omitted provisions relating to going-concern sale, because no auction notice was issued or Asset Sale Process Document finalized before that date.
The liquidator, Mr. Debashis Nanda, challenged this view before the NCLAT on the ground that the Committee of Creditors (CoC), by a unanimous 100% vote in its 7th meeting on August 31, 2020, had resolved to liquidate the corporate debtor and simultaneously recommended under Regulation 39C of the CIRP Regulations that the liquidator first explore sale of the debtor as a going concern. This recommendation was expressly incorporated in the liquidation order dated February 21, 2024, passed by the Adjudicating Authority under Section 33(2) of the IBC, which directed the liquidator to endeavor to sell the company as a going concern within 90 days before proceeding to piecemeal liquidation.
The NCLAT held that the liquidator's efforts following the liquidation order, including constituting the Stakeholders' Consultation Committee (SCC), deliberating over assets and liabilities, reserve price, marketing strategy, auction methodology, and drafting sale notices, constituted steps in implementation of the liquidation order and the CoC's recommendation. The Tribunal emphasized that the commencement of liquidation by sale as a going concern occurs on the date of the liquidation order itself, not on the issuance of an auction notice or finalization of an Asset Sale Process Document.
Notably, the Tribunal referred to its earlier coordinate bench decision in State Bank of India v. Garden Court Distilleries Pvt. Ltd. (Company Appeal (AT) (Ins) Nos. 1138 and 1145 of 2026), which had settled the identical issue and affirmed that the auction is a subsequent procedural step and not the legal test for commencement of going-concern liquidation.
The Tribunal further clarified that the Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2025, which omitted Regulations 32A and clauses (e) and (f) of Regulation 32 relating to going-concern sale, apply prospectively only and cannot retrospectively extinguish rights and processes crystallized under liquidation orders passed prior to the amendment date of October 14, 2025.
A key aspect addressed was the judicial restraint order passed by the NCLAT on May 28, 2024, which restrained the liquidator from issuing auction notices during pendency of related appeals. The Tribunal held that the liquidator cannot be prejudiced for complying with such judicial orders, and the period of restraint must be excluded from the timeline for completion of going-concern sale.
The Tribunal underscored the commercial wisdom exercised by the CoC in deciding to attempt sale as a going concern after failure of resolution plans, recognizing it as a non-justiciable decision aimed at value maximization and preservation of the enterprise, consistent with Supreme Court precedents such as K. Sashidhar v. Indian Overseas Bank (2019) and Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta (2020).
Consequently, the NCLAT set aside the impugned order, allowed the appeal, and directed the Adjudicating Authority to proceed further with the liquidation by sale as a going concern in accordance with law. The parties were directed to appear before the NCLT on October 26, 2026, for further orders.
This judgment reiterates the principle that the legal commencement of liquidation by sale as a going concern is governed by the liquidation order, and subsequent procedural steps, including auction notices, are parts of the process and not the starting point. It also reinforces that amendments to liquidation regulations cannot retrospectively affect ongoing liquidation processes, thereby providing certainty and protection to liquidators and stakeholders.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Liquidation - Sale of corporate debtor as a going concern - Where CoC under Regulation 39C recommended going-concern sale and such recommendation was incorporated in liquidation order, liquidation by sale as a going concern commenced on date of liquidation order itself - Issuance of auction notice or finalisation of Asset Sale Process Document is not the legal test for commencement - Subsequent amendment dated 14.10.2025 omitting provisions relating to going-concern sale cannot defeat process already commenced - Liquidator cannot be prejudiced for non-issuance of auction notice during period covered by judicial restraint.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 5(17), 33(2), 61; IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 Regulation 39C; IBBI (Liquidation Process) Regulations, 2016 Regulations 32, 32A; IBBI (Liquidation Process) (Second Amendment) Regulations, 2025
