Case Note & Summary
The appeal arose from a common order dated 27.09.2024 passed by the NCLT, Chennai, in IA(IBC)/415/2024, IA(IBC)/1701/2023, and IA(IBC)/1757/2023 in the principal proceedings IBA/870/2020, concerning the corporate debtor M/s. Ganga Foundations Private Limited. The appellant, Mr. V. Jaisankar, a suspended director of the corporate debtor, challenged the NCLT's order which confirmed the sale of the corporate debtor as a going concern and granted immunity under Section 32A of the Insolvency and Bankruptcy Code, 2016 (IBC). The liquidator had filed IA(IBC)/415/2024 seeking confirmation of the sale, declaration that the successful bidder is entitled to immunity under Section 32A and Section 238 IBC, and directions to statutory authorities to modify records. The appellant opposed the application, arguing that the liquidator should have filed a scheme of compromise or arrangement under Section 230 of the Companies Act, 2013, and that the sale process was flawed. The NCLT allowed the liquidator's application, confirming the sale and granting immunity. The appellant appealed to the NCLAT. The NCLAT dismissed the appeal, holding that the sale was conducted in accordance with the IBBI (Liquidation Process) Regulations, 2016, and that Section 230 of the Companies Act is not applicable during liquidation under the IBC. The NCLAT further held that the NCLT correctly invoked Rule 11 of the NCLT Rules, 2016, to pass the order, and that the grant of immunity under Section 32A was valid. The appeal was dismissed with no order as to costs.
Headnote
A) Insolvency Law - Liquidation Sale as Going Concern - Section 32A IBC - The NCLT confirmed the sale of the corporate debtor as a going concern and granted immunity under Section 32A IBC. The appellant, a suspended director, challenged the sale process. Held that the sale was conducted in accordance with the IBBI Liquidation Process Regulations and the grant of immunity was valid. (Paras 1-25)
B) Insolvency Law - Compromise or Arrangement - Section 230 Companies Act, 2013 - The appellant argued that the liquidator should have filed a scheme under Section 230 instead of a sale. Held that Section 230 is not applicable during liquidation under IBC; the liquidator is bound by the IBC and IBBI Regulations. (Paras 10-15)
C) Insolvency Law - Rule 11 NCLT Rules - Inherent Powers - The NCLT invoked Rule 11 to pass orders confirming the sale and granting immunity. Held that Rule 11 can be used to advance the object of the IBC and to fill procedural gaps. (Paras 16-20)
Issue of Consideration
Whether the NCLT was justified in confirming the sale of the corporate debtor as a going concern during liquidation and granting immunity under Section 32A IBC, and whether the appellant's objections regarding the validity of the sale process and the applicability of Section 230 were tenable.
Final Decision
The appeal is dismissed. The order of NCLT dated 27.09.2024 confirming the sale of the corporate debtor as a going concern and granting immunity under Section 32A IBC is upheld. No order as to costs.
Law Points
- Liquidation sale as going concern
- Section 32A immunity
- Section 230 compromise arrangement
- Rule 11 NCLT Rules
- IBBI Liquidation Process Regulations
Case Details
2024 LawText (NCLAT) (01) 52
Company Appeal (AT) (CH) (Ins) No. 459/2024
Justice Sharad Kumar Sharma (Member Judicial)
Ms. Aditya Sarangarajan, Mr. Abhineeth Saravanan (for Appellant), Mr. TK. Bhaskar, Mr. AG. Sathyanarayana (for Respondent No.1)
Mr. Mahalingam Suresh Kumar, Liquidator - Ganga Foundations Pvt. Ltd., Mr. Senthil Kumar, Mr. Chittibabu
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Company Appeal against order of NCLT confirming sale of corporate debtor as going concern and granting immunity under Section 32A IBC.
Remedy Sought
Appellant sought setting aside of NCLT order dated 27.09.2024 confirming sale and granting immunity.
Filing Reason
Appellant, a suspended director, challenged the sale process and the grant of immunity, arguing that the liquidator should have filed a scheme under Section 230 of Companies Act.
Previous Decisions
NCLT, Chennai, by common order dated 27.09.2024, allowed IA(IBC)/415/2024 filed by the liquidator, confirming the sale of the corporate debtor as a going concern and granting immunity under Section 32A IBC.
Issues
Whether the NCLT was justified in confirming the sale of the corporate debtor as a going concern during liquidation?
Whether the grant of immunity under Section 32A IBC was valid?
Whether the liquidator should have filed a scheme under Section 230 of Companies Act instead of a sale?
Whether the NCLT could invoke Rule 11 of NCLT Rules to pass the order?
Submissions/Arguments
Appellant argued that the liquidator should have filed a scheme of compromise or arrangement under Section 230 of Companies Act, 2013, and that the sale process was flawed.
Respondent/Liquidator argued that the sale was conducted in accordance with IBBI Liquidation Process Regulations and that Section 230 is not applicable during liquidation under IBC.
Ratio Decidendi
During liquidation under IBC, the liquidator is bound by the IBC and IBBI Regulations, and Section 230 of Companies Act is not applicable. The sale of a corporate debtor as a going concern is permissible under the IBBI Liquidation Process Regulations, and the NCLT can invoke Rule 11 of NCLT Rules to pass orders to advance the object of the IBC. Grant of immunity under Section 32A IBC is valid to ensure the successful bidder is not burdened with past liabilities.
Judgment Excerpts
The Appellant, in the instant Company Appeal has questioned the validity of the common Order dated 27.09.2024...
The Liquidator had prayed for passing orders (a) to confirm the sale of the Corporate Debtor as a going concern...
Held that Section 230 is not applicable during liquidation under IBC; the liquidator is bound by the IBC and IBBI Regulations.
Procedural History
The NCLT, Chennai, passed a common order on 27.09.2024 in IA(IBC)/415/2024, IA(IBC)/1701/2023, and IA(IBC)/1757/2023 in IBA/870/2020, allowing the liquidator's application for confirmation of sale and immunity. The appellant filed Company Appeal (AT) (CH) (Ins) No. 459/2024 before NCLAT challenging that order. NCLAT dismissed the appeal on the same date.
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: 32, 32A, 238
- IBBI (Liquidation Process) Regulations, 2016:
- NCLT Rules, 2016: 11
- Companies Act, 2013: 230
