Case Note & Summary
The appeal was filed against an order of the Adjudicating Authority (NCLT, Mumbai) dated 12.12.2025, concerning the liquidation proceedings of a corporate debtor. The appellants had purchased the corporate debtor as a going concern during the liquidation process, which commenced on 30.06.2021, and received a sale certificate on 07.08.2023. They sought concessions and waivers under Section 32A of the Insolvency and Bankruptcy Code (IBC) for liabilities incurred prior to the sale. The Adjudicating Authority denied these benefits, stating that the appellants were not entitled to any concessions during the liquidation period. The court examined the clean slate theory as established in the case of Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd., which allows for the extinguishment of past liabilities upon the sale of the corporate debtor. The court found merit in the appellants' argument that they should be entitled to protection under Section 32A even during the liquidation period. It concluded that the refusal of the Adjudicating Authority to grant concessions was incorrect and allowed the appeal, granting the appellants the benefits under Section 32A for specific items while subject to prescribed conditions. The decision emphasized that past liabilities do not survive post-sale of the corporate debtor as a going concern.
Headnote
A) Insolvency Law - Liquidation Proceedings - Entitlement to Benefits under Section 32A - Insolvency and Bankruptcy Code, 2016, Section 32A - The court recognized that the clean slate theory applies even during liquidation, allowing the appellants to claim benefits under Section 32A for past liabilities. The Adjudicating Authority's refusal to grant these benefits was set aside, affirming the legal principle that past liabilities do not survive post-sale of the corporate debtor as a going concern (Paras 5-7).
Issue of Consideration
Whether the appellants are entitled to benefits under Section 32A of the Insolvency and Bankruptcy Code during the liquidation period.
Final Decision
The appeal was allowed, and the portion of the Adjudicating Authority's order denying concessions was set aside. The appellants were granted benefits under Section 32A for specific items, subject to conditions.
Law Points
- Insolvency
- Liquidation
- Corporate Debtor
- Section 32A
- Clean Slate Theory
- Waiver of Liabilities
