Supreme Court Upholds Liquidation Closure, Emphasizes Revival Over Liquidation

The Supreme Court allowed the appeal and set aside the Adjudicating Authority's order dismissing the application for closure of liquidation. The Court affirmed that the sale of the 'Corporate Debtor' as a going concern by the Liquidator was in line with the regulations and the objective of maximizing asset value while minimizing job losses. It was emphasized that the Code aims to revive the 'Corporate Debtor' and that liquidation should be the last resort. The Court held that the Adjudicating Authority's interpretation questioning the validity of the regulations framed by IBBI was incorrect, as these regulations are consistent with the Code's provisions.

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Issues Involved:
1. Authorization of the Liquidator to sell the 'Corporate Debtor' as a going concern pursuant to Regulation 32 of IBBI (Liquidation Process) Regulations, 2016.
2. Consistency of Regulations 39C of CIRP Regulations and 32A, 45(3) of Liquidation Process Regulations with Section 54 of the Code.
3. Interpretation of the provisions of the Code and 'Liquidation Process Regulations' by the Adjudicating Authority.

Issue-Wise Detailed Analysis:

1. Authorization of the Liquidator to sell the 'Corporate Debtor' as a going concern:

The Liquidator is authorized to sell the 'Corporate Debtor' as a going concern under Regulations 32(e) & (f) of the Liquidation Process Regulations. This is consistent with the objective of the Code, which aims to maximize asset value and minimize job losses. The Supreme Court in 'Arcelormittal India Private Limited' and 'Swiss Ribbons Private Limited & Anr.' affirmed that liquidation should be the last resort. Regulation 32A, inserted after these decisions, defines the process for such sales, and Regulation 45(3) provides for the closure of liquidation proceedings if the 'Corporate Debtor' is sold as a going concern.

2. Consistency of Regulations 39C of CIRP Regulations and 32A, 45(3) of Liquidation Process Regulations with Section 54 of the Code:

Section 54 of the Code does not prohibit the closure of the liquidation process if the 'Corporate Debtor' is sold as a going concern. The Code aims to maximize asset value and ensure the continuation of the 'Corporate Debtor'. The Adjudicating Authority's conclusion that Regulations 39C, 32A, and 45(3) are inconsistent with the Code is contrary to the Code's objectives. The IBBI has the jurisdiction to frame these regulations under Section 240, and they are consistent with the Code's provisions.

3. Interpretation of the provisions of the Code and 'Liquidation Process Regulations' by the Adjudicating Authority:

The Adjudicating Authority's interpretation that the Liquidator cannot sell the 'Corporate Debtor' as a going concern and that only dissolution is envisaged under the Code is incorrect. The Supreme Court has emphasized that liquidation should be the last resort and that every effort should be made to keep the 'Corporate Debtor' as a going concern. The Adjudicating Authority overstepped its jurisdiction by questioning the validity of the regulations framed by IBBI, which is empowered to make such regulations under Section 240 of the Code.

Conclusion:

The Liquidator's sale of the 'Corporate Debtor' as a going concern was carried out in accordance with the regulations. The Adjudicating Authority's order dismissing the application for closure of liquidation was set aside. The Tribunal emphasized that the Code aims to revive the 'Corporate Debtor' and that liquidation should be the last resort. The appeal was allowed, and the impugned order was set aside.

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