Clean slate liquidation sale protects a going-concern purchaser from pre-sale liabilities after statutory distribution under insolvency law.

A going-concern sale of a corporate debtor in liquidation under the liquidation process regulations is treated as a clean slate sale once proceeds are distributed under section 53 of the Insolvency and Bankruptcy Code, 2016. Claims not submitted during CIRP or liquidation, and liabilities not disclosed in the sale notice, cannot later be imposed on the purchaser as past, contingent, or unpaid obligations. The document also notes that consequential reliefs may be required to extinguish remaining unpaid liabilities and past non-compliances so that the sale outcome is not undermined by belated claims and revival on a going-concern basis is preserved.

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Issues: (i) Whether, on a sale of the corporate debtor as a going concern in liquidation, the purchaser could be burdened with past, contingent, or unpaid liabilities not covered in the sale notice and not proved in the CIRP or liquidation process. (ii) Whether the purchaser was entitled to consequential reliefs extinguishing the remaining unpaid liabilities and past non-compliances after distribution of sale proceeds in accordance with section 53 of the Insolvency and Bankruptcy Code, 2016.

Issue (i): Whether, on a sale of the corporate debtor as a going concern in liquidation, the purchaser could be burdened with past, contingent, or unpaid liabilities not covered in the sale notice and not proved in the CIRP or liquidation process.

Analysis: The sale was held under the liquidation framework as a going concern under Regulation 32(e) of the Liquidation Process Regulations, 2016, with the sale proceeds distributed in the manner contemplated by section 53 of the Insolvency and Bankruptcy Code, 2016. The Court treated it as settled that once the sale proceeds are distributed according to the statutory priority, claims contrary to that distribution cannot be pressed against the purchaser. Claims not submitted during CIRP or liquidation, and not reflected in the sale notice, cannot later be foisted on the purchaser. The decision applied the clean slate principle to the liquidation-sale context.

Conclusion: The purchaser could not be saddled with the corporate debtor's past, contingent, or unpaid liabilities.

Issue (ii): Whether the purchaser was entitled to consequential reliefs extinguishing the remaining unpaid liabilities and past non-compliances after distribution of sale proceeds in accordance with section 53 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The Court held that, for an effective going concern sale in liquidation without dissolution, the corporate debtor must not remain burdened by unpaid outstanding liabilities after statutory distribution of the sale proceeds. It accepted that consequential reliefs are necessary to preserve revival on a clean slate and to prevent surprise claims from impairing the sale outcome. On that basis, the refusal to grant the requested extinguishment reliefs was corrected.

Conclusion: The purchaser was entitled to extinguishment of past and remaining unpaid liabilities, including contingent liabilities, after distribution under section 53.

Final Conclusion: The appeal succeeded in substance to the extent that the going concern sale was upheld, and the purchaser was protected from pre-sale liabilities and consequential claims, with the impugned order modified accordingly.

Ratio Decidendi: A corporate debtor sold as a going concern in liquidation cannot be burdened with pre-sale liabilities or belated claims once sale proceeds are distributed according to section 53, and the purchaser is entitled to a clean slate through necessary consequential reliefs.

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