Appeal dismissed over clean slate principle reliefs limited to insolvency commencement date under IBC Section 53

NCLAT Principal Bench dismissed the appeal challenging the Adjudicating Authority's refusal to extend clean slate principle reliefs beyond the insolvency commencement date to the actual sale date. The appellant sought extinguishment of all claims and liabilities up to the e-auction sale date, but NCLAT held that under IBC Section 53 and IBBI Liquidation Regulations 2016, claims are determined as of liquidation commencement date, not sale date. The tribunal found no illegality in limiting reliefs to the cut-off date and upheld the lower authority's decision as consistent with statutory scheme.

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Issues Involved:
1. Applicability of the "clean slate" principle.
2. Granting of reliefs and concessions by the Adjudicating Authority.

Detailed Analysis:

1. Applicability of the "clean slate" principle:
The primary issue in this appeal was whether the "clean slate" principle extends only to liabilities prior to the insolvency commencement date or extends to the date of actual sale of the Corporate Debtor as a "going concern." The Appellant argued that all liabilities up to the date of the issuance of the Sale Certificate should be extinguished based on the "clean slate" theory. However, the Respondent contended that the "clean slate" theory applies to a Resolution Plan and not to e-auctions in liquidation proceedings, which are conducted on an "as is where is & as is what is" basis.

The Tribunal noted that the e-auction was conducted under specific terms and conditions, which clearly stated that all known or unknown liabilities as on the liquidation commencement date would be dealt with as per Section 53 of the Insolvency and Bankruptcy Code (IBC). The Tribunal found no illegality in granting relief only for the period prior to the date of CIRP and upheld that all claims known or unknown on the liquidation commencement date must be dealt with per Section 53 of the IBC. Therefore, the Tribunal concluded that the reliefs and concessions sought by the Appellant for liabilities up to the date of the e-auction sale could not be granted as it was contrary to the terms under which the e-auction was held.

2. Granting of reliefs and concessions by the Adjudicating Authority:
The Appellant contended that the Adjudicating Authority erred in not granting all the reliefs and concessions sought in IA No.610 of 2024. Specifically, the Appellant referred to Item Nos. 6, 8, and 9 of paragraph 13 of the impugned order.

- Item No. 6: The Appellant sought a declaration that the Corporate Debtor would not be liable for any transaction or arrangement prior to the date of relief being granted. The Tribunal upheld the Adjudicating Authority's decision to grant this relief only for the period prior to the date of CIRP, noting that the e-auction terms did not contemplate relief for liabilities up to the date of the sale.

- Item Nos. 8 and 9: The Appellant sought waivers for any water and electricity dues of the Corporate Debtor. The Tribunal agreed with the Adjudicating Authority's direction for the Appellant to approach the appropriate authorities, as waiver of such liabilities could not be granted by the Adjudicating Authority and had to be dealt with according to the respective departments.

The Tribunal also addressed the Appellant's concern regarding paragraph 14 of the Adjudicating Authority's order, which stated that any relief and concession not mentioned in the table would be deemed not granted. The Tribunal found this to be a clarificatory statement, ensuring that the Appellant could seek relevant reliefs and concessions from appropriate authorities as per applicable laws.

Conclusion:
The Tribunal dismissed the appeal, affirming that the Adjudicating Authority had granted the reliefs and concessions to which the Appellant was entitled under the law and the statutory scheme of the liquidation process. The Tribunal found no error in the Adjudicating Authority's order that warranted interference.

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