Going concern sale under amended liquidation rules upheld; purchaser takes the business on a clean slate without past liabilities.

A going concern sale of a corporate debtor in liquidation was upheld where the amended liquidation regulation was already in force before the auction and the sale was completed in the first attempt; the earlier 90-day requirement under the unamended provision could not be used to invalidate the transaction. The purchaser was also held entitled to a clean slate: past liabilities not preserved in the sale framework could not be fastened on the successful bidder, and reliefs and concessions could not be refused on that basis. The adverse order dismissing the application and making adverse observations was set aside, and the connected appeals were allowed.

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Issues: (i) Whether the sale of the corporate debtor as a going concern was validly conducted under the amended liquidation regulations and could not be tested by the earlier 90-day requirement; (ii) Whether the successful bidder could be saddled with past liabilities or denied reliefs and concessions after the going concern sale was completed.

Issue (i): Whether the sale of the corporate debtor as a going concern was validly conducted under the amended liquidation regulations and could not be tested by the earlier 90-day requirement.

Analysis: The amended framework under Regulation 32A(4) had come into force before the auction, and the sale was completed in the first attempt. The record also showed that the bid value exceeded the reserve price and that the liquidator had already informed the Tribunal of compliance with the amended regime. In these circumstances, the earlier 90-day requirement under the unamended provision could not govern the completed sale.

Conclusion: The sale was held to be validly conducted under the amended regulation and was not liable to be invalidated on the basis of the earlier 90-day limit.

Issue (ii): Whether the successful bidder could be saddled with past liabilities or denied reliefs and concessions after the going concern sale was completed.

Analysis: A going concern sale in liquidation is intended to transfer the business on a clean slate, so that past unpaid liabilities not preserved in the sale framework do not burden the purchaser. Once the sale proceeds were realised and distributed to stakeholders in accordance with the Code, the purchaser could not be fastened with prior dues, and the application seeking reliefs and concessions ought not to have been dismissed on that footing.

Conclusion: The successful bidder was entitled to relief consistent with the going concern sale and could not be saddled with past liabilities.

Final Conclusion: The common order dismissing the application and making adverse observations was set aside, and the connected appeals were allowed.

Ratio Decidendi: Where a corporate debtor is sold as a going concern under the amended liquidation regime and the sale is completed in the first attempt, the sale cannot be defeated by invoking the earlier 90-day restriction, and the purchaser takes the business on a clean slate without being burdened by past liabilities already left to the liquidation waterfall.

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