TaxTMI 
TaxTMI 
2026 (9) TMI 422
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....thority (National Company Law Tribunal, Mumbai Bench-IV) in I.A. No. 840 of 2025 filed in C.P.(IB) No. 1056/MB/2020. By the said impugned order, the Adjudicating Authority has rejected/partly allowed certain reliefs and concessions prayed for in the above application filed by the present Appellant. Being aggrieved by the impugned order, the Appellant has come up in appeal. 2. Coming to the brief facts of this case, the Corporate Debtor-Talwalkars Better Value Fitness Ltd. was admitted into Corporate Insolvency Resolution Process ('CIRP' in short) on 11.01.2021. Since the CIRP process could not succeed, the Corporate Debtor was subjected to liquidation proceedings under Section 33(2) of the IBC by the Adjudicating Authority on 28.04.2022 following which the Respondent-Liquidator was appointed. The Liquidator issued e-auction sale notice for sale of the Corporate Debtor as a going concern on 15.07.2024 in accordance with Regulation 32(e) of the Liquidation Process Regulations. A Process Memorandum was also issued by the Liquidator on 15.07.2024 which outlined the terms and conditions for participation in the auction process. The e-auction was conducted on 16.08.2024 and upon succe....
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....ate Debtor as a going concern. It was submitted that sale as a going concern was not a mere transfer of asset but constituted in essence a transfer of a running business which required continuity as well as legal recognition which was not possible in the absence of appropriate reliefs, concessions and directions from the Adjudicating Authority. It was emphatically asserted that the Adjudicating Authority had erred in refusing to grant such consequential and necessary reliefs sought for by the Appellant even though the Adjudicating Authority was clothed with adequate jurisdiction under Section 60(5) of the IBC to grant all consequential and incidental reliefs necessary to implement a going concern sale under liquidation. It was submitted by the Appellant that they had not sought any relief which was beyond the statutory framework but only sought directions which were essential to pave the way for full and effective implementation of the sale of the Corporate Debtor as a going concern. It was vehemently asserted that several judgments had been passed by various coordinate benches of the NCLT granting similar reliefs/concessions while denial of similar permission by the Adjudicating A....
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....ditors in accordance with Section 53 of the IBC water-fall mechanism. Moreover, the proceeds from the sale of the assets had already been utilised for distribution to the creditors in the manner specified under Section 53 of the IBC and no further issues have been raised by the stakeholder committee in this regard. It was also submitted that process document of the e-auction sale notice contained the commercial terms of the sale as a going concern and the relief and concessions sought by the Appellant fell within the said terms and conditions. Hence, with the creditors of the Corporate Debtor having been discharged and the assets transferred to the Successful Auction Purchaser free of any encumbrances, it was incumbent upon the Liquidator to seek orders or directions from the Adjudicating Authority as are 'necessary' for liquidation of the Corporate Debtor in terms of Section 35(1)(n) of the IBC and the Adjudicating Authority was sufficiently empowered to allow such uncontested reliefs/concessions by invoking Section 60(5)(c) of the IBC which is in the nature of residuary jurisdiction vesting the Adjudicating Authority with the jurisdiction to adjudicate any question of law or fact....
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.... to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code." From a perusal of the above provision of law, it becomes clear that that Section 60(5)(c) confers jurisdiction on the Adjudicating Authority to adjudicate disputes which arise from or which relate to the insolvency of the Corporate Debtor or in relation to liquidation proceedings of the Corporate Debtor. Thus, as long as the issue of law or fact is raised before the Adjudicating Authority and the said issue has a nexus with the insolvency or liquidation proceedings, it is vested with residuary jurisdiction to adjudicate such disputes. 12. Now that we have noticed the relevant statutory provisions under IBC with respect to the ambit and scope of powers and jurisdiction of the Adjudicating Authority in permitting and allowing reliefs/concessions claimed by a Successful Auction Purchaser, we would now proceed to examine the tenability and legal sustainability of the decision taken by the Adjudicating Authority in the impugned order in rejecting or partly allowing certain reliefs and concessions which had been sought by the Appellant in the present factual matrix....
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....c. E. The equity shares issued as aforesaid to the Successful Auction Purchaser and/ or its nominee as decided by new board of Corporate Debtor and that to the existing shareholders shall be listed forthwith on the Bombay and National stock exchange where it is presently listed. H. By way of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Fourth Amendment) Regulations, 2017, issue of equity shares pursuant to an offer has been exempted from applicability of Chapter VII of the Corporate Debtor Regulations. Therefore, the Corporate Debtor shall not be required to comply with the requirements of Corporate Debtor Regulations for the issuance of Equity Shares to the Successful Auction Purchaser or its nominees. Accordingly, an exemption be granted from the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 ("SEBI LODR Regulations"), SEBI (Issue of Capital and Disclosure Requirements), Regulations, 2018 ("SEBI Corporate Debtor Regulations"), SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ('SEBI SAST Regulations"), as amended, and other applicable laws for various corporate action....
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....as that the reliefs sought by them was only consequential directions necessary to operationalise the sale of the Corporate Debtor as a going concern, including recognition of the revised shareholding pattern, issuance and listing of fresh equity shares, continuation of listing status and implementation of the Sale Certificate, without historical regulatory impediments frustrating the revival of the Corporate Debtor. It was asserted that they had not sought any blanket exemption from the provisions of the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956, the Securities Contracts (Regulation) Rules, 1957 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The reliefs sought by them stemmed directly from the liquidation process of the going concern sale and the Sale Certificate issued by the Liquidator. It was strenuously asserted that such reliefs squarely fall within the ambit of Section 60(5)(c) of the IBC, which empowered the Adjudicating Authority to decide all questions of law and fact arising out of or in relation to the insolvency resolution or liquidation proceedings. The jurisdiction invoked by the Appellant was therefore pretty m....
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....ting shares/share capital of the Corporate Debtor will be cancelled/extinguished without there being any payment to the shareholders. The transfer of ownership of the Corporate Debtor shall take place by way of writing off the entire existing shareholding of Corporate Debtor and issuance of fresh equity shares to the Successful Bidder and its nominees (who shall not be ineligible in terms of Section 29A of the Code), at the discretion of the Successful Bidder." It clearly emerges from the above Clauses of the Process Memorandum that there was no fetter on the Appellant to approach the Adjudicating Authority for seeking reliefs and concessions for the purpose of operation and management of the corporate debtor, pursuant to its acquisition for achieving value maximization and that the Liquidator was to extend cooperation to the Appellant in this regard. 19. At this stage, we may advert our attention to the relevant paragraphs of the Birla Cotsyn judgement which is as extracted below: "34. Considering what is stated herein above, the clarification/ exemption to the prior NOC requirement in Regulation 37(7) must equally apply to a scheme of arrangement for revival of a c....
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....rate Debtor, the consequential corporate actions necessary to operationalise such sale cannot be frustrated by an unduly restrictive interpretation of the securities laws. The regulatory framework must be purposively construed so as to facilitate rather than thwart the implementation of the going concern sale. 21. Interestingly, this ratio was later reaffirmed by this Tribunal in Equator Financial Services Ltd. v. BSE Ltd. in CA(AT)(Ins.) No. 592 of 2025 wherein objections of the Stock Exchange to the modification of the approved resolution plan by the successful resolution applicant to ensure compliance with the minimum public shareholding requirements prescribed under the Securities Contracts (Regulation) Rules, 1957 was rejected by this Tribunal on the ground that the modification sought was intended to ensure compliance with the applicable securities laws and therefore such relief ought to be granted. 22. The reasoning adopted in the Birla Cotsyn and Equator Financial Services judgements supra squarely apply to the facts of the present case. We are thus of the considered view that extinguishment of the entire existing shareholding of the promoters and issuance of fresh sh....
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.... even to going concern sales in liquidation. The "clean state" principle is not confined merely to extinguishment of liabilities but extends to ensuring that the legal consequences of the insolvency process are capable of effective implementation without repetitive litigation before multiple forums. 26. The other judgement is that of Arun Kr. Jagatramka Vs. Jindal Steel Power Ltd. (2021) 7 SCC 474 in which the Hon'ble Apex Court clearly postulated that the primary object of the IBC was to revive and continue the operations of a Corporate Debtor either by sale through resolution plan under CIRP; a sale during liquidation process or a sale under Section 230 of the Companies Act, 2013. Thus, all benefits or the disabilities attached to any of the above three modes of sale was to be attached to sale of a Corporate Debtor as a going concern under liquidation since the object behind these three modes are same. 27. In our considered opinion, this subtle distinction between legal recognition of the consequences of the insolvency process and exercise of independent statutory jurisdiction has not been appreciated in the correct perspective in para 5.5 of the impugned order. Present is ....
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....he objectives of the IBC to resolve the indebtedness of the Corporate Debtor and its revival. The Adjudicating Authority has failed to exercise jurisdiction vested in it by law by refusing reliefs essential for implementation of the Sale Certificate. The Adjudicating Authority enjoyed competent jurisdiction under Section 60(5) to permit this relief without directing the Appellant to approach regulatory authorities in this regard. The grant of reliefs as outlined at para 14 above being necessary to ensure compliance with law ought to have been allowed by the Adjudicating Authority subject to compliance with necessary procedures, filing of necessary forms and payment of prescribed fees by the Appellant in accordance with the securities laws and stock exchange regulations. 30. We now come to the next set of related reliefs/concessions in the bucket under the heading of "Financial Creditors". In this set of related reliefs prayed for by the Appellant, the same has been disposed of by the Adjudicating Authority with the liberty to the Appellant to approach the relevant authority which are as extracted below: P. The Hon'ble Tribunal may direct Financial Creditors to "UPGR....
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.... 33. When we look at Clause 7.C of the Process Document, it clearly states that the e-auction will be conducted on "as is where is basis", "as is what is basis", "whatever there is basis" and "no recourse basis". Similar stipulations have been made at Clause 9 of the Sale Certificate. Besides the clauses in the Process Document and the Sale Certificate, we must bear in mind that once a Corporate Debtor is sold as a going concern under Regulations 32(e) and 32A of the IBBI (Liquidation Process) Regulations, 2016, it's revival necessarily requires closure of historical lending relationships, updating of security records, release or satisfaction of charges wherever warranted under the Sale Certificate and the liquidation process, return of documents and recognition of the new management. 34. As we have already noticed, this Tribunal in Birla Cotsyn and Equator Financial Services judgements has held that all recognised modes of revival under the IBC must receive a purposive and commercially workable interpretation and expressly rejected any narrow or restrictive interpretation which would impose uncalled for practical burden on the revival of the Corporate Debtor. We have also se....
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....tive statutory powers under the applicable laws besides seeking compliance by the Appellant to prescribed procedure, if any. 38. This brings us to the next set of related reliefs/concessions in the bucket under the heading of "Claims by the Company/Corporate Debtor" which are as extracted below: "T. All existing and future receivables, claims, refunds, credits, benefits, grants, privileges by the Corporate Debtor and all its existing and future rights, entitlement, etc. with Governmental Authorities or any other Person (including third parties) but not limited to intellectual property rights, free from security interest, shall not be affected and shall remain enforceable after the Transfer Date and on and from the Transfer Date, such claims, entitlements and rights etc., shall be deemed to vest in the Corporate Debtor and/ or Successful Auction Purchaser and shall continue to exists and shall not get extinguished. U. Limitation period in respect of such receivables will be excluded and a fresh limitation shall be available to such receivables from Transfer Date to Corporate Debtor against their debtor before any of the statutory, judicial authority, arbitration....
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....2006, Medium Enterprises Development Act, 2006 etc. (collectively " Applicable Laws") shall cease, and the Corporate Debtor shall not be prosecuted or required to pay or settle any taxes, dues, claims, fees, penalty, charges, damages or interest (including any demand for any losses or damages or in connection with any third party claims or any inquires/ investigations by any government bodies or authorities such as the Central Bureau of Investigation (CBI), Serious Fraud Investigation Office (SFO), Enforcement Directorate (ED), or any other Government agency) thereon for such an non-compliance, default or offence and all the assessments, proceedings, demand notices, penalty proceedings, show- cause notice and appeals, whether completed or uncompleted, initiated or not initiated with respect to Applicable Laws shall deemed to have been completed and closed. W. Further no action shall be taken against the Corporate Debtor or any of its assets (excluding the asset as mentioned in the EAuction Process Information Document dated 15/07 / 2024) in relation to an offence committed prior to the Transfer Date. X. From the Transfer Date the Corporate Debtor shall not be pros....
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....e. 44. Before we return our findings, it would be useful to advert our attention to Section 32A of the IBC which reads as under: "Section 32A. Liability for prior offences, etc. (1) Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the liability of a corporate debtor for an offence committed prior to the commencement of the corporate insolvency resolution process shall cease, and the corporate debtor shall not be prosecuted for such an offence from the date the resolution plan has been approved by the Adjudicating Authority under section 31, if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not- (a) a promoter or in the management or control of the corporate debtor or a related party of such a person; or (b) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court; Provided....
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.... 32(e) and Regulation 32A of the Liquidation Process Regulations and Clause 9 of the Sale Certificate issued by the Liquidator stated that the liabilities of the Corporate Debtor was to be dealt in accordance with Section 53(1) of the IBC and that post distribution of the liquidation proceeds, the title of the Corporate Debtor was to be handed over to the Successful Auction Purchaser and that the Corporate Debtor shall not be liable for any past liabilities. We find from material placed on record that payments to creditors/stakeholders of the Corporate Debtor have been made by the Liquidator on 28.11.2024 as per Section 53(1) of the IBC. 47. Once the Liquidation sale has been completed and the Certificate of Sale has been given and also followed by handing over possession to the Successful Auction Purchaser, any claim relating to such property or offences related to dues prior to the auction cannot be raised against the Successful Auction Purchaser particularly so when the Corporate Debtor Company is in liquidation and the dues have already been claimed by the creditors and already discharged. When admittedly the sale proceeds of the Corporate Debtor have already been distribute....
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.... upon the Appellant. The scope and objective of the Code is to extinguish all claims specifically the ones which were not even made during the CIRP or in the Liquidation stage, to aid the purchaser of the Company as a 'going concern' to start on a 'clean slate'. The Hon'ble Supreme Court in 'Ghanshyam Mishra & Sons Pvt. Ltd.' Vs. 'Edelweiss Asset Reconstruction Company Ltd. & Ors.', Civil Appeal No. 8129 of 2019 and in 'CoC of Essar Steel India Ltd.' Vs. 'Satish Gupta & Ors.' (2020) 8 SCC 531 has laid down the proposition that the purchaser of the Company even in the Liquidation stage cannot be burdened with past liabilities when it is not mentioned in the 'Sale Notice'. 22. It is no longer Res Integra that while approving a 'Corporate Debtor' sale as a 'going concern' in Liquidation Proceedings without its dissolution in terms of Regulation 32(e) of the Liquidation Process Regulations, 2016, it is essential to see that the 'Corporate Debtor' is not burdened by any past or remaining unpaid outstanding liabilities prior to the sale of the Company as a 'going concern' and after payment of the sale proceeds distributed in accordance with Section 53 of the Code. The Impugned O....
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....Purchaser has not granted consequential directions to remove any uncertainty regarding the conduct of litigations and like legal proceedings by the new management. This has created a situation where the new management of the Corporate Debtor is required to establish its authority afresh before every judicial and statutory forum to establish its locus. 52. The Adjudicating Authority has failed to appreciate the distinction between continuity of litigation and adjudication of litigation. What seems to have been missed out by the Adjudicating Authority is that a going concern sale is intended to ensure continuity of the Corporate Debtor as a functioning entity under its new management and this continuity necessarily extends to legal proceedings pending in the name of the Corporate Debtor. There is logical justification that the Adjudicating Authority, having recognised the transfer of management, ought to have granted consequential directions removing any uncertainty regarding the conduct of litigations and like legal proceedings by the new management rather than leave it to the new management of the Corporate Debtor to establish its authority afresh before every judicial and statu....
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....he Lol, now that the sale process has culminated, the Successful Bidder shall bear all the necessary expenses like applicable stamp duties/ additional stamp duty / transfer charges, fees, etc. in relation to the sale of Corporate Debtor as a going concern, for purpose of its acquisition. Additionally, the payment of all statutory /non - statutory dues, taxes, rates, assessments, charges, fees, etc. owed by Corporate Debtor to anybody shall be sole responsibility of the Successful Bidder. The Successful Bidder has to bear the cess or other applicable tax, as applicable, on the sale of Corporate Debtor as a going concern. The Successful Bidder/Buyer will also be responsible for evaluating completeness of applicability of taxes in India at the time of closure and will be responsible for paying all such taxes/duties in relation to sale of Corporate Debtor as a going concern. The Liquidator does not take or assume any responsibility for any dues, statutory or otherwise, of the Corporate Debtor, including such dues, if any, which may affect sale of the Corporate Debtor in the name of the Successful Bidder and such outstanding dues, if any, will have to be borne/paid by the Successful Bid....
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....rtificate issued. No exemption or waiver could have been granted by the Adjudicating Authority on the lines prayed for by the Appellant. We are of the view that no error has been committed by the Adjudicating Authority by directing the Successful Auction Purchaser to approach the concerned statutory authority. 59. We now come to the next set of reliefs/concessions sought in in the bucket under the heading of "General Reliefs". This set of reliefs prayed for by the Appellant under this bucket which has not been granted by the Adjudicating Authority are as extracted below: "BB. Direct that, from the Transfer Date, no consents, licenses, approvals, rights, entitlements, benefits, and privileges of the Corporate Debtor under applicable law, contracts, leases shall be terminated on account of insolvency/liquidation, change in control, or settled unpaid dues pursuant to the acquisition by the Successful Auction Purchaser. CC. Direct that all subsisting consents, licenses, approvals, rights, benefits, and privileges of the Corporate Debtor shall continue without disruption notwithstanding contractual provisions and insolvency/liquidation proceedings, and that all addi....
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....l change in ownership and management pursuant to the going concern sale, the concerned authorities may give effect to such change without in any manner compromising the exercise of their respective statutory functions. 63. The Appellant has merely sought legal recognition that the going concern sale has validly taken place under the IBC framework and that all consequential acts required for giving effect to such sale may be undertaken by the respective authorities in accordance with law. The competent statutory authorities would continue to exercise their independent jurisdiction under their respective enactments. 64. We are of the considered view that all subsisting consents, approvals, licenses, rights and entitlements, benefits and privileges under law or contract including Lease or License and other statutory rights shall remain vested with Corporate Debtor as it is being sold as a going concern. However, compliance, if any, required under any statute/law/rules/regulations/orders due to change in ownership and management of Corporate Debtor would have to be met by Successful Auction Purchaser including payment of renewal fees, if any, to the concerned statutory/licensing ....
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.... procedural action required to update the status of the Corporate Debtor to active." 69. We are not able to appreciate with the reasoning adopted by the Adjudicating Authority in denying this relief. When the Corporate Debtor company had to undergo liquidation pursuant to orders passed by the Adjudicating Authority under the statutory provisions of IBC and the Sale Certificate issued to the Successful Auction Purchaser clearly provided for this relief, in the absence of any express direction of the Adjudicating Authority to this effect, the consequential procedural steps for change of the status of the Corporate Debtor on the MCA portal would face unnecessary hurdles. We quite agree with the Appellant that unless the Adjudicating Authority provides the nod for conversion of the status from 'liquidation' to 'active', it would come in the way of the Successful Auction Purchaser to fulfil the consequential procedural compliance of filing Form INC-28 with the RoC. Denial of such relief renders the principal relief of the going concern sale itself incomplete resulting in commercially unworkable outcome frustrating the legislative objective of ensuring continuity of the Corporate Debt....