NCLAT: Liquidation begins on the date of the liquidation order; later regulations cannot retrospectively unsettle a going-concern sale

The appeals arose from the NCLT, Ahmedabad’s order dated 17 June 2026 in I.A. No. 678 of 2026 in C.P. (IB) No. 269 of 2023, by which the application seeking reliefs and concessions for implementation of the sale of the Corporate Debtor as a going concern was rejected.

The Committee of Creditors (“CoC”), by Resolution No. 5, had resolved under the then-existing Regulation 39C of the CIRP Regulations that the liquidator should first explore the sale of the Corporate Debtor as a going concern under Regulation 32(e) of the Liquidation Regulations.

This recommendation was placed before and recorded by the Adjudicating Authority in its liquidation order dated 10 October 2025.

The NCLT ordered that the Corporate Debtor be admitted into liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 (“IBC”), with the liquidation to be conducted in accordance with Chapter III of the IBC and the Liquidation Regulations, “effective from the date of this order”.

The liquidation order was therefore passed before the IBBI (Liquidation Process) (Second Amendment) Regulations, 2025, notified on 14 October 2025.

Thereafter, the liquidator conducted the auction and the Corporate Debtor was sold as a going concern.

The NCLT nevertheless applied the 14 October 2025 amendment and declined the consequential reliefs sought for implementing the sale.

1. Whether the IBBI (Liquidation Process) (Second Amendment) Regulations, 2025, notified on 14 October 2025, could govern or retrospectively affect a liquidation process commenced by an order dated 10 October 2025?

2. Whether the sale of the Corporate Debtor as a going concern commenced with the liquidation order dated 10 October 2025, or only when the subsequent auction process was undertaken?

3. Whether the NCLT was justified in rejecting the reliefs and concessions sought for implementation of the concluded sale as a going concern on the basis of the subsequent regulatory amendment?

The Court applied Section 33(2) of the IBC, under which the CoC may resolve, by the requisite voting share, to liquidate the Corporate Debtor before confirmation of a resolution plan.

It relied on Section 5(17) of the IBC, which defines the “liquidation commencement date” as the date on which liquidation proceedings commence in accordance with Section 33 or Section 59.

The unamended Regulation 39C of the CIRP Regulations permitted the CoC, while deciding to liquidate the Corporate Debtor, to recommend that the liquidator first explore its sale as a going concern under Regulation 32(e) or the sale of its business as a going concern under Regulation 32(f) of the Liquidation Regulations.

The Court further applied the principle that rights and obligations arising from a liquidation process are ordinarily determined with reference to the regulations in force on the date of the liquidation order, relying on Ashok Kumar Gulla v. State Bank of India & Ors., Company Appeal (AT) (Ins.) No. 786 of 2023.

Accordingly, a subsequent amendment cannot retrospectively alter the legal character or foundation of a liquidation process already commenced by an order of the Adjudicating Authority.

The Court held that the liquidation process commenced on 10 October 2025, when the NCLT passed its Section 33(2) liquidation order and expressly recorded the CoC’s Regulation 39C decision to explore sale of the Corporate Debtor as a going concern.

The subsequent auction and sale were not the commencement of a new liquidation process; they were consequential steps taken in implementation of the existing liquidation order and the CoC’s decision.

Since the liquidation order preceded the 14 October 2025 amendment, the rights and obligations governing the process had to be assessed under the regulatory framework existing on 10 October 2025.

The NCLT therefore erred in treating the auction as the commencement of the going-concern sale and in applying the later amendment retrospectively.

The Court also emphasised that sale as a going concern promoted value maximisation and protected the interests of creditors, employees and local farmers dependent on the Corporate Debtor’s operations.

The 14 October 2025 amendment could not retrospectively govern or invalidate the sale process undertaken pursuant to that order.

The impugned NCLT order was set aside to the extent that it incorrectly applied the subsequent amendment and frustrated the concluded sale.

The matter was remanded to the NCLT to examine, in accordance with law, the reliefs and concessions to be granted to the successful auction purchaser within two weeks of receipt of the NCLAT order.

Both appeals were disposed of, and pending applications were also disposed of.