Adjudicating Authority Cannot Declare Sale Of Going Concern As Void Without Any Challenge: NCLAT New Delhi

Background

Application under Section 7, seeking initiation of the CIRP, was filed by the Bank of Baroda against the Corporate Debtor, Vimal Oil and Foods Limited. The Adjudicating Authority admitted the application, commencing CIRP. As no resolution plan was approved, a liquidation order was passed.

Following this, the liquidator issued a public auction notice for the sale of the corporate debtor as a going concern. Arrhum Trade Pvt. Ltd. emerged as the successful bidder in the auction, and the sale was finalized for Rs. 69.95 Cr. The Financial Creditors issued a no objection/ no dues certificate to the Corporate Debtor, thereby confirming the sale of the business as a going concern. The entire consideration was paid, and possession of the Corporate Debtor was transferred to the auction purchaser.

Relying on Section 32A of the IBC, 2016, the appellant filed IA No. 471/2022 seeking certain reliefs and concessions. However, the Adjudicating Authority dismissed the application and set aside the sale as a going concern and directed penalties against the liquidator. Aggrieved by the said order, the appeal has been preferred before the NCLAT.

Contention of the Parties

Appellant (Arrhum Tradelink Pvt. Ltd.)

The appellant contended that the application seeking relief and concession was filed by the Successful Auction Purchaser, and at the time of consideration of the application, there was no occasion to declare the sale void and illegal. The appellant submitted that since there was no challenge to the sale, the question of the sale being void or illegal could not have been gone into by the Adjudicating Authority. The appellant also referred to the Gujarat High Court in Criminal Miscellaneous Application No. 11557 of 2021, which extended the benefit of Section 32A, granting immunity to the corporate debtor post-sale.

Liquidator

The learned counsel for the liquidator supported the submissions of the Successful Auction Purchaser and submitted that the sale was never challenged by any of the bidders or any of the creditors. It was also highlighted that the Corporate Debtor has already been handed over and was being run as a going concern. They also highlighted that the petition only sought certain reliefs and concessions, hence, there was no occasion to declare the sale null and void.

Financial Creditor (Bank of Baroda)

The Financial Creditor aligned with the appellant's submissions and submitted that there was no challenge to the sale.

Observations of NCLAT

The NCLAT noted that the appellant had been declared the Successful Auction Purchaser and also that the liquidator had executed the sale agreement in its favour. Also, the Corporate Debtor has been handed over to and is currently being run by the Successful Auction Purchaser.

The tribunal also observed that no bidder or creditor had contested the auction notice as a going concern. The bench ruled that the issue of going concern sale could not be raised by the Adjudicating Authority of its own at the time of considering the application for relief and concession.

The bench lastly observed that the Adjudicating Authority declaring the going concern sale as null and void cannot be supported.

Case Title: Arrhum Tradelink Pvt. Ltd. v. Manoj Khattar (Liquidator)

Case Number: Company Appeal (AT) (Insolvency) No. 1944 of 2024

For Appellant: Mr. Navin Pahwa, Sr. Advocate with Mr. Himanshu Satija, ms. Neha Mehta Satija, Mr. Harsh Saxena Ms. Ridhi Ranjan and Mr. Ravi Pahwa, Advocates

For Respondent: Ms. Richa Kapoor, Mr. Kunal Anand and Ms. Shisham Pradhan, Advocates for R-2 (Bank of India). Mr. Palash Agarwal, Advocate for Liquidator

Bench: Justice Ashok Bhushan (Chairperson) and Arun Baroka (Member- Technical)

Order Date: 17/04/2025

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