Liquidation Amendments Cannot Retrospectively Invalidate Prior Sale Orders: NCLAT

The National Company Law Appellate Tribunal has barred the retrospective application of liquidation regulatory amendments, ruling that a sale process initiated under an existing judicial order remains immune to subsequent regulatory shifts. This landmark decision secures the finality of 'going concern' sales, preventing administrative updates from dismantling concluded auctions and protecting the commercial wisdom of creditors.

A three-member bench comprising Justice Yogesh Khanna (Officiating Chairperson), Mr. Barun Mitra (Member Technical), and Mr. Ajai Das Mehrotra (Member Technical) heard the appeals filed by the State Bank of India and the successful auction purchaser. The Tribunal was tasked with determining whether the IBBI (Liquidation Process) (Second Amendment) Regulations, 2025, notified on October 14, 2025, could override a liquidation order passed just four days earlier on October 10, 2025.

Key Takeaways

Regulatory Non-Retrospectivity

Liquidation processes are governed by the regulations in force on the date the liquidation order is passed, not by subsequent amendments.

Sanctity of CoC Decisions

The commercial wisdom of the Committee of Creditors to sell a corporate debtor as a 'going concern' under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 is a binding foundation for the sale process.

Protection of Value Maximization

Unsettling a concluded sale process risks significant socio-economic harm, including loss of employment and prejudice to operational creditors like local farmers.

Court's Rationale on Statutory Commencement

The Tribunal emphasized that the auction process is not a standalone event but a step in the implementation of the liquidation order. It observed that the Adjudicating Authority erred in treating the amendment as a retrospective gatekeeper for a process that had already received judicial imprimatur.

The Court, in its reasoning, observed: "The principal error in the Impugned Order lies in treating the Amendment Notification dated 14.10.2025 as though it retrospectively governed a liquidation process which had already commenced on 10.10.2025... the subsequent amendment dated 14.10.2025 cannot retrospectively alter the legal character or foundation of a liquidation process which had already commenced and had received the imprimatur of the Adjudicating Authority on 10.10.2025."

Drawing upon the precedent in Ashok Kumar Gulla vs State Bank of India & Ors., the NCLAT reiterated that rights and obligations must be determined with reference to the regulations prevailing on the date the Corporate Debtor was admitted into liquidation.

Directions Issued to NCLT

The Tribunal set aside the order of the NCLT Ahmedabad Bench and issued the following directions:

"We remand the matter before the Ld. NCLT to examine the reliefs and concessions, if any, to be granted to the SRA in accordance with law, within two weeks of receipt of this order."

Ratio

Liquidation by sale as a going concern commences on the date the Adjudicating Authority passes the liquidation order under Section 33 of the Insolvency and Bankruptcy Code, 2016. Consequently, the legal validity of the liquidation process and the liquidator's fees are strictly governed by the regulations existing on the 'liquidation commencement date' as defined under Section 5(17) of the Code, and cannot be altered by subsequent regulatory amendments unless expressly stated to be retrospective.

Background

The dispute arose after the NCLT Ahmedabad Bench rejected an application filed by the successful auction purchaser seeking reliefs and concessions for the implementation of the sale of M/s Honest Derivatives Private Limited as a going concern. The NCLT had reasoned that the sale process was governed by the IBBI (Liquidation Process) (Second Amendment) Regulations, 2025, which came into effect after the liquidation order was passed on October 10, 2025, but before the auction was finalized.

The Appellants argued that the Committee of Creditors had already resolved, under Regulation 39C of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, to explore the sale as a going concern. This decision was recorded in the original liquidation order. The NCLAT agreed, holding that the auction was merely a subsequent step in a process that had legally commenced prior to the amendment. The Tribunal highlighted that failing to recognize the sale would lead to the loss of 800+ jobs and adversely affect local farmers who acted as operational creditors.

Case Details:
Case No.: COMPANY APPEAL (AT)(INS) NO.1138 OF 2026 and 1145 OF 2026
Case Title: State Bank of India Vs Garden Court Distillieries Pvt Ltd & Anr.
Appearances:
For the Petitioner(s): Mr. Krishnendu Datta, Sr. Advocate with Ms. Ekta Choudhary, Mr. Gaurav Raj Grover, Advocates; Mr. Abhijeet Sinha, Sr. Advocate.
For the Respondent(s): Mr. Sumant Batra, Mr. Sarthak Bhandari, Ms. Riya Kaur Arora, Mr. Aditya Jain, Advocates for Liquidator; Ms. Shreya Moondhra, Advocate.

Source: 2026 CaseBase(NCLAT) 548