The NCLT, Mumbai on July 02, 2022 in the matter of Harsh Vinimay Pvt. Ltd. v Gajanan Industries Ltd., held that when a Corporate Debtor is sold as a ‘going concern’, then such sale shall include both assets and liabilities and not merely assets sans liabilities.

In the instant matter, NCLT Mumbai Bench (“Adjudicating Authority”) passed the liquidation order against the Gajanan Industries Ltd. (“Corporate Debtor”) and C.A. Devang P Sampat was appointed as the Liquidator. The E-auction of the assets of the Corporate Debtor was scheduled and Mr. Gaurav Agarwal (“Applicant”) had submitted an Earnest Money Deposit of Rs. 50,00,000/- for participating in the e-auction. The Applicant was declared as the Successful Bidder of the Corporate Debtor as a going concern with a bid amount of Rs. 4,65,00,000/- and was accordingly issued a letter of intent by the Liquidator. The Applicant paid the entire remaining consideration of Rs. 4,15,00,000/- along with an interest of Rs. 10,09,000/- towards the auction purchase and the same was acknowledged by the Liquidator.

Thereafter, the Applicant filed an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (“IBC”) against the Liquidator before the Adjudicating Authority, seeking:

“ii. The Applicant shall not be responsible for any other claims/ liabilities/ obligations etc. payable by the Corporate Debtor as on this date to the Creditors or any other stakeholders including Government dues. All the liabilities of the Corporate Debtor as on the date stand extinguished, as far as the Applicant is concerned.”

The Adjudicating Authority placed reliance on the NCLAT judgment in M/s Visisth Services Limited v. S.V. Ramani, Company Appeal (At) (Ins) No. 896 of 2020, wherein it was held that- “It can be seen from the afore-noted discussion as well as Regulation 32 A of the IBBI (Liquidation Process) Regulations, 2016 that Sale as a ‘Going Concern’ means sale of assets as well as liabilities and not assets sans liabilities…….sale of a Company as a ‘Going Concern’ means sale of both assets and liabilities, if it is stated on ‘as is where is’ basis…”