NCLAT Upholds Rejection Of Dissolution Plea, Cites Slump Sale Decision's Inconsistency With IBC Objectives
NCLAT Upholds Rejection Of Dissolution Plea, Cites Slump Sale Decision's Inconsistency With IBC Objectives
Introduction
The National Company Law Appellate Tribunal (NCLAT) Principal Bench, New Delhi, delivered a judgment on May 6, 2025, in the matter of Daulat Ram Jain v. ASL Enterprises Ltd which was presided by the bench of Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member).
Factual Background
The Liquidator of Adi Ispat Pvt. Ltd. filed appeals challenging the order dated December 17, 2024, passed by the National Company Law Tribunal, Division Bench, Court No. II, Kolkata.
Procedural Background
The Liquidator had filed two applications - IA (I.B.C)/1687(KB)2023 seeking dissolution of the Corporate Debtor under Section 54 of the Insolvency and Bankruptcy Code, 2016, and IA (I.B.C.)/1562(KB)2024 praying for recalling of the order dated May 10, 2024, granting reliefs and concessions to the Successful Auction Purchaser, ASL Enterprises Ltd.
Issues Involved
1. Dissolution of Corporate Debtor: Whether the Liquidator's application for dissolution of the Corporate Debtor was rightly rejected by the Adjudicating Authority.
2. Recall of Order: Whether the Liquidator's application for recalling the order granting reliefs and concessions to the Successful Auction Purchaser was justified.
Contentions of the Parties
Liquidator's Contentions: The Liquidator argued that the sale was not made of the Corporate Debtor as a going concern, but rather as a slump sale of assets, and therefore, the Successful Auction Purchaser was not entitled to reliefs and concessions.
Respondent's Contentions: ASL Enterprises Ltd. contended that it had purchased the assets of the Corporate Debtor, including the plant and machinery, and had revived the Corporate Debtor, and that the Liquidator's endeavor to dissolve the Corporate Debtor was not in accordance with the objectives of the Insolvency and Bankruptcy Code, 2016.
Reasoning and Analysis
The NCLAT observed that the Adjudicating Authority had rightly noted that the sale notice did not clearly indicate that it was a slump sale or sale as a going concern. The NCLAT also observed that the Stakeholders' Consultation Committee's decision to sell the Corporate Debtor as a slump sale basis without exploring other options was against the objectives of the Code.
Final Decision
The NCLAT affirmed the order of the Adjudicating Authority and dismissed both appeals, holding that the Liquidator's applications for dissolution and recall were without merit.
Law Settled
This judgment showcases the principle that in liquidation proceedings, the focus is on maximizing the value of the assets and reviving the corporate debtor, and that the decision to sell the corporate debtor as a going concern or otherwise should be in accordance with the objectives of the Insolvency and Bankruptcy Code, 2016.
