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Debashis Nanda Wins Appeal: NCLAT Holds Starts from
In a significant clarification under the , the , Delhi, has ruled that a liquidation sale of a corporate debtor as a going concern commences from the date of the itself, and not from the issuance of an . The decision came in an appeal filed by Debashis Nanda, the liquidator of Chamber Constructions Private Limited, against an order of the (NCLT) that had denied an extension of time to complete the .
The NCLAT bench, comprising Judicial Member Justice Mohammad Faiz Alam Khan and Technical Member Naresh Salecha, overturned the NCLT’s finding that the sale process had not “commenced” before a regulatory amendment removed the provisions. The appellate tribunal held that the , which incorporated the Committee of Creditors’ (CoC) recommendation to explore a , marked the starting point of that mode of realisation.
Background of the Liquidation
Chamber Constructions was admitted into corporate insolvency resolution process (CIRP) on . After no viable resolution plan was received, the CoC, with a 100% voting share, resolved on , to liquidate the company. At the same meeting, the CoC recommended under , that the liquidator first attempt a sale of the corporate debtor as a going concern under , and alternatively a sale of its business as a going concern under clause (f).
The NCLT passed the on , appointing Nanda as liquidator. The order expressly directed him to “endeavour to sell the company as a going concern under ,” giving effect to the CoC’s recommendation. It further provided that if the sale could not be achieved within 90 days, the liquidator should proceed under , which deal with piecemeal asset sales.
The Steps Taken and the Hurdle
Following the order, the liquidator constituted a Stakeholders’ Consultation Committee (SCC) and placed the CoC’s recommendation before it. At subsequent SCC meetings, the proposed reserve price, marketing strategy, auction process, and draft sale notice were discussed. However, before an could be issued, the erstwhile management of Chamber Constructions challenged the before the NCLAT. On , the appellate tribunal restrained Nanda from issuing any pending the appeal.
The restraint continued until the challenge was dismissed on . Meanwhile, on , the notified the , which omitted and clauses (e) and (f) of Regulation 32 — the very provisions that allowed going-concern sales. The amendment, however, contained a that preserved cases where liquidation by sale as a going concern had already commenced.
NCLT’s Rejection and the Appeal
After the restraint was lifted, the SCC resolved that the liquidator should approach the NCLT for directions to complete the . Nanda filed an application seeking an extension of time and permission to carry the sale to completion. The NCLT rejected the application, holding that the had not commenced before the amendment because no had been issued and the Asset Sale Process Document had not been finalised.
Aggrieved, Nanda appealed to the NCLAT. He argued that the itself had commenced the because it incorporated the CoC’s recommendation and expressly directed him to pursue that mode. He further pointed out that the had made it legally impossible to issue the , and he could not be penalised for complying with a judicial direction.
The NCLAT’s Reasoning
The NCLAT relied on , which defines “” as the date on which proceedings for liquidation commence under . The bench observed:
“Liquidation itself commences on the under Section 5(17), that is, when proceedings for liquidation commence under . Once the is passed, the corporate debtor is in liquidation, the Liquidator is in office, and the mode of realisation is to be governed by the order and the Regulations then in force. Where that order itself directs that the going-concern route be first explored, the liquidation has commenced by that mode from the same date.”
The bench further held that the issuance of an is merely a step in the execution of a sale process that has already commenced, not the event that brings that process into being. It distinguished the NCLT’s view by noting that the CoC’s recommendation, once incorporated into the , forms part of the liquidation process from the order date.
The NCLAT also followed its earlier decision in , delivered on , which had squarely held that a commences with the . The bench noted that required it to follow the of that case, and it independently reached the same conclusion.
and the Effect of Restraint
Even assuming that were required to establish commencement, the bench found them present. The liquidator had constituted the SCC, placed the CoC’s recommendation before it, and initiated discussions on the proposed sale — all before the could be issued. The NCLAT further held that the liquidator could not be faulted for not issuing an while he was restrained from doing so by a judicial order. Holding otherwise would amount to penalising him for complying with a judicial direction.
The bench also addressed the 90-day timeline mentioned in the , holding that it was directory and could be extended by the NCLT. The regulations applicable on the date of the () continued to govern the process, and the 2025 amendment did not affect cases where the had already commenced.
The Outcome and Its Implications
The NCLAT allowed the appeal, set aside the NCLT’s order, and directed the parties to appear before the NCLT on , for further proceedings in accordance with law. The decision clarifies a critical procedural point for liquidators and stakeholders: the commencement of a is tied to the itself, not to subsequent administrative steps like issuing an .
For legal professionals practising insolvency law, this judgment reinforces the importance of the ’s terms and the CoC’s recommendations. It also provides a safeguard for liquidators who face judicial restraints beyond their control — they will not be penalised for delays caused by litigation. The ruling is likely to influence future cases where the timing of a sale process is contested, particularly in light of regulatory amendments that may remove provisions.
The decision underscores the NCLAT’s commitment to of the IBC, ensuring that the object of maximising value through going-concern sales is not frustrated by technicalities. It also serves as a reminder that the liquidation process is a continuum that begins with the adjudicating authority’s order, not with the liquidator’s ministerial acts.
