Back
2024 Supreme(Online)(NCLT) 22
NATIONAL COMPANY LAW TRIBUNAL
Shri Prabhat Kumar,, Justice V.G. Bisht (Retd.), J
EARLS GENERAL TRADING PRIVATE LIMITED – Appellant
Versus
CA Gomti Ramchandra Choudhary Liquidator of M/s. Vintage Comtrade Private Limited – Respondent
IA(I.B.C) - 2594/2024
For the Petitioner:Arjun Padhiyar
The court affirmed that a corporate debtor sold as a going concern must be free from past liabilities to ensure operational viability and compliance with the clean slate principle.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 29A and 53 - Liquidation process - Successful auction purchaser sought reliefs for smooth functioning of corporate debtor post-acquisition - Reliefs included discharge of past liabilities, reconstitution of Board, and amendments to constitutional documents - Court granted reliefs to ensure clean slate principle and operational viability. (Paras 2.1, 3.2, 3.3, 3.4, 3.5)
(B) Corporate Debtor - Sale as going concern - The sale of the corporate debtor must be free from past liabilities and obligations not expressly taken over by the purchaser to achieve revival and value maximization. (Paras 3.1, 3.2)
Facts of the case:
The applicant, having successfully bid for the corporate debtor, sought various reliefs to ensure smooth operations post-acquisition, including discharging past claims and liabilities. The liquidation order was passed on 06.12.2023, and the auction was held on 29.03.2024.
Findings of Court:
The court allowed the application partly, granting reliefs necessary for the corporate debtor's operational viability and confirming the cancellation of existing share capital.
Issues: The main issues included the necessity of additional reliefs for operational viability and the implications of past liabilities on the purchaser.
Ratio Decidendi: The court emphasized the clean slate principle, stating that the corporate debtor must be transferred without unknown liabilities to ensure effective business operations.
Result: Application partly allowed and disposed of.
1. The present application is filed by Earls General Trading Private Limited, the successful auction purchaser of the Corporate Debtor who has purchased the Corporate Debtor, namely M/s. Vintage Comtrade Private Limited as a going concern and therefore, for smooth functioning of the corporate debtor has preferred the present application seeking for certain reliefs, concessions, waivers and exemptions for the proper acquisition of the corporate debtor.
2. The Liquidation order came to be passed by this Tribunal on 06.12.2023 appointing the Respondent herein as a liquidator of the corporate debtor and further this Tribunal directed the liquidator to first go for sale of the corporate debtor as a going concern and thereafter if the same fails, than the liquidator can take other modes for sale of the assets of the corporate debtor.
2.1. The Liquidator published notice on 06.03.2024 for selling the corporate debtor as a going concern. The Applicant herein submitted its bid on 19.03.2024 for participating in the public auction in relation to the sale of corporate debtor as a going concern.
2.2. The Auction for sale of corporate debtor as a going concern came to be held on 29.03.2024 where the applicant came to be declared as the Hl bidder for bidding an amount of Rs. 1,49,500/- and accordingly sale confirmation letter dated 30.03.2024 came to be issued by the Respondent Liquidator. 2.3. The applicant made the entire payment as per sale confirmation letter dated 30.03.2024 and accordingly, the sale certificate dated 15.04.2024 came to be issued by the liquidator.
2.4. Hence, the applicant for smooth functioning of the corporate debtor has preferred the present application seeking for certain reliefs, 6 concessions, waivers and exemptions for the proper acquisition of the corporate debtor.
2.5. The Applicant has sought the following relief/concession a. The purchaser would be free to reorganize staff, employees and workers without any kind of burden/obligation resulting from the pre-acquisition operations and to design its own model of employment which includes contractual, fixed term, in the form of consultants, on probation, on a regular basis from anywhere without any reservation for a particular state or region.
b. All the past claims against the Company by any related/unrelated party and all past liabilities of the Company towards any related party /unrelated party whether the said claimant has filed any claim or has not filed any claim, shall stand automatically discharged and all such liabilities shall immediately, irrevocably and unconditionally stand fully and finally discharged and settled with there being no further claims whatsoever against _ the Company and/ or the new management of Company.
c. The Purchaser is entitled to get all the rights, title and interest over whole and every part of the corporate debtor.
d. The purchaser seeks that from the date of approval of these reliefs, the Board of Directors of the Corporate Debtor be re-constituted as per the Companies Act, 2016. The purchaser shall nominate the name of proposed board of directors of corporate debtor by filling requisite forms with Registrar of Companies; existing board shall be replaced with new board.
e. The constitutional documents of the Corporate Debtor including the Memorandum of Association and Article of Association shall stand revised. The amendment to the Memorandum of Association, including the revisions to the capital clause therein, shall be pursuant to the approval of these reliefs and shall not require_ any additional approval from the shareholders or otherwise. The Purchaser may cause amendments to the Article of Association of the Company, upon the authorized persons who will be part of managing and operating the affairs of the company are identified.
f. The existing share capital of the Corporate Debtor shall stand cancelled. The Liquidator in consultation with the Registrar of Companies (RoC) concerned shall take action for cancelling the exist
