Honest Derivatives' Going Concern Sale Not Subject to Later Liquidation Amendment: NCLAT

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi , has ruled that a liquidation process already commenced cannot be retrospectively altered by a subsequent regulatory amendment. The decision protects the going concern sale of Honest Derivatives Private Limited to Garden Court Distillieries Pvt Ltd .

A bench comprising Judicial Member Justice Yogesh Khanna, Technical Member Barun Mitra, and Technical Member Ajai Das Mehrotra held that the rights and obligations arising from the liquidation must be determined under the regulations in force when the liquidation order was passed.

The October 2025 Timeline: A Tale of Two Dates

The dispute turned on two critical events in October 2025. On October 10, the National Company Law Tribunal (NCLT), Ahmedabad Bench , admitted Honest Derivatives into liquidation under Section 33(2) of the Insolvency and Bankruptcy Code (IBC) . The order explicitly recorded the Committee of Creditors' (CoC) decision to first explore sale of the corporate debtor as a going concern under Regulation 32(e) of the Liquidation Process Regulations .

Just four days later, on October 14, the Insolvency and Bankruptcy Board of India (IBBI) notified the Second Amendment to the Liquidation Process Regulations . The amendment, if applied retrospectively , threatened to invalidate the steps taken by the liquidator after that date—including the auction and sale of Honest Derivatives as a going concern.

The Core Legal Question

The successful auction purchaser, Garden Court Distillieries, had sought reliefs and concessions from the NCLT to implement the sale. However, the NCLT rejected the application, effectively treating the amendment as governing the liquidation process . The purchaser appealed.

The central question before the NCLAT was whether the October 14 amendment could apply to a liquidation process that had already begun on October 10. The appellant argued that the auction was merely a step in implementing the existing liquidation order —not the commencement of a fresh process.

NCLAT's Reasoning: A Process Commenced Cannot Be Undone

The NCLAT agreed with the appellants. It emphasized that the liquidation order dated October 10, 2025 , was a substantive order admitting the corporate debtor into liquidation, with the process made "effective from the date of this order." The CoC's decision to explore a going concern sale was recorded in the order itself.

"Thus, the order dated 10.10.2025 is a substantive order admitting the Corporate Debtor into liquidation under Section 33(2) of the IBC, with the liquidation expressly made effective from the date of the order," the bench observed.

The Tribunal further held that the auction process cannot be viewed in isolation. "The auction was not the commencement of liquidation; rather, it constituted a subsequent step in the liquidation process , undertaken pursuant to the Committee of Creditors' decision and the express recognition thereof in the liquidation order ."

Reliance on Precedent: The Ashok Kumar Gulla Principle

The NCLAT drew strength from its earlier ruling in Ashok Kumar Gulla vs State Bank of India & Ors. In that case, the Tribunal had held that while examining issues arising in liquidation, the applicable regulations are those "as they stood on the date when the liquidation order was issued." Applying that principle here, the bench concluded that the regulations prevailing on October 10, 2025 —not the amended ones—governed the process.

"Thus, 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," the judgment stated.

Human and Economic Consequences

The NCLAT also highlighted the real-world impact of its decision. It noted that failure to proceed with the going concern sale would affect over 800 employees whose livelihoods depended on restarting the factory. Additionally, farmers in the region—many of whom are operational creditors—would suffer significant losses if the local processing facility remained closed.

"Non-sale as going concern would lead to loss of employment of 800+ employees if the factory is not restarted; and the farmers are primarily the operational creditors in the area, would lose significantly," the bench observed.

The Final Decision

The NCLAT set aside the impugned order of the NCLT, holding that liquidation by sale as a going concern had commenced on October 10, 2025 —before the amendment. The matter was remanded to the NCLT with a direction to examine the reliefs and concessions to be granted to the successful auction purchaser in accordance with law, within two weeks of receiving the order.

The decision reinforces the principle that regulatory amendments cannot retroactively derail concluded or ongoing liquidation processes, providing much-needed certainty to auction purchasers and stakeholders in insolvency proceedings.