Skip to main content

Difference Between Sale Of 'Corporate Debtor As A Going Concern' And Sale Of 'Business Of The Corporate Debtor As A Going Concern'

Citation : M.S. Viswanathan, Liquidator of Gemini Communication Limited vs Pixtronic Global Technologies Pvt. Ltd,  IA/1215/CHE/2021 in CP/699/IB/2017

Date of Judgment/Order : 15/2/22

Court/Tribunal : National Company Law Tribunal, Division Bench I, Chennai

Corum: R. Sucharitha, Member (Judicial), Sameer Kakar, Member (Technical)

Background

Application was filed by the Liquidator under Regulation 32(e) of the IBBI (Liquidation Process) Regulations, 2016 seeking approval from the Tribunal for sale of the Corporate Debtor as a going concern.

Order

Allowing the application, the NCLT went into an elaborate but useful explanation of the entire law behind the term 'Going Concern'.

NCLT observed that  the term 'going concern' means all such assets and the liabilities, which constitute an integral business or the Corporate Debtor, that must be transferred together, and the consideration must be for the business or the Corporate Debtor. The buyer of the assets and liabilities should be able to run business without any disruption. 

There are two going concern sales defined under Regulation 32 of IBBI (Liquidation Process) Regulations, 2016. The first one pertains to Sale of "Corporate Debtor as a going concern" under Regulation 32(e) and sale of "Business of Corporate Debtor as a going concern" under Regulation 32(f).

In the sale of "Corporate Debtor as a going concern" under Regulation 32(e) of IBBI (Liquidation Process) Regulations, 2016 the Corporate Debtor will not be dissolved. In this part of sale, the entire business, assets and liabilities, including all contracts, licenses, concessions, agreements, benefits, privileges, rights or interests of the Corporate Debtor will be transferred to the acquirer. The existing shares of the Corporate Debtor will not be transferred and shall be extinguished.

In the sale of "Business of Corporate Debtor as a going concern" under Regulation 32(f) of IBBI (Liquidation Process) Regulations, 2016, the entire business(s) along with assets and liabilities, including intangibles, will be transferred as a going concern to the acquirer, without transfer of the Corporate Debtor, and therefore, the Corporate Debtor will be dissolved. The existing shares will be extinguished. The remaining assets, other than those sold as part of business will be sold and the proceeds thereof will be used to meet the claims under Section 53 of IBC, 2016 

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'. The Hon'ble NCLAT in the matter of M/s. Visisth Services Ltd. Vs. Mr. S. V. Ramani, Liquidator of United Chloro-Paraffins Pvt. Ltd. Company Appeal (AT)(Ins) No. 896 of 2020 held that as per Regulation 32A of the IBBI (Liquidation Process) Regulations, 2016, the Sale as a 'Going Concern' means sale of assets as well as liabilities and not assets sans liabilities. 

NCLT concluded that 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'.

Comments

Post a Comment

Most viewed this month

Deposit Of Minimum 20% Fine/Compensation U/s 148 NI Act Mandatory

In OP(Crl.).No.348 OF 2019, T.K.SAJEEVAN vs FRANCIS T.CHACKO, the appeal was filed against the order of the lower court to deposit 25% of the fine before filling of appeal. The appellant argued that the deposit introduced through the Section 148 of the NI Act after amendment was directory in nature as it used the term 'may' while mentioning the issue of deposit. The Kerala High Court however disagreeing held that in view of the object of the Legislature while incorporating Section 148 into N.I. Act, the word 'may' will have to be read as 'shall'. The imposition of payment contemplated under Section 148 N.I. Act cannot be restricted to some prosecutions and evaded in other prosecutions. Since the amount directed to be deposited being compensation, undoubtedly, it is liable to be ordered to be deposited irrespective of the nature of the prosecution. Therefore, the word 'may' can only be taken to have the colour and meaning of 'shall' and there
Post a Comment
Read more

NCLT - Mere admission of receipt of money does not qualify as a financial debt

Cause Title : Meghna Devang Juthani Vs Ambe Securities Private Limited, National Company Law Tribunal, Mumbai, CP (IB) No. 974/MB-VI/2020 Date of Judgment/Order : 18.12.2023 Corum : Hon’ble Shri K. R. Saji Kumar, Member (Judicial) Hon’ble Shri Sanjiv Dutt, Member (Technical) Citied:  Carnoustie Management India Pvt. Ltd. Vs. CBS International Projects Private Limited, NCLT Swiss Ribbons Pvt. Ltd. & Anr vs. Union of India & Ors. (2019) Sanjay Kewalramani vs Sunil Parmanand Kewalramani & Ors. (2018) Pawan Kumar vs. Utsav Securities Pvt Ltd 2021 Background Application was filed under section 7 of the Insolvency and Bankruptcy Code, 2016 alleging loan of Rs, 1.70 cr is due. The Applicate identified herself as the widow and heir of the lender but could not produce any documents proving financial contract between her Late husband and the CD but claimed that the CD has accepted that money was received from her husband. The applicant subsequently filed rejoinder claiming the debt t
Post a Comment
Read more

Jurisdiction of consumer forum is not ousted even if the other party has filed suit on the same matter in Civil Court

In Yashwant Rama Jadhav v. Shaukat Hussain Shaikh, First Appeal No. 1229 of 2017, decided on 18.11.2017,  the grievance of the petitioner before the National Consumer Disputes Redressal Commission was that appellants/complainants had entered into agreements with the respondents for purchase of residential flats, which the respondents were to construct and despite paying the substantial amount to the respondents, the construction of the flats had not been completed. The State Commission dismissed the complaints and ruled in favor of respondents against which the appellants approached the National Commission. The NCDRC held that Section ‘3’ of the Consumer Protection Act, to the extent it is relevant provides that the provisions of the Act shall be in addition and not in derogation of the provisions of any other law for the time being in force. Thus the remedy available under the Consumer Protection Act is an additional remedy, which Parliament has made available to a consumer. Even
Post a Comment
Read more