NCLT Chennai explains the difference between the sale of “corporate debtor as a going concern” U/R 32(E) and the sale of “corporate debtor’s business as a going concern” in IBC

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the NCLT Division Bench, Chennai composed of R. Sucharitha, judicial member and Sameer Kakar, technical member in the case of MS Viswanathan c. Pixtronic Global Technologies Pvt. ltd. allowed the liquidator to sell the debtor company as a going concern, while specifying that the “sale as a going concern” means the sale of both assets and liabilities, if indicated “as which where is”.

The liquidator of Gemini Communications Ltd., who is the plaintiff in this case, sold the debtor company as a going concern to the successful bidder, M/s. Pixtronic Global Technologies Pvt. ltd.

The liquidator has filed an application under 35(1)(n) r/w IBC Section 60(5), 2016 and Regulation 32(e) of the IBBI (Winding Up Process) Regulations, 2016 requesting approval of the sale of the Debtor business as a going concern.

The Court observed that “sale as a going concern” refers to all those assets and liabilities, which constitute an integral business of the debtor business, which must be transferred together, and the consideration must be for the business of the debtor company. The buyer of assets and liabilities must be able to manage its affairs without any interruption.

The Court explained that there are two going concern sales defined under Regulation 32 of the IBBI (Winding Up Process) Regulations 2016. The first is the sale of the “debtor company as a going concern” under Regulation 32(e) and the second is the sale of “the business of the debtor company as a going concern” under Regulation 32(f).

“In the sale of the ‘debtor company as a going concern’ under Regulation 32(e) of the IBBI (Winding Up Process) Regulations 2016, the debtor company will not be dissolved. In this part of the sale , all of the business, assets and liabilities, including all contracts, licenses, concessions, agreements, advantages, privileges, rights or interests of the Debtor Company will transfer to the purchaser. will be transferred to the acquirer.The existing shares of the Debtor Company will not be transferred and lapses.

In connection with the sale of the “business of a debtor company as a going concern” under Regulation 32(f) of the IBBI (Winding-Up) Regulations 2016, the entire business as well as assets and liabilities, including intangible assets, will be transferred as a going concern to the acquirer, without transfer from the Debtor Company, and consequently, the Debtor Company will be dissolved. Existing shares will be extinguished. The remaining assets, other than those sold as part of the business, will be sold and the proceeds therefrom will be used to satisfy claims under Section 53 of the IBC, 2016.”

The Tribunal relied on the NCLAT’s decision in Mrs. Visith Services Ltd. Vs. M. SV Ramani, liquidator of United Chloro-paraffins Pvt. ltd. and ruled that under Regulation 32A of the IBBI (Winding-Up) Regulations, 2016, the sale of a “going business” means the sale of both assets and liabilities and not assets without liabilities, if listed on an ‘as is where is’ basis.

The NCLT cleared the application for the sale of the ‘debtor company as a going concern’ and ordered the liquidator to file an application under Regulation 45(3) of the IBBI (Winding Up Process) Regulations 2016 for the closure of the liquidation process after the distribution of the proceeds to the stakeholders in accordance with the cascade mechanism u / s 53 of the Code.

Case title: MS Viswanathan c. Pixtronic Global Technologies Pvt. ltd.

Claimant’s advice: Mr. R. Venkatavaradan, lawyer

Counsel for the Respondent: MB Gopinath

Click here to read/download the order

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