NCLAT Delhi Ruling: Liquidation Commencement Date Tied to NCLT Order; Subsequent IBBI Regulations Deemed Prospective

The appellate authority under the insolvency framework has recently delivered a crucial judgment clarifying the exact point at which a liquidation process is deemed to have commenced and the applicability of subsequent regulatory amendments to ongoing proceedings. In a significant legal pronouncement, the National Company Law Appellate Tribunal (NCLAT), New Delhi, adjudicated on the temporal application of amendments made by the Insolvency and Bankruptcy Board of India (IBBI).

The core of the dispute in the matter of State Bank of India Vs Garden Court Distillieries Pvt Ltd centered around whether regulatory changes introduced after the formal order of liquidation could retroactively alter the fundamental parameters of a going-concern sale. The Appellate Tribunal firmly established that the rights, duties, and procedural guidelines governing a liquidation process are crystallized on the date the Adjudicating Authority passes the liquidation order.

Factual Matrix and Procedural Background

The judicial controversy arose from an order passed by the National Company Law Tribunal (NCLT), Ahmedabad Bench. The appellant, who emerged as the successful auction purchaser of the corporate debtor on a going-concern basis, had approached the Adjudicating Authority seeking specific consequential reliefs and concessions necessary to implement the sale successfully.

Through the impugned order dated 17.06.2026, issued in I.A. No. 678 (AHM) of 2026 arising out of C.P. (IB) No. 269 (AHM) of 2023, the NCLT rejected the appellant's application. The Adjudicating Authority's refusal was primarily based on its interpretation of the IBBI (Liquidation Process) (Second Amendment) Regulations, 2025, which were officially notified on 14.10.2025.

However, the chronological sequence of events revealed a critical disconnect. The NCLT had already passed the foundational liquidation order for the corporate debtor on 10.10.2025 under Section 33(2) of the Insolvency and Bankruptcy Code, 2016. In this initial order, the Adjudicating Authority had explicitly documented the commercial wisdom of the Committee of Creditors (CoC). The CoC had specifically resolved that the appointed liquidator must initially pursue the sale of the corporate entity as a going concern, drawing authority from Regulation 32(e) read alongside Regulation 39C of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

The primary grievance brought before the NCLAT was that the Adjudicating Authority had erroneously applied a subsequent regulatory amendment to a process that had already been legally initiated. The appellant contended that the liquidation order dated 10.10.2025 categorically stated it was effective immediately. Therefore, any subsequent auction procedures or sale mechanisms were merely execution steps of that pre-existing order, not the genesis of a new liquidation phase that would attract the amended regulations notified four days later on 14.10.2025.