The Insolvency and Bankruptcy Code 2016 aims at reviving companies that are going for liquidation. If reviving the company is not possible, the the code will enable to liquidate the company in a judicial and rational manner so that it serves the interests of all stakeholders and the public at large. That is is because liquidation is not the ultimatum objective of the Code as it leads to sufferings on the part of all the connected parties of the company like employees, suppliers, creditors, customers etc. when the company’s business closes down.
Slump sale instead of liquidation
Instead of the liquidation leading to closing the business, if entire assets could be sold in the form of slump sale. This will result in the business continuity and ultimately would save the interest of all the connected parties. This concern is already envisaged in the drafting of the language of Regulation 32 of the Insolvency & Bankruptcy Board of India (Liquidation Process) Regulations, 2016 as against the provisions of Section 33 (7) of the Code which treats liquidation order as a notice of discharge to officers, employees and workmen.
However, in the matter of Gujarat NRE Coke Ltd., the Kolkata bench of NCLT upheld the concern raised by employees and workmen going to lose their jobs by virtue of liquidation of business, if ordered, and therefrom the concept ‘Liquidation as a going concern’ came into picture.
Gujarat NRE Coke matter
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