Liquidation As Going Concern Under Insolvency and Bankruptcy Law

Abstract

The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as IBC, 2016) has been enacted to give effect to a highly time bound process for insolvency resolution of corporate persons, partnership firms and individuals. The objective is speedy resolution and maximizing recovery for lenders. The IBC, 2016 provides for a framework in which an Interim Resolution Professional shall carry on the business operations of the corporate as a going concern until the Committee of Creditors proposes a resolution plan that would keep the business of the corporate post insolvency resolution. On incidence of failure of the resolution plan, liquidation of the corporate person takes place. However, when liquidation of a corporate person takes place by sale of corporate debtor or its business as going concern; the person does not get dissolved and continues to exist in market as a going concern entity. The provision for this feature of liquidation was first inserted by the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2018 w.e.f. 1-4-2018 under Regulation 32 which provided for ‘Manner of sale’. Further, the provision was amended by the Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2018, w.e.f 22-10-2018. The Second Amendment substituted the previous title of ‘Manner of Sale’ with ‘Sale of Assets, etc.’ the provisions which provides for liquidation as going concern are clause (e) and (f) of Regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. ‘Going Concern’ is a concept of accounting and it’s relation with the Insolvency and Bankruptcy law will be examined in this study, with primary focus upon, the need for the concept of liquidation as going concern under Insolvency and Bankruptcy Law.