NCLAT Protects Pre-Amendment Going-Concern Sale in Honest Derivatives Liquidation
The National Company Law Appellate Tribunal has set aside an Ahmedabad NCLT order that had blocked implementation of a going-concern sale involving Honest Derivatives Private Limited, giving an important clarification on how the October 2025 overhaul of the IBBI Liquidation Process Regulations should apply to transactions already in motion.
The appeal was brought by Garden Court Distilleries Private Limited, which had emerged as the successful purchaser in the liquidation process of Honest Derivatives. NCLAT’s official listing records the matter as Garden Court Distilleries Private Limited v. Mr. Akhil Ahuja, Liquidator of Honest Derivatives Ltd. & Anr., with the judgment uploaded on September 10, 2026.
Why the October 2025 amendment became decisive
On October 14, 2025, the Insolvency and Bankruptcy Board of India notified the IBBI (Liquidation Process) (Second Amendment) Regulations, 2025 through notification IBBI/2025-26/GN/REG129. The amendment removed clauses (e) and (f) of Regulation 32, which had provided for sale of the corporate debtor or its business as a going concern, and omitted Regulation 32A.
Crucially, the notification itself says the changes apply prospectively, meaning to cases where liquidation by sale as a going concern had not commenced. That saving language became central to the dispute because the Honest Derivatives liquidation and the purchaser’s transaction had begun before the amendment was notified.
NCLAT rejects retrospective use of the new rule
Contemporaneous reporting of the September 10 judgment states that the Ahmedabad Bench of NCLT had rejected Garden Court Distilleries’ plea to implement the sale after relying on the amended liquidation regulations. NCLAT disagreed with that approach and held that the later regulatory change could not be applied retrospectively to undo a process that fell within the amendment’s prospective-saving framework.
The legal point is wider than the facts of one liquidation. Whenever a regulation expressly says it applies prospectively, insolvency professionals and adjudicating authorities must identify the relevant cut-off event before applying the new regime. In this case, the dispute turned on whether the going-concern sale process was already protected from the October 14 change.
What the 2025 amendment actually changed
- Regulation 31A(1)(f) was omitted.
- Regulation 32(e) and 32(f), dealing with going-concern sale modes, were omitted.
- Regulation 32A, which specifically governed sale as a going concern, was omitted.
- The notification expressly stated that the amendment would apply prospectively to cases where liquidation by sale as a going concern had not commenced.
The result is that the timing of a liquidation transaction can materially affect which regulatory framework governs it. Professionals should therefore retain auction notices, process memoranda, letters of intent, bid records, payment evidence and other dated records that show when the relevant sale process crossed the operative threshold.
Practical implications for insolvency and finance teams
For liquidators and insolvency professionals, the decision reinforces the importance of transition clauses whenever IBBI changes a live process. A regulation that removes an available route for future cases does not automatically extinguish rights or steps validly initiated under the earlier framework where the amendment itself protects ongoing transactions.
For successful bidders, lenders and transaction advisers, the case is also a reminder that regulatory-change risk should be addressed in process documentation. Bids and implementation plans can span months, while IBBI regulations may change during that period. A clear chronology of the auction, declaration of the successful bidder, letter of intent, sale consideration and applications before NCLT can become decisive in a later dispute.
Professionals should also distinguish between the current rule for fresh liquidations and the treatment of a legacy process. The October 2025 amendment substantially narrowed the going-concern route for future cases, but its own prospective wording preserved a transition question for transactions that had already commenced.
What happens next
NCLAT’s setting aside of the NCLT order revives the successful purchaser’s case for implementation of the transaction in accordance with the appellate ruling and the applicable pre-amendment framework. Any consequential steps must still follow the operative directions in the judgment and the liquidation record.
Practical takeaway: The September 10 NCLAT ruling is a useful transition-rule precedent: when IBBI expressly makes an amendment prospective, insolvency professionals should test the transaction against the stated cut-off rather than automatically applying the new rule to an already-commenced process.
Official source: View the official source document
Key takeaway
NCLAT has set aside an Ahmedabad NCLT order that applied the October 2025 liquidation-rule change to a pre-existing going-concern sale, reinforcing the amendment’s express prospective operation.
