IBC, 2016 and Power of Liquidator in Private Sale under IBC

IBC, 2016 and Power of Liquidator in Private Sale

Whether the Liquidator was required to obtain “prior permission” of the Adjudicating Authority for the conduct of the private sale and if so whether the requirements of prior permission had been met by the Liquidator in terms of Regulation 33(2)(d) of the IBBI (Liquidation Process) Regulations, 2016 ?

It was explained that when we look at Regulation 33(1) of LPR, we notice that sale by auction is the preferred and accepted mode for conduct of liquidation proceeding under IBC, 2016. Sub Regulation 2 of Regulation 33 of LRP however caters to private sale and this clearly stipulates that for a private sale to be carried out, the Liquidator has to undertake “prior consultation” of the SCC. Such a private sale is to be conducted by the Liquidator with prior consultation with the SCC only when the asset is perishable or is degradable in value. In all other cases of private sale, in terms of Sub Regulation 2(d), the “prior permission” of the Adjudicating Authority is required to be obtained for a private sale. 

There is need of “prior permission” not only for private sale but highlights that there is “yet another embargo” of “prior permission” which is to be sought in case of sale to a related party. Furthermore, the intention of having this stringent condition to protect the assets of the corporate debtor and the interests of the stakeholders has also been emphasized.

Obligation of the Liquidator to obtain “prior permission” has been emphasized as not a mere formality but necessary to be followed scrupulously.  

Case reference is Orissa Alloy Steel Private Limited v S M Steels and Power Limited [2025] GCtR 1716 (NCLAT).