NCLT Amaravati Allows Closure of Smilecare Hospitals Liquidation After Going-Concern Sale

Smilecare Multi Speciality Hospitals India Private Limited (NCLT Amaravati)

The National Company Law Tribunal (NCLT), Amaravati Bench, allowed the application filed by the liquidator of M/s. Smilecare Multi Speciality Hospitals India Private Limited seeking closure of the liquidation process following the sale of the corporate debtor as a going concern. The application, IA (IBC) 179/2024 in TCP(IB)/54/7/AMR/2019, was filed under Section 35(1)(n) and Section 60(5) of the Insolvency and Bankruptcy Code, 2016, read with Regulation 45(3)(a) of the IBBI (Liquidation Process) Regulations, 2016. The Bench, comprising Judicial Member Shri Rajeev Bhardwaj and Technical Member Shri Sanjay Puri, passed its order on 26 June 2024. The Tribunal considered whether the completed going-concern sale justified closure of liquidation and the grant of consequential reliefs enabling the successful bidder to operate the corporate debtor without specified historical liabilities.

The corporate insolvency resolution process commenced on 17 December 2019 following an application by Reliance Commercial Finance Limited under Section 7 of the IBC. Subsequently, the Tribunal ordered liquidation on 10 May 2021 and confirmed Mr. Ramachamula Ramachandra Reddy as liquidator. The liquidator invited claims, constituted the Stakeholders’ Consultation Committee, prepared the prescribed reports and conducted successive auctions. The first two auctions, with reserve prices of ₹222.16 lakh and ₹166.62 lakh, were unsuccessful. The third auction, held on 27 January 2022 with a reserve price of ₹150 lakh, succeeded. The corporate debtor was sold as a going concern for ₹1,51,72,718, and the liquidator issued the sale certificate on 10 March 2022. The proceeds were thereafter distributed among stakeholders in accordance with Section 53 of the IBC. The liquidator also submitted the final report, audited financial statements and compliance documents required for closure of liquidation.

The Tribunal referred to earlier decisions of NCLT Hyderabad in Viswa Infrastructures & Services Pvt. Ltd. and NCLAT New Delhi in RMV Industries LLP Vs Apple Industries Pvt. Ltd., concerning reliefs available in going-concern sales. It observed that a purchaser acquiring a corporate debtor as a going concern requires certain permissions, concessions and protections to restart and continue business operations. The Tribunal recognised that a going-concern sale is broadly comparable to the resolution of a corporate debtor and that Section 60(5) of the IBC enables the adjudicating authority to consider appropriate reliefs relating to the insolvency or liquidation proceedings. On examining the completed sale, distribution of proceeds and supporting documents, it found sufficient grounds to allow closure of the liquidation process and grant consequential directions.

Accordingly, the NCLT allowed IA (IBC) 179/2024, closed the liquidation process under Regulation 45(3)(a), and discharged the liquidator, subject to completion of residual duties. It permitted reconstitution of the board of directors, directed the Registrar of Companies to change the company’s status from liquidation to active, extinguished existing shares and specified past liabilities, and granted protection against claims and proceedings relating to the period before liquidation, as set out in the operative order. It also directed that existing licences, approvals and permissions continue subject to applicable conditions, recognised the successful purchaser’s rights over the company’s assets, and permitted review or termination of earlier contracts. The successful purchaser was directed to undertake the necessary Companies Act and regulatory compliances. The order was passed without costs. These reliefs arise from the particular liquidation order and should not be treated as an unrestricted statutory exemption from every liability or regulatory requirement.

Cases Discussed