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CS Professional · Insolvency and Bankruptcy - Law and Practice · Group Insolvency

An operational creditor of two group companies argues that, because the Supreme Court has recognised in Jaypee Infratech-type cases that the CIRP should be a collective process for the benefit of all stakeholders, the NCLT must pool the group's assets. Which response is correct?

Pooling cannot be demanded as of right. The tribunal must examine the facts, including how interconnected the companies are and how the creditors of each entity would be affected, before ordering any group treatment. Listing status or the stage of liquidation is not the test.

  1. APooling is not a right of the creditor; the tribunal must examine facts such as interconnection and interests of creditors of each entity before ordering any group-level treatmentCorrect
  2. BPooling must be granted on request of any operational creditor
  3. CPooling is available only after liquidation commences for all companies
  4. DPooling applies only to companies listed on a stock exchange

Explanation

Courts emphasise the separate legal identity of each debtor and the need to protect each entity's creditors. Any group-level treatment depends on facts and tribunal discretion, not on a creditor's request, listing status, or liquidation stage.

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