CS Professional · Insolvency and Bankruptcy - Law and Practice · Group Insolvency
Gamma Ltd and Delta Ltd are group companies with separate registered offices, separate boards, separate audited books and distinct creditors. Gamma is in CIRP and a creditor asks the NCLT to treat Delta's assets as available to Gamma's creditors, relying only on the fact that both are owned by the same promoter family. Which view is most consistent with the settled approach to substantive consolidation?
The request should be refused. Companies are separate legal persons, and common ownership alone does not justify pooling assets. Substantive consolidation is exceptional and needs facts like deep intermingling of affairs or sham structures; here books, boards and creditors are distinct, so separate estates continue.
- AIt should be granted, because common ownership alone justifies pooling assets
- BIt should be refused, because separate legal personality is respected and common ownership alone does not justify pooling absent intermingling or shamCorrect
- CIt should be granted because Delta is automatically a corporate debtor once Gamma is admitted
- DIt should be refused only if Delta's creditors consent unanimously
Explanation
A company is a separate legal person, and group status or common promoters is not enough. Pooling is considered only in exceptional cases such as deep intermingling of affairs or a sham structure. Delta is not automatically admitted into CIRP, and unanimous creditor consent is not the test.
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