CS Professional · Insolvency and Bankruptcy - Law and Practice · Group Insolvency
The CoC of Alpha Ltd. is also the CoC of its sister company Beta Ltd., and both are in CIRP with a common resolution applicant. The NCLT is asked to approve a single plan treating both companies as one economic unit. Which approach did tribunals adopt in group cases such as Videocon (where assets of group companies were consolidated)?
Tribunals have permitted consolidation only on specific facts, where the companies' affairs are so intertwined, with common creditors and assets, that separate processes are impractical. It is a discretionary, case-specific remedy, not automatic on common promoters, and it is neither expressly prohibited nor left to the Central Government.
- AConsolidation is allowed only where the tribunal has by consent or on facts found the companies' affairs so intertwined that separation is impractical, and it is a limited, case-specific exerciseCorrect
- BConsolidation is automatic whenever two companies share a promoter
- CConsolidation is barred in every case because the IBC prohibits it expressly
- DConsolidation can be ordered only by the Central Government by notification
Explanation
In the Videocon matter the NCLT permitted consolidation of group companies' CIRP because of deep interconnection and common creditors, exercising its discretion on facts. It is not automatic on common promoters (first option wrongly broad) and is not expressly prohibited or reserved to the Government.
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