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

Three companies of a promoter group owe money to the same bank, and each has its own board and balance sheet. The bank files separate Section 7 applications against each of them. In which manner does the Indian IBC framework, as applied in judicial decisions, generally treat these companies for insolvency purposes?

Group companies are treated as separate legal entities, each facing its own CIRP. Judicial decisions do not automatically consolidate them on the basis of common promoters or financial linkages, because the IBC contains no statutory provision for automatic substantive consolidation of group entities.

  1. AAs separate legal entities, each undergoing its own CIRP, with no automatic substantive consolidationCorrect
  2. BAs a single debtor, with one CIRP covering all group companies automatically
  3. CAs one entity, with the group holding company's resolution professional controlling all the others
  4. DAs a single estate, whose assets are pooled once the first company is admitted

Explanation

The IBC treats each corporate debtor as a distinct legal person. Courts have held that group companies are not automatically merged merely because they share a promoter or financial dealings. Options suggesting a single CIRP or automatic pooling of assets ignore this separate-entity principle.

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