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

Two companies, Alpha Textiles Ltd and Beta Dyes Ltd, belong to one promoter group and are in separate CIRPs before the same NCLT bench. Their operations, bank accounts and management are heavily intermingled. The IBC has no statutory provision for group insolvency. What approach have Indian Tribunals and courts generally taken in dealing with such cases?

Indian Tribunals have allowed procedural coordination of group insolvencies, such as a common IRP or joint hearings, where facts justify it, while treating each company as a separate legal entity with its own estate. Automatic substantive consolidation is not the norm, and the Code's silence does not bar coordination.

  1. ARefuse any coordination because each corporate debtor is a separate legal entity and the Code is silent
  2. BAllow procedural coordination, such as common IRP or CoC, in appropriate cases while keeping each entity's estate separateCorrect
  3. COrder automatic substantive consolidation of all group companies into one estate
  4. DTransfer both cases to the Supreme Court for a single combined resolution

Explanation

Tribunals have used their powers to coordinate proceedings of group entities, for example by appointing the same IRP or hearing the cases together, where facts justified it. Each company's estate has generally stayed distinct, so separate assets and liabilities are maintained. Automatic consolidation is not the rule, and the Code's silence has not prevented procedural coordination.

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