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

Vihaan Textiles Ltd, a subsidiary, is in CIRP. Its parent, Vihaan Holdings Ltd, has given a corporate guarantee for its debts, and both use the same factory premises. Under the IBC as it presently stands in India, how is the position of group insolvency best described?

The Code currently has no comprehensive group insolvency chapter. A framework was recommended by the Insolvency Law Committee and a rule-based approach has been suggested, but at present only separate provisions, such as those on corporate guarantors, and tribunal coordination apply, not mandatory consolidation.

  1. AThe Code contains a full chapter on group insolvency with mandatory consolidation of group CIRPs
  2. BThe Code has no specific group insolvency provisions; a framework has been proposed, and only guarantor-related provisions and judicial coordination applyCorrect
  3. CThe Code bars the initiation of CIRP against any member of a group
  4. DThe Code requires the Competition Commission to approve group insolvency

Explanation

The IBC at present has no comprehensive group insolvency regime. The Insolvency Law Committee recommended a framework, and for now guarantors of corporate debtors are dealt with under separate provisions and the NCLT may coordinate. Hence the claim of a full mandatory chapter is wrong.

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