Page 34 - Banking Finance August 2024

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e) Components of Procedural Coordination - As old and is bound to evolve with maturity. Even during this
recommended by the CBIRC, directives related to the brief period, there have been instances (Videocon Industries
following coordination mechanisms may be part of the Ltd. vs State Bank of India and others, Edelweiss Asset
framework: Reconstruction Co Ltd v. Sachet Infrastructure Pvt. Ltd &
i. Joint Application for filing of corporate insolvency Others. to name a few)wherein complications arose during
resolution process against two or more entities insolvency proceedings due to the presence of group
belonging to the same group by their creditors linkages.
(both financial and operational) or the entities
themselves. In the absence of a defined Group Insolvency framework in
India, our courts have taken their own course and have
ii. Conducting proceedings in a single NCLT (common
for all the group entities) having territorial applied the principals of group insolvency in their verdicts.
The judgments relied on precedents from jurisdictions like
jurisdiction over any one of the corporate debtors.
USA and UK where there are formal regulations surrounding
iii. Formation of Group Committee of Creditors (Group Group Insolvency.
COC). Participation of individual COC's in the group
COC will be on a voluntary basis. Group CoC will be Hence, it can be said that group insolvency is evolving in
responsible to device strategies for undertaking India out of practice. However, a major limitation of this
combined valuation, negotiating resolution plans approach is the lack of uniformity. Individual courts, based
etc. Such group COC's to give procedural assistance on their wisdom, may interpret situations in an independent
only and will not take any substantive decisions. manner. Non-Uniform verdicts in similar cases are likely to
result in confusion among stakeholders. Hence, it is
iv. Decision regarding appointment of a single
imperative that legislation on Group Insolvency be
resolution professional for the entire group to be
introduced at an early date. It is highly likely that the
taken by CoCs of the respective corporate debtors
legislature will come up with a group insolvency framework
if they deem it necessary.
that is facilitative and helps in development of a unified
v. Mandatory provisions for promoting co-operation, resolution plan involving multiple entities belonging to the
facilitating communication and information sharing same group on a consensual manner. The framework should
among the participants of the group insolvency help in reduction of administrative costs and efforts of
proceedings. disentangling the complexities arising out of inter-linkages
involved in a group setting.
vi. Provisions regarding enabling "Group Co-ordination
Proceedings". Such proceedings may be initiated References:-
either during the CIRP process or during liquidation.
i. Cross Border Insolvency Rules /Regulations Committee
vii. Provision for appointment of "Group Coordinator". (CBIRC-II) report on Group Insolvency, December 2021.
Primary responsibility of the coordinator is to
ii. https://uncitral.un.org/en/texts/insolvency/
develop a "Group Strategy". Besides, it is also to
legislativeguides/insolvency_law
be entrusted to come up with recommendations for
iii. https://uncitral.un.org/en/MLEGI
the coordinated conduct of insolvency proceedings
iv. Company Groups in India (OECD,2021)https://
of the participating group members.
www.oecd.org/corporate/Company-Groups-in-India-
viii. A broad definition of "Group Strategy" that permits 2022.pdf.
several combinations of measures aimed at
v. https://ibbi.gov.in/uploads/publication/2021-02-12-
synchronization of the CIRP or liquidation 154823-p3xwo-
proceedings of participating group entities under 8b78d9548a60a756e4c71d49368def03.pdf
resolution.
vi. https://www.lexology.com/library/
detail.aspx?g=87578ef4-6368-462a-b30a-
Conclusion 17c4bd82672d(Group Insolvency - The need of the
The Insolvency and Bankruptcy Code in India is just 8 years Hour -Bharucha & Partners)

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