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Insolvency’s Group Tangle

T he Insolvency and Bankruptcy Code (IBC) has been through judicial orders, without explicit provisions within the

around for nearly seven years, and in these seven
Code. "While group insolvency is a critical requirement in
years, it has been amended six times. However,
many cases, mandating substantive consolidation under the
it is yet to address a significant concern: group
structures and financing across each company within a
insolvencies. Code might not be prudent due to varying ownership
group," he explains.
While the IBC lags in accommodating the consolidation of
resolution processes for group companies, courts have Interlinked, interdependent
frequently intervened to take up group insolvency matters.
On January 8, 2019, the National Company Lay Tribunal
(NCLT) Mumbai had, for the first time, recognised the
The absence of a dedicated provision for group insolvency
principle of “consolidation”, drawing from legal precedents
within the IBC has led to notable cases of judicial
in the UK and USA, to consolidate 13 out of 15 corporate
consolidation. Among these are the consolidation of 13
insolvency resolution processes of Videocon Industries Ltd.
Videocon group companies, Lavasa corporation and its group companies.
subsidiaries, and the procedural consolidation of Srei
Equipment Finance and Srei Infra Finance Ltd.
"The NCLT recognised the interlinked operations and
financial interdependencies within corporate groups," says
There was also the case where, to benefit homebuyers, the
Sonam Chandwani, Managing Partner, KS Legal and
National Company Law Appellate Tribunal merged the
Associates. This approach, she adds, enabled a holistic and
insolvencies of five Edelweiss Asset Reconstruction Company efficient resolution process, considering the interconnected
Ltd entities developing a common township.
assets and liabilities, leading to potentially higher recoveries
and more viable resolution plans.
"In commercial matters, the law serves as a roadmap for
transactions," says MS Sahoo, distinguished professor at the
National Law University Delhi.

"The corporate insolvency resolution process, initially
outlined by the IBC, is one such route." Another avenue,
prepackaged insolvency resolution, was introduced through
an amendment to the IBC, he explains. "Group insolvency
resolution," Sahoo adds, "represents yet another guided
pathway that requires legal provision. Courts, however, lack
the capacity to lay such a path."

Anoop Rawat, partner at the law firm Shardul Amarchand
Mangaldas & Co, adds that consolidation has so far arisen

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