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Group Insolvency: Introduction

Group means two or more enterprises, which directly or indirectly are in a position to exercise 26% or more voting rights in other enterprise or appoint more than 50% members of the Board of Directors in the other enterprise or control the management or affairs of the other enterprise.[1]

Typically, when one of the enterprises of a group entity gets insolvent, it is treated as a separate entity and insolvency proceedings are initiated against that particular entity only. But when group entities are significantly interdependent, it may not be helpful to conduct the insolvency proceedings for only such enterprise, which is ex facie insolvent. In fact, one should not turn a blind eye to the interlinkages between group entities when one or more of enterprises within a group become insolvent. Insolvency proceedings initiated against each such enterprise would be time-consuming, ineffective and  an unnecessary burden on an already over-burdened judicial system. The concept of group insolvency is being developed gradually in India and in that process, it is important to identify such interlinkages between different entities of a group to have a more effective resolution process.

Group Insolvency: Need for a Legislative Framework

It is common for the entities of a group to be dependent on each other in terms of finances and operations. If one is to separate the ownership of assets and liabilities of such interdependent entities, then the insolvency process can become cumbersome, complex, inefficient, and costly. This can also run against the expectations and interests of the creditors, as it can be value destructive. Moreover, lenders often consider the financials of the whole group while making lending decisions in respect of enterprises forming part of the group.

The Insolvency and Bankruptcy Code (hereinafter ‘the Code’) comprehensively deals with the insolvency of corporate debtors as separate legal entities. However, it does not envisage a framework to either coordinate insolvency proceedings of corporate debtors belonging to a group or to have a common resolution for them. To address this gap, the National Company Law Tribunal (hereinafter ‘NCLT’), and National Company Law Appellate Tribunal (hereinafter ‘NCLAT’), under the Code and the Supreme Court have passed certain orders (which are discussed in the next section). These orders have either enabled coordination of insolvency proceedings of group members in some instances or have applied general principles of corporate law in relation to piercing of the corporate veil to make group companies liable for each other. It is thus to be kept in mind that insolvency jurisprudence is still evolving in India in this respect.

There are situations where if interlinked companies are resolved together, there may be maximisation of value of assets and higher possibility of revival of companies. So, purely for the sake of value maximisation, higher possibility of revival of companies and the gap in relation to group insolvency in the Code, a group insolvency framework is required.

Group Insolvency: Adjudicating Authorities Bridging the Gap

Since the coming into force of the Code, issues related to interlinking of group companies have arisen in several insolvency proceedings. Despite no specific provision for dealing with group insolvency under the Code, the Adjudicating Authorities have dealt with these issues in the following manner:

Bikram Chatterji v. Union of India[2]

Homebuyers in projects built by various companies of Amrapali group filed a writ petition before the Supreme Court to safeguard their interests following the insolvency of various Amrapali group companies. In these proceedings, the Supreme Court addressed the group as a whole. The Court also mandated that the assets of all forty group firms in the Amrapali group be attached and that all bank accounts belonging to the companies and their directors be frozen due to the nature of the transactions between the group companies.

Venugopal N. Dhoot v. State Bank of India[3]

In order to treat “the corporate insolvency resolution process as one in respect of all of the companies”, the parties in this case requested that the same Adjudicating Authority handle all issues pertaining to the insolvency resolution of multiple Videocon companies and that the separate proceedings of Videocon companies be consolidated. In order to “avoid conflicting orders and facilitate the hearing” of these proceedings, the Principal Bench of the NCLT ordered that all matters pertaining to the insolvency resolution processes of these several entities be handled by the same bench of the NCLT.

Edelweiss Asset Reconstruction Company Limited v. Sachet Infrastructure Private Limited [4]

In this case, NCLAT held that “group insolvency proceedings were required to be initiated” against five companies that had been working as joint consortium to develop a residential colony. Taking into consideration the facts of the case and enabling successful development of the colony, the NCLAT ordered “continuation of simultaneous corporate insolvency resolution processes against them under the guidance of the same Resolution Professional. The Resolution Professional was also ordered to initiate a consolidated ‘Resolution Plan(s)’ for total development”.

It thus can be seen that even in the absence of any express provisions in the Code, the Adjudicating Authorities have taken decisions relating to group insolvency. Though these orders offer their value as judicial precedents, they do not deal with group insolvency comprehensively. Instead, these orders deal with insolvency [CAM1] [VS2] on a case-to-case basis, making them unsuitable as a substitute for a comprehensive legal framework.

Group Insolvency: Proposed Legal Framework and Recommendations of the Committee

The Report of Cross Border Insolvency Rules/Regulation Committee on Group Insolvency (hereinafter ‘the Committee’) has proposed a draft framework for regulating group insolvency in India. The Committee has referred the Report of Working Group on Group Insolvency and has also sought opinions from the relevant stakeholders. Some of the major recommendations of the Committee are reproduced as follows:

  • Group insolvency should be implemented gradually, with the first phase focusing solely on domestic group insolvency-related regulations. A structure for group insolvency of this kind ought to be voluntary, flexible and enabling in nature.
  • Control and substantial ownership are two possible bases for a broad, inclusive definition of ‘group’. As per Section 227 of the Code, this definition should also apply to limited liability partnerships and businesses, but not to financial service providers.
  • The group insolvency framework should not apply to solvent group members.
  • A group Committee of Creditors (hereinafter ‘the group CoC’) may be established, provided that the Committee of Creditors (hereinafter ‘the CoC’) of each group member provide sufficient representation The group CoC (outside of a group coordination proceeding) may only offer procedural support.
  • It should be mandatory for the CoCs and insolvency professionals assigned for corporate debtors in the same group to cooperate, coordinate, and share information with each other.
  • For corporate debtors in the same group going through a corporate insolvency resolution or liquidation process under the Code, the law should permit group coordination proceedings. A group coordinator should be appointed for such purpose.
  • The group coordinator will appoint suitable representatives from each participating member’s CoC to form a group CoC. The group CoC (in a group coordination proceeding) may carry out tasks assigned to it by other CoCs. However, the group CoC cannot be given the authority to endorse a resolution plan.
  • The group coordinator will lead the group coordination proceedings and develop a group strategy. Each participating CoC must approve the group strategy with 66% of their voting shares. The group plan will become binding on all parties involved as soon as it is filed and approved with the Adjudicating Authority.
  • A group coordination proceeding shall terminate if the group coordinator applies for a termination order on any of the following grounds:
    • the group strategy has been approved and fully implemented;
    • the CoCs and liquidators have approved such termination by the required majority; or
    • the CoCs and liquidators have failed to approve a group strategy and the group coordinator is of the opinion that it is not feasible for participating group members to agree on a group strategy.

    Group Insolvency: Regulatory Framework Across Jurisdictions

    Group insolvency is not a novel concept and countries across the world have tried incorporating it in their insolvency law regime. Following are some examples:

    European Union

    In the European Union, Regulation (EU) 2015/848 on the subject of “Insolvency Proceedings” of the European Parliament and of the Council governs Group Insolvency. Chapter V of the Regulations, i.e., Article 56 to 77, talks about Insolvency Proceedings of Members of Group Companies. These provide for a detailed framework of Group Procedural Coordination.[5] Chapter V contains rules designed to promote cross-border cooperation and coordination between courts and insolvency practitioners in insolvency proceedings concerning group companies in the entire Europe.


      Group insolvency was first brought into German insolvency law on March 9, 2017. It permits the initiation of insolvency proceedings for companies that are part of a corporate group before a single German Insolvency Court and/or the administration of such proceedings by a single Insolvency Administrator. Some important characteristics that are included in these regulations include the Group venue; the ability to designate the same individual as the Group Insolvency Administrator/receiver; and the Group Coordination proceedings.[6]


      Lenders within Australian corporate groups frequently seek group guarantees and cross-collateralization. These assurances give investors comfort that a holding company will support the operation companies or special purpose vehicles. The purpose of the statutory cross-guarantee is to give creditors who lend money or provide services to operational subsidiaries some comfort by making group members liable for each other’s debt.

      In Australia, group proceedings are prohibited since each member is regarded as a separate legal entity. To guarantee coordination and the avoidance of conflicts throughout the insolvency proceedings, an application may be filed with the Court to appoint a single trustee for each group company. Australian law also allows insolvency proceedings with the same Court and judge against the group companies.[7]

      Therefore, there are countries around the world that have attempted regulating group insolvency in one form or the other. The Indian Legislature should take inspiration from these countries and try to come up with a comprehensive framework.

      Group Insolvency: Conclusion and Way Forward

      As on date, group insolvency has been recognised in India but only through case laws. While some countries already have regulations in place for group insolvency, no legislative framework is in place in India to regulate the same. The difficulty that corporate debtors may face due to the absence of legislative framework regulating group insolvency can be highlighted through the following case.

      In the case of Giriraj Enterprises,[8] the Chennai Bench of NCLAT had the opportunity to deal with the aspect of consolidation of insolvency proceedings of the holding company, Regen Powertech Private Limited (hereinafter ‘the RPPL’) and its subsidiary company, Regen Infrastructure and Service Private Limited (hereinafter ‘the RISPL’). The Chennai Bench of NCLT through its impugned order dated 1 November 2021 in IA/694/CHE/2021 in IBA 1099/2019 had held against the consolidation of [CAM3] [VS4] insolvency proceedings of RPPL and RISPL. One of the grounds for rejection was the absence of equity jurisdiction being vested upon NCLT and the absence of specific provisions under the Code allowing consolidation or simultaneous running of insolvency proceedings of RPPL and RISPL at the fag end of insolvency proceedings.

      Reversing the impugned order of the NCLT, the NCLAT through an order dated 31 August, 2023, ordered the consolidation of proceedings of RPPL and RISPL on the ground that through consolidation, maximisation of value of assets and value addition can be ensured, which is the main scope and objective of the Code. This NCLAT order has been challenged before the Supreme Court by the CoC of RPPL.[9] The Supreme Court through the order dated 9 October, 2023, has not interfered with the impugned judgment/order of NCLAT and has rejected the stay application. The matter is set to be next listed in January 2024. It would be interesting to see how the Hon’ble Supreme Court deals with this matter.

      In any event, in the present circumstances it is desirable that there is an appropriate legislative framework regulating this particular aspect of group insolvency, which seems to be need of the hour.

      [1] Explanation (b) to Section 5 of the Competition Act 2002.

      [2] Bikram Chatterji v. Union of India, (2018) 17 SCC 707.

      [3] Venugopal N. Dhoot v. State Bank of India, 2018 SCC OnLine NCLT 29551.

      [4] Edelweiss Asset Reconstruction Company Limited v. Sachet Infrastructure Pvt. Ltd, 2019 SCC OnLine NCLAT 592.

      [5] Giriraj Enterprises v. Regen Powertech Private Limited and Ors, Company Appeal (AT) (CH) (Ins) No. 323 of 2021 (Giriraj Enterprises)

      [6] Ibid.

      [7]  Procedural and Substantive Aspects of Group Insolvency: Learnings from Practical Experiences, Indian Institute of Insolvency Professionals of ICAI, available at IIIPI-Research GI Consolidated Report1.1.indd (

      [8] Giriraj Enterprises, n. 6.

      [9] Committee of Creditors of Regen Powertech Private Limited. v. Echanda Urja Private Limited, Civil Appeal No. 6690-6706/2023.