INTRODUCTION
In response to historic criticism of a disjointed solution to group companies, where parallel CIRPs destroy value in duplicated expense and incompatible strategy, the IBC Amendment Act 2026, to take effect in April 2026, involves parcelling out responses to group companies. With chapter V-A, voluntary coordination through joint applications to NCLT is facilitated, so that the timelines are met and shared professionals occur without substantial asset mergers. However, joint CoCs formation, which lies at the heart of decision-making, brings new contradictions, since creditors of subsidiaries can come into conflict with stakeholders in the holding company on the issue of resource distribution. This article explores these traps using the text of the Act and the initial policy debate surrounding it to identify the traps of a promise of procedure over practical dangers to the changing Indian insolvency system.
SECTION 59A OVERVIEW
Section 59A authorises NCLT to direct group insolvency when group entities or creditors jointly petition that the entities are interrelated and the reward maximisation advantages are realised. The notable components are the appointment of common resolution professionals (RPs), aligned 330-day programs, and joint CoCs in which creditors cast their votes on joint plans. It does not eliminate entity separateness as is the case with substantive consolidation under Chapter 11 in the US, but instead provides only limited coordination, such as the sharing of information and the consolidation of meetings. The provision pertains to conglomerates such as Adani groups or Vedanta groups, which have intra-group guarantees that raise the contagion risks. Nonetheless, in the absence of conflict resolution through explicit mechanisms, Section 59A is likely to stalemate when CoCs focus on individual recoveries rather than on viability holistically.
JOINT COC FORMATION
Joint CoCs unify the creditors of various entities into one forum, though with different weighting proportions based on claim value as a member of the group. Formation needs NCLT approval after application, and it requires that the inter-company claims and guarantees be disclosed. This structure aims to expedite the approvals of cross-entity resolution plans, without siloed committees vetoing them. In practice, claims through unified portals are submitted by creditors, and RP validates claims by Section 18 criteria. Early IBBI consultation propositions indicate the proportional representation rules, but still, uncertainty abides regarding the manner of dealing with the disputed inter-group debts, and this has provided the groundwork for the formation of disputes. Practically, a holding company can be run by its own creditors, to the disadvantage of trade counterparts of troubled subsidiaries.
VOTING POWER CONFLICTS
Joint CoCs voting consolidates claims, enabling disproportionate, cross-collateral claimholders to have an excessive influence on entities. To give an example, an unsecured creditor of the parent bank in 30(4) plan approvals would be overridden by a bank with 60% exposure to the parent bank. This intensifies the common pool problem, wherein the majority of creditors drain the minority ones through intra-group set-offs. This omission of sub-CoC veto rights in the Act, contrary to single CIRPs, increases the risks, which may result in the breach of the commercial wisdom doctrine in case NCLT steps in. Orders of NCLT in standalone cases, such as Byjus in the recent past, have illustrated the existence of such frictions; the friction on scaling to groups would bring proceedings to a standstill. Included in the IBBI 2024-25 report is empirical evidence revealing that 7 out of 10 group insolvencies do not succeed in isolation; hence, the immediate need and danger of collective voting[1].
In addition to that, such a framework encourages strategic holdouts, a situation in which minority creditors hold up approvals to seek concessions, as is the case in the multi-entity saga of Videocon Industries. The lack of tiered voting rules maintains the marginalisation of operational creditors (often MSMEs supplying group subsidiaries), and the IBC creditor hierarchy critiques continue to be borne out.
PRIORITY MISALIGNMENT RISKS
The priorities of creditor groups contradict each other drastically, with secured lenders demanding asset ring-fencing and operating creditors demanding a going-concern sale. The section 59A coordination agreements have to deal with this, and where there are no statutory waterfalls to try to deal with shared proceeds, misalignments breed. Indicatively, scenarios such as the liquidation of a lucrative subsidiary to finance a parent by CIRP would raise the adversarial challenges in Section 29A. Priorities are further complicated by avoidance transactions under longer two-year look-backs (as of 2026 amendments) since clawbacks are in favour of CoC of one entity to the disadvantage of a different entity.
Critiques of the policy are coupled with the observation that, in the absence of a mandatory priority harmonisation, joint CoCs are tempted to replicate the flaws of creditor democracy, which are more benevolent to banks than to MSMEs- a systemic bias demonstrated by 85 per cent creditor dominance in CIRP[2]. These threats to Chapter V-A jeopardise its value maximisation ethos.
NCLT SAFEGUARDS
NCLT has oversight capacity as the nodal authority, which has the mandate of amending the terms of coordination, disbanding joint CoCs, or reverting to separate processes on the evidence of conflict. The appeals are made to NCLAT in accordance with 61, which guarantees control over the impartiality of RP. Nevertheless, the resolution of voting issues puts a strain on the backlog of NCLT, which has more than 5,000 pending admissions as of March 2026, risking violating the 14-day mandate elsewhere. The analogies presented in judicial precedents, such as Videocon (multi-entity), focus on the group interest tests, but their application is not binding to Chapter V-A, which leaves safeguards vulnerable to practical ineffectiveness.
CASE STUDY PROSPECTS
Emerging scenarios such as the potential affiliates of the Adani group, or background Reliance groups, preview CoC conflicts. Theoretically, within a telecom-energy conglomerate, the creditors could forestall parent resolutions endorsing spectrum assets. After 2026, the conglomerate jurisdiction of NCLT Mumbai covering the west will put structures to the test, with consequences defining regulations. Three pilot applications, not yet resolved, warn of teething problems in CoC alignments in the quarterly reports (Jan-Mar 2026) of IBBI. Such can be analysed through public orders to determine any doctrinal implications, including whether joint structures amplify or reduce value destruction experienced, as seen in 40% liquidation rates in groups. These pilots highlight unresolved inter-creditor discussions, in which subsidiary functional creditors complain about parent-centred strategies. The developing group viability test offered by NCLT might be more focused on holistic measures of recovery, rather than silos of entities. Resolution timelines that are longitudinally tracked will then measure whether Chapter V-A will reduce the 18-month average delays afflicting stand-alone group CIRPs.
IBBI RULE GAPS
Section 59A (14)-pending IBBI notifications should address any gaps: specify shareholding thresholds to constitute a group (e.g., 50%), limit voting differences and impose minority safeguards such as qualified majority overrides. International patterns, such as in the UK (so-called pooling orders) or Singapore (so-called group plans), propose the compulsory substantive consolidation qualifications and independent monitors. The framework of India is behind because it does not cover cross-border aspects, which are essential in a 20 per cent inbound FDI cluster. Post-rules empirical research had the ability to compare itself to UNCITRAL LGIM, which recommended AI-flagged conflicts (albeit non-AI here).
STRATEGIC RECOMMENDATIONS
In the effort to reduce CoC pitfalls, IBBI must emphasise the sub-CoC consultation rules to have minority creditor input, proportional voting limits (e.g. no single creditor has more than 40% influence) and escrow arrangements of inter-group claims against or amongst groups, based on the UNCITRAL model of group insolvency[3]. NCLT might consider following expedited (and mandatory mediated) group interest hearings, and RPs can be trained on how to alert to a conflict; empirically, pilot programs tracking CoC in-blocking throughout the first 50 applications will inform refinements, enabling Chapter V-A to soar with its transformative potential, without hitting the creditor warfare.
CONCLUSION: PROMISE AND PERIL
Chapter V-A is a radical development in the Indian insolvency regime, likely to smooth out the longstanding corporate group problems of fragmented CIRPs, but whose joint CoC regime contains fundamental contradictions that may undermine the maximisation of value. I have demonstrated that imbalances of voting power and misalignment of priorities, to the degree of entrenching financial creditor power, threaten to repeat IBC defects at an even greater level (in a group-based context) and compromise the very efficiency objectives of the 2026 Amendment. In the absence of NCLT protections undergone in backlog and IBBI regulations on file, initial situations will determine how coordination leads to revival or a surge of disagreements, in which doctrinal and empirical questions must be carefully examined to prevent procedural stagnation.
Authors: Vidhi Sharma & Shresth Kukreja (University Institute of Legal Studies (UILS), Chandigarh)
References:
[1] Insolvency and Bankruptcy Board of India, ‘Annual Report 2024-25’ (2025)
[2] IBBI, Newsletter on MSMEs in the IBC 12 (2025)
[3] UNCITRAL Model Law on Enterprise Group Insolvency (2019)