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The emanating concept of insolvency had been established in India by the Insolvency and Bankruptcy Code, 2016 giving relief to individual corporate debtors through the initiation of the insolvency process overlooking the aspect of group companies. The aspect of group insolvency or


The emanating concept of insolvency had been established in India by the Insolvency and Bankruptcy Code, 2016[1] giving relief to individual corporate debtors through the initiation of the insolvency process overlooking the aspect of group companies. The aspect of group insolvency or the initiation of proceedings at an enterprise level is still at its nascent stage. In India, with the landscape of conglomerates having holding companies and subsidiary companies under the umbrella term of group companies, a default in financial debt by one organization can affect other larger groups having a stake in that organization with the chance of shutdown of business and subsequent winding up. This has led to the consideration of combining all the individual companies under one substantive consolidation and writing off the assets and liabilities which have been clubbed together and conducting the insolvency proceedings, commonly referred to as group insolvency. There had been speculations pertaining to the fact that since companies both holding and subsidiary companies are separate legal entities[2], no group insolvency proceedings can be initiated. Also, the tussle of the lifting of the corporate veil and considering the entities as a single economic enterprise for the initiation of the group insolvency process is suggested by insolvency experts. The reasons for such suggestions are mainly because the Companies Act, 2013[3] mandates the group companies to prepare a consolidated balance sheet for accounting and presentation considering the holding and subsidiary as one single economic entity. Whereas insolvency law is new legislation as compared to the Act of 2013 and is special legislation, it would prevail upon the latter but with no provisions being inserted in the Code of 2016.


Recognizing the need for specific guidelines for governing group insolvency in India, the Insolvency and Bankruptcy Board of India[4] constituted a working group[5] in the year 2019, to draft measures to govern the corporate group insolvency framework in India. The WG presented its report with the imperative to define the concept of group as the companies including the holding, subsidiary, and associate companies with the flexibility to apply it on a case-by-case analysis. This definition was also suggested to include other groups like trusts and partnerships to be made inclusive into the group companies’ definition. The resolution professional appointed to carry out the insolvency proceedings must be one person for the corporate entities rather than diversifying the individuals according to the number of companies distributed. The time within which the insolvency proceedings were to be concluded was suggested to be within 420 days.[6] While expanding the report to cross border insolvency regime, the alignment of both the domestic and the foreign entities is suggested taking into consideration the substantive consolidation of the corporate group in question.

The take of the Supreme Court and the National Company Law Tribunal along with the Appellate Tribunal sets a major ground for the group insolvency process to be developed in the Indian Legal landscape. While considering the issues in various cases, determining the assets and the liabilities of the companies involved in the insolvency initiation while determining the link for appropriation between the holding companies, subsidiary companies, and associate companies poses a challenge before the courts. The Indian courts have developed a yardstick in various judicial precedents in consonance with the US and UK[7] jurisprudence to determine the combinations of claims in the event of default, preparation of the resolution plan, the appointment of an insolvency professional, calculation of the group as a single economic entity, etc.


Videocon Case

The Central Bank, RBI with the power conferred upon it under Section 35A of the Banking Regulation Act, 1949[8] instructed the major lenders of the Videocon Group to initiate insolvency proceedings against the humongous conglomerate whose debts ran into approximately 1 lakh crores. State Bank of India[9] the largest lender of Videocon initiated the process of insolvency against Videocon and its 15 group companies of which 13 petitions were resolved to establish group insolvency norms in India.

The case State Bank of India & Ors. vs. Videocon Industries Ltd. & Ors.,[10] dealt with an application file before the NCLT Mumbai Bench the insolvency application filed by the SBI, for the aim of CIRP to create the common debtor, fifteen Videocon entities sought to be tangibly aggregated into a single insolvency proceeding which was allowed by the NCLT.

The NCLT created a yardstick in this case wherein the following factors were considered to allow and initiate a company group insolvency process:[11]

  1. common control, assets, and liabilities across the company
  2. common financial creditors, and common group of debtors combining having the same criteria for availing loans
  • pooling of company resources and finances in the event group companies had common directors
  1. interloping of debts where the financial arrangements provided for the protection of debt of subsidiaries, etc.
  2. intricate link of subsidiaries
  3. cross shareholding[12]

The case also laid down the principle that bankruptcy courts can order consolidation of applications that had been derived from the UK and US courts.

Axis Bank Case

The method of deciding which cases are to have assented for group insolvency which was introduced with the Videocon case was carried forward by the courts and upheld in Axis Bank Ltd & Ors v. Lavasa Corp Ltd.[13] The Lavasa group’s insolvencies were consolidated by NCLT to prevent losses that would result from fractured insolvencies, considering that the insolvency of the subsidiaries was heavily reliant on the resolution of parent companies’ determination and distribution of assets and liabilities. Financial creditors of the holding company submitted a request for the consolidation of the CIRP of Lavasa Corporation Limited and its two wholly-owned subsidiaries. Financial creditors sought to satisfy the whole group debt owed by “Lavasa” in the current instance. The Lavasa group’s CIRP was consolidated under the direction of the NCLT.

IL&FS Case

The resolution of 348 companies with the collapse of Infrastructure Leasing and Financial Services Ltd. made the need for a group insolvency regime to be created more prominent. IL&FS has group companies in many industries, including energy, transportation, and financial services. The IL&FS Group was in serious financial difficulty and owed roughly over Rs. 91,000 crores. In the period between July 2018 and September 2018, two IL&FS Group companies reported loan and intercorporate deposit repayment issues to banks and lenders.[14] At the beginning of July 2018, IL&FS’ road division was having trouble paying bond repayments. IL&FS Group’s business, a small industry development bank in India (SIDBI), also could not pay back a short-term loan of Rs. 1,000 crores at the beginning of September 2018.[15]

A 90-day deadline for NCLAT’s strategy to protect the public interest and resolve debt was set by the Central Government on October 15, 2018, in the case Union of India vs. Infrastructure Leasing and Financial Services Ltd & Ors.[16] A judgment from the NCLAT from June 22, 2017 states that “from numerous situations emerging under the IBC, Law has formed that Group Insolvency can be considered,” although IL&FS’ insolvency exists outside the IBC.


If the group insolvency process would make insolvency proceedings less tie consuming and cost-effective is something that can only be determined in the future course of action but it can be assuredly said that the complexity of the insolvency process will be resolved. Yet more concepts are to be evolved like the definition of ‘group’, establishing a distinct Adjudicating Authority, if the lifting of the corporate veil can be initiated, etc. The WG report of 2019 submitted to IBBI gives a purview on the need to initiate the framework for group insolvency for the purposes to facilitate cross-border insolvency. When multinational companies become insolvent, it becomes a significant issue because they are present in numerous countries. As a result, an effective cross-border insolvency framework is required. Most multinational corporations maintain several subsidiaries, making them cross-border group companies as they operate through many subsidiaries. The concept of group insolvency offers several benefits that make it imperative in the long run for the law-making bodies to adopt the necessary provisions under the IBC to recognize it and with the judiciary making laws in favour, the regime would be soon to be implemented in consonance with the foreign jurisdictions.

Author(s) Name: Aathira Pillai (Maharashtra National Law University, Mumbai)


[1] Insolvency and Bankruptcy Code, 2016, hereinafter referred to as “Code of 2016”

[2] Salomon v. A Salomon & Co. Ltd. (1897) <> accessed February 6, 2023

[3] Companies Act, 2013, hereinafter referred to as “Act of 2013”

[4] Hereinafter referred to as “IBBI”

[5] Hereinafter referred to as “WG”

[6] “Procedural and Substantive Aspects of Group Insolvency ”(Indian Institute of Insolvency Professionals of ICAI) <> accessed February 6, 2023

[7] PSA, “Group Insolvency in India – Insolvency/Bankruptcy – India”, Mondaq, <,need%20to%20go%20through%20CIRP> accessed February 6, 2023

[8] Banking Regulation Act, 1949, s. 35A

[9] Hereinafter referred to as “SBI”

[10] 2019 SCC Online NCLT 745

[11] Supra note 7

[12] Consultants VK, “Videocon Ruling Setting a Benchmark for Group Insolvency” <> accessed February 6, 2023

[13] MA 3664 of 2019 in CP 1765-1757&574/2018 on 26.02.2020

[14] “IL&FS Case Study” (Anti money laundering – GRM institute) < content/uploads/2021/05/ILFS-case-study-AML.pdf>accessed February 6, 2023

[15] ibid

[16] Company Appeal (AT) No. 346 of 2018