Introduction
Modern corporate enterprise is almost invariably conducted through groups: networks of parent companies, subsidiaries, holding entities, special purpose vehicles, and affiliated businesses that are legally distinct but economically integrated. These groups share management, resources, intellectual property, customer relationships, and in many cases, cross-guarantee each other’s liabilities. When a group encounters financial distress, the distress is rarely confined to a single entity. The interconnections that define the group in health become vectors of contagion in distress.
The Insolvency and Bankruptcy Code, 2016 was designed around the concept of a single corporate entity as the unit of insolvency. Each CIRP is initiated by, and focuses on, a single corporate debtor. The framework provides no mechanism for treating affiliated entities as a group for insolvency purposes, whether by consolidating their assets and liabilities or by coordinating their separate insolvency proceedings to achieve a unified resolution outcome. Each subsidiary, each affiliate, and each associated company must, under the current law, be the subject of a separate CIRP before a separate NCLT bench, with a separate resolution professional, a separate committee of creditors, and a separate resolution plan.
This entity-by-entity approach creates profound complications when the distressed enterprise is a large corporate group. The Videocon Industries group insolvency, which involved 34 connected entities, is the most dramatic illustration of these complications, but it is not the only one. The IL&FS group, the DHFL group, and various real estate conglomerates have all raised acute questions about how entity-wise insolvency processes can be coordinated, and whether coordination alone is sufficient or whether some form of asset pooling is necessary for an efficient resolution.
Legal Framework
The IBC’s entity-wise design is reflected throughout the statute. The definitions of “corporate debtor,” “corporate insolvency resolution process,” “committee of creditors,” and “resolution plan” all contemplate a single legal entity. There is no provision in the current IBC for a single CIRP application covering multiple legal entities, for a single CoC representing the creditors of a group of companies, or for a resolution plan that addresses the assets and liabilities of multiple group companies collectively.
The closest the IBC comes to acknowledging group structures is in the definition of “related party” under Section 5(24) and the use of this definition in the connected persons disqualification under Section 29A. The IBC also uses related-party concepts in defining avoidable transactions, since preferential transactions with related parties attract a longer look-back period. However, these provisions use group relationships as a factor in assessing individual transactions rather than as a basis for collective insolvency proceedings.
IBBI’s Working Group on Group Insolvency, constituted in 2019 under the chairmanship of M.S. Sahoo, produced a detailed report recommending the adoption of a group insolvency framework for India. The report drew on international models and identified both procedural coordination (coordinating separate insolvency proceedings involving different entities in the same group) and substantive consolidation (pooling the assets and liabilities of group members into a single insolvency estate) as distinct concepts requiring different legal treatment. As of 2026, the recommendations of the Working Group have not been enacted into law.
IBBI has, through amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, introduced some procedural accommodations for group insolvencies, including provisions for appointing a common resolution professional for related group entities and for sharing information across related proceedings. These regulatory measures fall far short of a comprehensive group insolvency framework.
Judicial Developments
The Videocon Industries group insolvency, which commenced before NCLT Mumbai in 2019, tested the limits of the existing framework more severely than any other case. Videocon Industries Limited and 12 of its directly related entities were admitted to CIRP together, with a common resolution professional. The RP sought to extend the CIRP to cover a further 22 connected entities, eventually bringing 34 entities into a consolidated process. NCLT Mumbai allowed this consolidation, treating the 34 entities as a single cluster for the purpose of CIRP, but this order was challenged before the NCLAT.
NCLAT’s examination of the Videocon consolidation raised fundamental questions about the legal basis for treating legally distinct corporate entities as a single insolvency unit. The NCLAT modified the NCLT’s order, drawing distinctions between entities that were directly related to the principal debtor and those that were more distantly connected, and imposing conditions on the extent to which assets and liabilities could be pooled across entities. The Supreme Court, when petitioned, did not finally resolve the substantive legal question of the validity of group consolidation under the existing IBC framework, but the Videocon proceedings produced a resolution plan in 2023 that addressed multiple group entities together, setting a precedent by practice if not by law.
The IL&FS group insolvency presented a different approach. Rather than proceeding under the IBC framework, the government applied to the National Company Law Tribunal for the appointment of a new board to manage IL&FS and its subsidiaries collectively, using the Companies Act, 2013’s remedial provisions rather than the IBC. This choice reflected a judgment that the IBC’s entity-wise framework was inadequate for a group of the scale and complexity of IL&FS, which had over 350 entities. The Companies Act approach allowed a degree of group-level coordination that the IBC did not permit, though it also lacked the clear creditor protection and resolution mechanism of the IBC framework.
NCLT decisions in other group contexts, including the Amtek Auto group and the Lanco Infratech group insolvencies, have developed various procedural accommodations: common CoC meetings for related entities, information sharing between related CIRPs, and coordinated timelines for plan submission. These measures improve efficiency but do not address the fundamental problem of how assets and liabilities should be allocated across group entities for resolution purposes.
Contemporary Issues and Analysis
The absence of a statutory group insolvency framework creates both commercial and legal problems that accumulate as Indian corporate groups grow larger and more complex.
The most significant commercial problem is the treatment of intercompany transactions within a distressed group. Large corporate groups routinely extend intercompany loans, provide intercompany guarantees, transfer assets between entities, and enter into management fee, royalty, and services arrangements. When the group enters insolvency, each entity’s insolvency is assessed individually, and the RP for each entity must evaluate which intercompany transactions are genuine arm’s-length dealings and which are, in effect, transfers of value from one entity (typically an operating subsidiary) to another (typically a holding company or the promoter’s vehicle). The characterisation of these intercompany transactions significantly affects each entity’s insolvency estate.
Under entity-wise insolvency, the RP of an operating subsidiary may find that the subsidiary is owed large sums by the parent or by sibling entities, but those debts are worthless in the parent’s insolvency. Conversely, the parent’s creditors may find that the operating subsidiaries’ assets are locked into separate entity insolvencies where they rank behind the subsidiaries’ own creditors. This fragmentation of the group’s economic reality into legally separate insolvency processes produces outcomes that do not reflect the economic reality of how the group operated and financed itself.
The legal problem is that the absence of statutory authority for group insolvency leaves the NCLT without clear guidance on when and how to accommodate group realities within the individual CIRP framework. Judicial improvisations, however creative and practically effective in individual cases, do not create the legal certainty that resolution applicants need to assess the scope and value of a potential group resolution. A potential bidder for a distressed group cannot confidently price a bid if it does not know which entities are included, how intercompany liabilities will be treated, and what legal mechanism will implement the group resolution.
Comparative and International Perspective
The concept of substantive consolidation in US Chapter 11 bankruptcy law provides a well-developed body of doctrine on when and how the assets and liabilities of affiliated companies may be pooled into a single insolvency estate. US courts apply a multi-factor test for substantive consolidation, examining whether the entities’ assets were commingled, whether creditors treated the entities as a single economic unit when extending credit, whether financial records can be meaningfully segregated on an entity-by-entity basis, and whether the benefits of consolidation to the creditor body as a whole outweigh the harm to creditors of individual entities who may receive less under consolidation than they would under entity-wise insolvency. The doctrine has been used in significant group insolvencies including Lehman Brothers, Enron, and WorldCom, providing a rich body of precedent.
The UK’s Cork Report of 1982, which was the intellectual foundation for the UK’s modern insolvency law, recommended the creation of a statutory framework for group administration, including provisions for the pooling of group assets in certain circumstances. While the UK has not implemented substantive consolidation as a general doctrine, the administration framework allows administrators of related companies to coordinate their proceedings effectively through joint administration orders and information sharing. The UK also allows enterprise disposals where the business of a group is sold as a going concern across multiple entities simultaneously, without requiring separate NCLT approval for each entity.
The Cayman Islands has developed a group provisional liquidation mechanism that allows a court to appoint a common provisional liquidator for an entire group of companies, providing interim group coordination while longer-term resolution or restructuring is arranged. This mechanism has been used in several significant Asia-Pacific restructurings where Cayman Islands holding companies sit atop groups with operating subsidiaries in various Asian jurisdictions.
Singapore’s Insolvency, Restructuring and Dissolution Act provides for a “lead supervisor” mechanism in judicial management, where a single judicial manager can be appointed for related companies, with the costs and expenses shared across the group. Singapore has also adopted the UNCITRAL Model Law on Enterprise Group Insolvency recommendations in its judicial cooperation practices, though full implementation awaits further legislative development.
Practical and Policy Implications
The practical implications of the current framework’s limitations are most acutely felt by creditors of distressed Indian corporate groups. Banks that have extended credit to a group on the assumption that the group’s combined creditworthiness supports the lending find themselves holding claims against legally separate entities with different creditor profiles, different asset bases, and different resolution prospects. Coordinating recovery across multiple entity-wise insolvencies is expensive, slow, and produces outcomes that frequently fall short of what a coordinated group resolution would achieve.
For resolution applicants, the absence of a group insolvency framework creates uncertainty about the scope of what they are acquiring. If a bidder wants to acquire the operational business of a distressed group, the fact that the business is spread across many entities means that the bidder may need to participate in multiple separate CIRPs, each with its own CoC approval, timeline, and resolution plan requirements. This complexity reduces the attractiveness of group insolvencies to all but the most experienced and well-resourced bidders.
The Indian banking system’s exposure to large corporate groups means that the cost of inadequate group insolvency law is primarily borne by the public sector banks and, ultimately, by their public owners. The cumulative value destruction from fragmented entity-wise resolution of large corporate groups, compared to what a coordinated group resolution would have produced, represents a significant social cost.
Suggestions and Reforms
Parliament should enact a comprehensive group insolvency framework for the IBC, building on the recommendations of the IBBI Working Group’s 2019 report. The framework should include the following elements.
First, procedural coordination provisions: where multiple entities in the same group are in CIRP or liquidation, the NCLT should be empowered to direct joint administration, appoint a common resolution professional, hold combined CoC meetings with separate voting by each entity’s creditors, and coordinate timelines across the related proceedings.
Second, a statutory basis for substantive consolidation: where the assets and liabilities of group entities are genuinely commingled (shared bank accounts, pooled cash management, commingled assets), or where creditors have demonstrably dealt with the group as a single economic unit, the NCLT should be empowered to order consolidation of the insolvency estates. This order should be available as an interim measure, subject to challenge by creditors who would be harmed by consolidation.
Third, a mechanism for group resolution plans: where a resolution applicant proposes a plan addressing multiple group entities simultaneously, the plan should be capable of being approved by combined CoC votes (with specified majority requirements for each entity’s creditors), with a single NCLT order implementing the plan across all relevant entities.
Fourth, clear rules for intercompany transactions in group insolvencies: a statutory presumption that intercompany transactions within a group that are not documented on arm’s-length terms are avoidable transactions should be established, shifting the burden to the beneficiary entity to demonstrate the commercial justification for the transaction.
Conclusion
Group insolvency is not a marginal concern in Indian corporate law; it is one of the central challenges facing the IBC as it enters its second decade. The largest, most economically significant insolvency cases in India involve corporate groups, and the IBC’s entity-wise architecture is manifestly inadequate for these cases.
The Videocon proceedings demonstrated that NCLT can improvise creative solutions within the existing framework, but improvisation is not a substitute for law. The legal uncertainty about the validity and scope of consolidated group proceedings deters resolution applicants, impairs creditor recovery, and ultimately undermines the IBC’s goal of maximising value for all stakeholders. Enacting a statutory group insolvency framework, informed by the best practices of US, UK, and Singapore law, is one of the most important items on India’s insolvency reform agenda.
