Group Insolvency In India

1. Introduction

The Insolvency and Bankruptcy Code, 2016 ("IBC") is a significant reform for the Indian economy because it allows a creditor to initiate insolvency proceedings against a Corporate Debtor ("CD") in order to protect asset value. While the IBC includes detailed provisions for dealing with a CD's insolvency on an individual basis, it does not include a framework for initiating insolvency on a group or enterprise level. While India generally follows the separate juristic personality of corporations, exceptions have been created over the years through judicial pronouncements and legislative actions where group companies can be held liable for the debts of their associates and subsidiaries. Financial (inter-corporate guarantees for loans taken by one group company) or operational links (dependence on a group company for supply chain) can exist between companies in a group. In these cases, treating the insolvency of each group company in an isolated manner