[This article is authored by Poorna Poovamma K. M. and Abhishek Wadhawan, students at Gujarat National Law University, Gandhinagar. It attempts to explain Group Insolvency and its challenges by examining the judicial decisions and also suggest probable solutions.]
The Insolvency & Bankruptcy Code, 2016 is one of the most recent Indian legislations that deals with insolvency of companies in India. Originally, the Insolvency & Bankruptcy Code did not contain any provisions for group insolvencies as the legislation itself was at a nascent stage. However, over the years, the number of conglomerates, multi-national corporations, related party transactions etc., have exponentially risen in India due to which the interconnectedness between different corporate bodies has increased. The Insolvency & Bankruptcy Board of India constituted a Working Group on Group Insolvency under the chairmanship of U.K. Sinha to delve upon the mechanism for group insolvency regime in India. The Working Group submitted its report in September 2019. In light of the recommendations of the Working Group, the main aim of this paper is to identify the most concerning issues in relation to introduction of group insolvency in India and proposing solutions to these problems. Part 1 of the paper deals with the basic conceptual understanding of group insolvency. Part 2 discusses the current Indian jurisprudence in relation to group insolvency through judicial decisions, and also highlights the key provisions of the Report of the Working Group on Group Insolvency. Part 3 identifies the various challenges posed to the introduction of group insolvency regime in India related to the definition of corporate group, jurisdictional challenges, cross border insolvency issues, and the problem of extension of liability in group insolvency proceedings. Part 3 also highlights the probable solutions to the challenges so identified, followed by Part 4, which deals with the concluding remarks for the paper.