WHATS HAPPENING AROUND? - Bankruptcy board set to tackle group insolvency

By EDITORIAL TEAM - INSOL India Posted On : April 21, 2020

India’s bankruptcy regulator, the Insolvency & Bankruptcy Board of India (the Board), is seeking to amend its rules and regulations to ensure that the IBC is suited to handle group insolvencies. Accounts such as Videocon and others have underscored the problem of indebtedness at the group level and have outlined the difficulties faced by the NCLT in the application of IBC to such group insolvencies. A panel on group insolvency has submitted its report to the Board whereby reforms in the legal framework have been proposed to address group insolvency. The report has recommended that the definition of ‘group’ be made specific, and that it may include holding, subsidiary and associate companies.

In the case of Adel group of companies, the court suggested procedural coordination to ensure simultaneous proceedings with a common resolution professional. “It is important that a detailed assessment be made with respect to entities that would be brought into group insolvency” said Satish Kumar Gupta, a resolution professional. “Group insolvency should lead to resolution that is value accretive for that particular group, realizing value more than on the sum-of-the-parts basis, with assessment.”

Bringing entities on the basis of inter-connectedness or common assets into framework for group insolvency may face challenges and lead to banks classifying standard accounts as NPAs, thereby dragging standard assets into insolvency on account of non-recovery of dues of a group or inter-connected entity.