Group Insolvency under IBC: Section 59A

Indian businesses are commonly organised as groups: a parent with many subsidiaries, linked by cross-guarantees, shared plants and intercompany loans. When such a group fails, separate insolvencies of each company in different benches, with different professionals and committees, can destroy the value that lies in the group as a whole. Until 2026, the Code had no provisions for this. The 2026 Amendment introduced section 59A, a framework for rules on group insolvency. This note explains the problem, the judicial response and the new law.

1. Why Groups Are a Problem

• Separate personality. Each company in a group is a separate legal person with its own assets and creditors, and the Code applies company by company.
• Excluded assets. The liquidation estate of a parent includes its shares in subsidiaries but not their assets (section 36(4)), so value in a subsidiary can be reached only through its own proceedings (Topic 55)
• Fragmentation. Group companies often share plants, brands and management; separate processes can lead to inconsistent outcomes, duplicated costs and lower bids for assets that are more valuable together.
• Intertwined finances. Cross-guarantees, intercompany loans and common lenders make it hard to determine what each company truly owns and owes.

2. Two Approaches

Figure 1: Procedural coordination and substantive consolidation

• Procedural coordination. Each company's proceeding remains separate, but they are heard together and synchronised through common benches, shared information, cooperation between professionals and joint timelines.
• Substantive consolidation. The assets and liabilities of several companies are pooled into one estate, as if they were a single debtor; this disregards separate personality and can prejudice creditors of the stronger companies, so it is reserved for exceptional cases where the companies' affairs cannot be separated.
• Working Group, 2019. A Working Group constituted by the IBBI reported in September 2019, recommending that a corporate group be understood by reference to holding, subsidiary and associate companies, with provision to include companies that are intrinsically linked, and an enabling framework centred on procedural coordination.

3. Videocon, 2019

• The order. In State Bank of India v Videocon Industries, the NCLT Mumbai Bench on 8 August 2019 ordered consolidation of the CIRPs of 13 Videocon group companies, with a common resolution professional and committee.
• Tests. The NCLT considered factors such as common control, common directors, common assets and liabilities, interdependence, interlacing of finance, pooling of resources, intertwined accounts, common financial creditors and cross shareholding.
• Later order. In February 2020, the NCLT further treated the foreign oil and gas assets held through overseas subsidiaries as assets of the corporate debtor for the purposes of the CIRP, an order criticised for its treatment of foreign entities.
• Significance. Without statutory backing, consolidation rested on the NCLT's inherent and case management powers, which created uncertainty that the 2026 Amendment aims to address.

4. Section 59A

Figure 2: Matters on which group insolvency rules may provide

• Rule-making power. Chapter V-A, inserted in 2026, empowers the Central Government to prescribe, notwithstanding anything to the contrary in the Code, the manner and conditions of insolvency proceedings against two or more corporate debtors forming part of a group.
• Scope of rules. The rules may provide for a common Bench and transfer of pending proceedings to it; coordination between the proceedings, including between committees of creditors and professionals; appointment of a common insolvency professional; a committee of the committees of creditors; an agreement to coordinate and synchronise proceedings, binding on the debtors and committees that approve it and enforceable by the NCLT; and treatment of the costs of coordination.
• Modified application. The rules may apply provisions of the Code with modifications to group proceedings.
• Parliamentary scrutiny. Draft rules must be laid before each House of Parliament for 30 days, during which either House may disapprove or modify them, and the notified rules must also be laid before Parliament.

Figure 3: Key definitions in the Explanation to section 59A

5. Status and Significance

Section 59A was excluded from the provisions brought into force on 26 May 2026, and as of the IBBI's April to June 2026 newsletter, neither the section nor any rules had been notified. The section is notable for what it does not do: it provides for coordination, not for substantive consolidation, and leaves the details to rules subject to parliamentary control. Until the rules are made, group cases will continue to rely on the NCLT's case management powers, as in Videocon.

6. Frequently Asked Questions

Does section 59A allow the NCLT to pool the assets of group companies?

Not expressly. It provides for rules on procedural coordination, such as a common Bench, a common professional and coordination agreements. Substantive consolidation, as in Videocon, remains a judicial device.

What is significant ownership for the purposes of section 59A?

The right to exercise 26 per cent or more of the voting rights in a corporate debtor.

Can a parent company's liquidator sell its subsidiary's factory?

No. The subsidiary's assets are excluded from the parent's estate under section 36(4). The liquidator can sell the parent's shares in the subsidiary, or the subsidiary's own insolvency must be pursued.

Why are group insolvency rules to be laid before Parliament in draft?

Because they may modify the application of the Code itself and override other provisions, Parliament retained the power to disapprove or modify them before they take effect.

Will an agreement to coordinate group proceedings bind a group company whose committee did not approve it?

Under section 59A(2)(e), the rules may provide for an agreement that binds the corporate debtors and committees that approve it. A company or committee that does not approve it is not bound by that clause, though the NCLT may still coordinate proceedings on a common Bench.

Is a company that holds only 20 per cent of another's voting rights part of its group under section 59A?

Not on that basis alone, since significant ownership requires 26 per cent or more. It may still be part of the group if it has control, such as the right to appoint a majority of directors, or falls within the Companies Act definitions of holding, subsidiary or associate company.

7. Related Topics

• Topic 12: Corporate Guarantors and Simultaneous CIRP. Proceedings against group guarantors.
• Topic 55: Section 36. The liquidation estate.
• Topic 64: Cross-Border Insolvency. Sections 234, 235 and 240C.