THE INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) ACT, 2026 PART – IX- GROUP INSOLVENCY

Group insolvency

Group insolvency refers to a legal framework for managing the simultaneous insolvency of multiple related companies (e.g., holding and subsidiaries) within a single corporate group, rather than treating them in isolation. It aims to streamline proceedings, maximize asset value, and prevent conflicting decisions by allowing combined resolution strategies.

The Act inserted a new Chapter VA in the Code dealing with group insolvency. There is only one section in this Chapter – Section 59A. The said section gives powers to make rules for initiating proceedings for coordination and cooperation of corporate debtors of group and also gives some definitions important to Group Insolvency. Besides Section 59A the amendments brought by the Act in other sections are also to be discussed in this Article.

Definitions

Explanation (a) to Section 59A (3) defines the term ‘control’ as including the right to appoint majority of the directors or other key managerial personnel entitled to manage the affairs of the corporate person or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding, management rights, ownership interest, shareholders agreements, voting agreements, articles of association, limited liability partnership agreements or in any other manner.

Explanation (b) to Section 59A(3) defines the term ‘group’ as two or more corporate debtors that are interconnected by control or significant ownership, and include a holding company, a subsidiary company and an associate company of a corporate debtor, as defined under the Companies Act, 2013.

Explanation (c) to Section 59A (3) defines the expression ‘insolvency proceedings’ as corporate insolvency resolution process and liquidation process under Part II of

this Code.

Explanation (d) to Section 59A (3) defines the expression ‘significant ownership’ as including the right to exercise 26% or more voting rights.

Power to make rules

Section 59A provides that the Central Government may prescribe the manner and conditions for conducting insolvency proceedings under Part II, where these proceedings are initiated against two or more corporate debtors that form part of a group. The said rules may provide the following-

• a common Bench for the insolvency proceedings of the corporate debtors that form part of a group and the manner of the transfer of pending proceedings of such corporate debtors to such Bench, and for proceedings under the rules made under this section;
• coordination between the insolvency proceedings of the corporate debtors that form part of a group, including the coordination between their committee of creditors and interim resolution professionals, resolution professionals, or liquidators;
• appointment and replacement of a common insolvency professional to facilitate coordination between the insolvency proceedings of the corporate debtors that form part of a group;
• formation of a committee comprising of the committee of creditors of the corporate debtors that form part of a group;
• making of an agreement that provides measures to coordinate and synchronise different aspects of the insolvency proceedings of the corporate debtors that form part of a group, which shall be binding on the corporate debtors approving the same including their committees of creditors, and the Adjudicating Authority may issue necessary orders to implement the approved agreement; and
• treatment of the costs incurred for taking measures to coordinate the insolvency proceedings of the corporate debtors that form part of a group.

The rules made by the Central Government under this section may provide that any of the provisions of the Code shall apply with such modifications, as may be required to administer and implement the provisions of this section.

Rule laid before Parliament

A draft of every rule proposed to be issued under this section, shall be laid before each House of Parliament, while it is in session, for a total period of 30 days which may be comprised in one session or in two or more successive sessions, and if both Houses agree in disapproving the issue of rule or both Houses agree in making any modification in the rule, the rule shall not be notified or shall be notified only in such modified form, as may be agreed upon by both the Houses of Parliament.

The period of 30 days shall not include any period during which the House is prorogued or adjourned for more than 4 consecutive days.

Every rule notified under this section shall be laid, as soon as may be after it is made, before each House of Parliament.

Appeals and Appellate Authorities

Section 61 of the Code provides the procedure for filing appeal before the National Company Law Appellate Tribunal (‘NCLAT’ for short). The Act inserted a new Section 61(6) which provides that the NCLAT shall dispose the appeal within 3 months from the date of receipt of the appeal.

Penalty for frivolous proceeding

The Act inserted a new Section 64A. This section provides that if any person has initiated a frivolous or vexatious proceeding before the Adjudicating Authority under this Part, it may impose upon such person a penalty which shall not be less than Rs. 1 lakh but may extend to Rs. 2 crores.

Amendment to Section 66

The Act substituted the marginal heading ‘Fraudulent and wrongful trading’ for ‘Fraudulent or Wrongful trading’.

After incorporating the insertions by the Act Section 66(1) and 66(2) will read as below-

66(1) - If during the corporate insolvency resolution process or a liquidation process, it is found that any business of the corporate debtor has been carried on with intent to defraud creditors of the corporate debtor or for any fraudulent purpose, the Adjudicating Authority may on the application of the resolution professional or the liquidator, pass an order that any persons who were knowingly parties to the carrying on of the business in such manner shall be liable to make such contributions to the assets of the corporate debtor as it may deem fit.

(2) On an application made by a resolution professional during the corporate insolvency resolution process or by a liquidator, the Adjudicating Authority may by an order direct that a director or partner of the corporate debtor, as the case may be, shall be liable to make such contribution to the assets of the corporate debtor as it may deem fit.

Contravention of moratorium or resolution plan

The Act inserted a new section 67B. The new section provides that-

• Where a corporate debtor or any of its officer contravenes the provisions of section 14 (moratorium), the Adjudicating Authority may, on an application made by the Board or the Central Government or any person authorised by the Central Government in this behalf, as the case may be, impose penalty upon the officer, who committed or authorised or permitted such contravention, which shall not be less than Rs. 1lakh, but may extend to Rs. 2 crores.
• Where any creditor contravenes the provisions of section 14, the Adjudicating Authority may, on an application made by the Board or the Central Government or any person authorised by the Central Government in this behalf, as the case may be, impose penalty upon any person who authorised or permitted such contravention by a creditor, which shall not be less than Rs.1 lakh, but may extend to Rs. 2 crores.
• Where a corporate debtor, any of its officers or creditors or any person on whom the approved resolution plan is binding under section 31 (approval of resolution plan), contravenes any of the terms of such resolution plan or abets such contravention, the Adjudicating Authority may, on an application made by the Board or the Central Government or any person authorised by the Central Government in this behalf, as the case may be, impose penalty upon such corporate debtor, officer, creditor or person, which shall not be less than Rs. 1 lakh, but may extend to Rs. 1 crore or 20%. of the amount to be distributed under the resolution plan, whichever is higher.

Non-disclosure of dispute

The Act inserted a new Section 67C. The said section provides that where an operational creditor has concealed in an application under section 9, the fact that the corporate debtor had notified him of a dispute in respect of the unpaid operational debt or the full and final payment thereof; or any person who authorised or permitted such concealment; or any person who acted on such authorisation or permission, the Adjudicating Authority may, on an application made by the Board or the Central Government or any person authorised by the Central Government in this behalf, as the case may be, impose penalty upon such operational creditor or person, which shall not be less than Rs. 1 lakh but may extend to Rs.2 crores.

Omission of sections

The Act omitted Section 74 and 76. Section 74 provides punishment for contravention of moratorium or resolution plan. Now the provisions of this section have been incorporated in the newly inserted section 67B. Section 76 provides punishment for contravention of non-disclosure of dispute or payment of debt by operational creditor.