Tribunal Denies Consolidation of Proceedings under Insolvency Code, Emphasizes Individual Resolution

The Tribunal dismissed the application for consolidation of proceedings under the Insolvency and Bankruptcy Code, emphasizing the distinct legal status and causes of action of the entities involved. Despite the Liquidator's efforts to consolidate assets and liabilities for efficient resolution, the Tribunal found that substantive consolidation was not warranted due to the absence of provisions supporting such action in the Code. The decision highlighted the importance of individual resolution processes based on unique defaults and creditor claims, ultimately prioritizing resolution over liquidation in line with the objectives of the Code.

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Issues: Application for consolidation of proceedings under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016.

Analysis:
1. The Liquidator filed an application seeking the consolidation of the Corporate Debtor and Respondents Nos. 2-6 into a single proceeding for the Corporate Insolvency Resolution Process (CIRP). The prayers included substantive consolidation, appointment of a common Resolution Professional, constitution of a common Committee of Creditors, and approval of a comprehensive Resolution Plan. The application aimed to consolidate assets and liabilities for efficient resolution under the Code.

2. The case involved multiple proceedings against the Corporate Debtor and Respondents Nos. 2-6 initiated under different sections of the Insolvency and Bankruptcy Code. Separate Interim Resolution Professionals were appointed for each proceeding, leading to diverse outcomes such as admission of CIRP and liquidation orders based on the Committee of Creditors' decisions.

3. Respondent No. 1 contested the application, arguing lack of legal basis for consolidation under the Code and questioning the applicant's standing in the proceedings. Respondent No. 1 highlighted the absence of provisions allowing consolidation of properties and emphasized the distinct nature of the entities involved, negating the possibility of consolidation.

4. The Tribunal examined the facts, noting the separate admissions of CIRP against different companies, each with distinct causes of action and creditors. The Tribunal emphasized that the entities were not group companies but held substantial shares in the Corporate Debtor, leading to individual initiation of CIRP proceedings based on unique defaults and creditor claims.

5. While acknowledging the applicant's reliance on legal precedents, the Tribunal emphasized the exceptional nature of substantive consolidation as a remedy, typically applicable to group companies. In this case, due to the lack of group company status and the absence of specific provisions in the Code, consolidation was deemed inappropriate.

6. Ultimately, the Tribunal concluded that the application for consolidation was not maintainable under the given circumstances. The application was disposed of based on the entities' separate legal status, distinct causes of action, and the absence of provisions supporting consolidation in the Insolvency and Bankruptcy Code, emphasizing resolution over liquidation as the primary objective of the Code.

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