Lifting Of Corporate Veil and Group Insolvency
The creditors might have given loan to a company based on the credentials of the group, and the management might have siphoned the funds into related entities, causing insolvency of the borrower company. In such a situation, the creditors of the borrower insolvent company will suffer huge financial loss. Further, in some cases, there may be practical difficulties in carrying out the insolvency proceedings of one or more entity within a group due to intermingling of assets of the group entities. There is, therefore, a need to carve an exception to the concept of separate legal entity, and pierce the corporate veil by bringing the assets of the solvent entities within the purview of the insolvency proceedings of its associate or subsidiary. In India, the concept of group insolvency gained prominence in the case of Videocon Industries Limited [1] , wherein the Hon’ble National Company Law Tribunal, Mumbai Bench held that in the corporate insolvency resolution process of Video...