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The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, introduced in Parliament during the monsoon session, seeks to plug a major gap in India’s insolvency regime. It proposes a new Chapter VA on group insolvency — a long-awaited reform on business groups that operate through layers of holding companies, subsidiaries, and associates. Until now, fragmented proceedings against individual entities in such groups have historically led to conflicting outcomes and value erosion. A coordinated approach is essential to preserve enterprise value and ensure efficient resolutions. However, the Bill’s design raises concerns about excessive delegation of power to the executive, in a manner reminiscent of “Henry VIII clause” — allowing the government to modify primary law through subordinate rules. Proposed Section 59A (1) empowers the Central Government to prescribe the manner and conditions for conducting insolvency proceedings involving two or more companies in a group. Subsection (2) outlines areas that “may be prescribed,” including a common National Company Law Tribunal bench, coordination among committee of creditors (CoCs), and appointment of a common insolvency professional. Subsection (3) further authorises the government to apply any IBC provision “with modifications” to group insolvency. This broad delegation contravenes established judicial principles of legislative limits. In In Re Delhi Laws Act (1951), the Supreme Court held Parliament cannot abdicate essential legislative functions, such as laying down policy and principles, confining delegation to mere details. This was reaffirmed in Ajoy Kumar Banerjee v. Union of India (1984), emphasising that core issues of rights, obligations, and policy must remain with Parliament. No procedural afterthought Group insolvency, moreover, is no procedural afterthought; it strikes at the core of company jurisprudence. Since long, each company has been recognised as a distinct legal person, and the corporate veil can be pierced only in exceptional cases of fraud or evasion. Treating a group of companies as a single economic unit during insolvency would fundamentally alter creditor rights, inter-corporate guarantees, and value allocation. Such a shift demands explicit parliamentary legislation, not executive fiat. The Bill’s ambiguity intensifies these issues. It mentions “coordination” but leaves unclear whether this entails a consolidated resolution plan for the entire group or merely parallel plans with consultations. Similarly, it refers to a “committee comprising of the committee of creditors,” without specifying if this supersedes individual CoCs or serves as advisory role. These elements directly impact creditor democracy and resolution fairness under the IBC. Equally problematic is the definition of “group.” Borrowed from the Companies Act, 2013, it covers associate companies with a mere 26 per cent shareholding. This threshold suits corporate governance but is far too broad for insolvency. If Company A holds 26 per cent in Company B without shared liabilities or operations, dragging B into group insolvency would unfairly prejudice B’s creditors, who relied on its standalone creditworthiness. A definition based on financial or operational interdependence would be more appropriate. Earlier this year, the IBBI had proposed introducing group insolvency through regulations alone — it would have created substantive rights through delegated legislation. While this Bill corrects that course by amending the IBC, its skeletal structure still leaves the core framework to future rule-making. This pattern mirrors the Companies Act, 2013, where key areas like corporate social responsibility and related-party transactions were fleshed out via notifications. A stark example is the Companies (Auditor’s Report) Order, 2020, which imposed extensive new responsibilities on statutory auditors — such as reporting on internal financial controls and undisclosed income — that exceeded the Act’s own provisions, sparking debates on whether such substantive expansions should be delegated rather than legislated. In insolvency, where livelihoods and asset values are at stake, such fluidity could be far more damaging. Parliament now has an opportunity to legislate the fundamentals: (1) criteria for ordering joint and coordinated proceedings based on proven interdependence; (2) mechanisms for CoC interactions, including voting protocols and conflict resolutions; (3) rules for handling inter-company claims and guarantees to avoid double-dipping or unfair subordination; (4) safeguards for dissenting creditors, ensuring minority protection akin to IBC’s Section 30(2). With these in statute, delegation could be limited to operational mechanics like timelines or forms. As India pushes for ease of doing business, a robust group insolvency regime is vital. But rushing it through vague clauses risks judicial challenges and implementation chaos. It is therefore submitted that the lawmakers must revisit the Bill. The writer is an advocate at the Delhi High Court Published on October 28, 2025
