December 22, 2021
In this matter, 15 applications were filed before NCLT’s Mumbai Bench, some in favour of consolidation of insolvency proceedings of the Videocon group companies, and some against such consolidation. The Tribunal observed that a blanket view declaring that the entire group was fit to be consolidated simply because they were connected or controlled by common management, was not possible. The Tribunal noted that each unit or subsidiary should be examined on its merits. Many factors needed to be considered to distinguish the units into two categories:
Keeping the above in view, the Tribunal ordered that the assets and liabilities of 13 Videocon companies out of the group of 15 should be substantively consolidated. The Tribunal laid down the following parameters while consolidating the 13 companies:
(i) common control; (ii) common directors; (iii) common assets; (iv) common liabilities; (v) inter-dependence; (vi) interlacing of finance; (vii) pooling of resources; (viii) co-existence for survival; (ix) intricate link of subsidiaries; (x) intertwined accounts; (xi) inter-looping of debts; (xii) singleness of economics of units; (xiii) Interdependence due to intertwined consolidated accounts; (xiv) cross-shareholding; (xv) Common pooling of resources, etc. (Para 78).
The Tribunal clarified that this was not an exhaustive list. However, the existence of these points would help in examining whether in a particular case the question of ‘consolidation’ was worth consideration. Accordingly, the present matter was disposed of.
Full text of the order accessible here.
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