Joint Insolvency Proceedings for Intricately Linked Corporate Entities Under IBC

Introduction

On February 3, 2026, the Supreme Court of India delivered a landmark judgment in Satinder Singh Bhasin v. Col. Gautam Mullick & Ors. [1], which affirmed that a single insolvency petition under the Insolvency and Bankruptcy Code, 2016 can be maintained against multiple corporate entities when they are intrinsically linked in project execution and marketing. By expressly recognizing the permissibility of joint insolvency proceedings under the IBC, the Court provided crucial clarity on proceedings against separate corporate debtors whose operations and obligations to creditors are deeply intertwined, particularly in real estate developments where multiple entities often collaborate. The ruling underscores that corporate structures cannot be used to fragment unified business operations and thereby defeat the core objectives of insolvency resolution.

The Supreme Court Judgment

The case involved 141 allottees of the Grand Venezia Commercial Tower project in Greater Noida who filed a petition against M/s. Grand Venezia Commercial Towers Private Limited and M/s. Bhasin Infotech and Infrastructure Private Limited [1]. The allottees sought initiation of Corporate Insolvency Resolution Process against both companies jointly, claiming they had not received possession despite making substantial payments. The appellants challenged admissibility of a single petition against two distinct entities, arguing that segregating allottees by company would reduce numbers below the statutory threshold of 100 allottees required under Section 7(1) of the Insolvency and Bankruptcy Code.

The Supreme Court bench of Justice Sanjay Kumar and Justice K. Vinod Chandran rejected these arguments, upholding the National Company Law Tribunal and National Company Law Appellate Tribunal orders [1]. The Court observed that Bhasin Infotech originally undertook the project and later granted marketing rights to Grand Venezia. Both entities functioned as a unified commercial operation, being jointly answerable to allottees. The Supreme Court concluded that the corporate debtors were intrinsically linked and a joint insolvency process would maximize asset realization [1].

Legislative Framework Under IBC

The Insolvency and Bankruptcy Code, 2016 was enacted to consolidate laws relating to reorganization and insolvency resolution of corporate persons in a time-bound manner for maximization of value of assets [2]. Section 7 provides that a financial creditor may file an application for initiating corporate insolvency resolution process against a corporate debtor when default has occurred [2]. This provision forms the foundation for creditor-initiated proceedings and has been extensively invoked by financial creditors, including homebuyers recognized as financial creditors following amendments.

The Insolvency and Bankruptcy Code (Amendment) Act, 2020 introduced specific thresholds for real estate allottees through the second proviso to Section 7(1), mandating that allottees file applications jointly with not less than one hundred creditors or not less than ten percent of total creditors, whichever is less [3]. This threshold was upheld in Manish Kumar v. Union of India [3], where the Supreme Court held that the amendment prevented frivolous petitions and protected interests of other allottees who might have different views on insolvency proceedings.

Threshold Requirements and Their Application

In Manish Kumar v. Union of India (2021), the Supreme Court examined constitutional validity of threshold requirements for real estate allottees [3]. The Court held that classification was based on intelligible differentia, including numerosity, heterogeneity, and individuality in decision-making among allottees in large real estate projects. The Court reasoned that allowing a single allottee to initiate proceedings could jeopardize interests of hundreds or thousands of other allottees who might prefer different remedies or have faith in the developer.

The Supreme Court clarified that required numbers must be reckoned at the time of filing the application, not at admission stage [3]. This principle was directly applied in the Satinder Singh Bhasin case, where 103 allottees filed the petition, satisfying the threshold. The Court rejected contentions that thresholds should be calculated separately for each corporate entity, holding that where entities are intrinsically linked to the same project, allottees should be counted collectively.

Group Insolvency Principle: The Edelweiss Precedent

The Supreme Court’s decision drew heavily from the National Company Law Appellate Tribunal’s ruling in Edelweiss Asset Reconstruction Company Limited v. Sachet Infrastructure Private Limited [4], which established that group insolvency proceedings can be initiated when multiple corporate entities are jointly involved in collaborative development projects. The case involved five corporate guarantors who were co-borrowers in a township development project in Palwal, Haryana.

The National Company Law Appellate Tribunal held that these corporate debtors were co-borrowers and corporate guarantors, and resolution would not succeed if the entire township was not developed comprehensively [4]. The Tribunal found it was a joint consortium requiring group insolvency to develop the township on corporate debtors’ land along with Corporate Insolvency Resolution Process against Adel Landmarks Limited, the principal borrower. The Tribunal directed group Corporate Insolvency Resolution Process against five corporate debtors apart from ongoing proceedings against the principal borrower [4].

The Edelweiss judgment recognized that when multiple corporate entities jointly participate in a project with inseparable business operations, conducting fragmented insolvency proceedings would jeopardize project completion and adversely affect allottees [4]. The Tribunal emphasized recognizing interconnected roles of corporate guarantors in land development projects, reasoning that their insolvency could not be addressed in isolation without impacting overall project viability. Group insolvency resolution was therefore warranted to create a cohesive plan for project completion.

Determining When Entities Are Intrinsically Linked

The Supreme Court in Satinder Singh Bhasin provided guidance on determining when corporate entities should be considered intrinsically linked for joint insolvency proceedings under the IBC [1]. The test is not merely existence of separate legal personalities, but practical reality of how entities function in relation to the project and their obligations to creditors. Several factors are relevant in this determination.

First, the nature of collaboration in project development and marketing is examined. Where one entity undertakes development while another handles marketing, but both are jointly answerable to allottees, this demonstrates functional integration. Second, operational intertwining is assessed. When business operations cannot be segregated and entities function as a unified commercial operation, this indicates intrinsic linkage. Third, the Court considers whether keeping entities as going concerns requires a consolidated approach. Where separate proceedings would diminish resolution prospects and reduce asset realization, joint proceedings become appropriate [1].

Protection of Homebuyers’ Rights

Recognition of homebuyers and real estate allottees as financial creditors under the Insolvency and Bankruptcy Code represents a significant shift in Indian insolvency law. Prior to 2018 amendments, homebuyers were classified as operational creditors, placing them in a subordinate position. Amendment to Section 5(8) to include amounts raised from allottees under real estate projects as financial debt fundamentally altered real estate insolvency dynamics.

This reclassification empowers homebuyers by giving them rights to initiate Corporate Insolvency Resolution Process proceedings against defaulting developers and provides representation in the Committee of Creditors, where they participate in critical decisions regarding resolution plans. While 2020 amendment threshold requirements impose limitations on individual action, they actually strengthen collective bargaining positions by requiring coordinated action.

The Satinder Singh Bhasin decision further enhances homebuyer protection by ensuring developers cannot escape liability by fragmenting operations across multiple corporate entities [1]. The judgment recognizes that in many real estate projects, developers use multiple special purpose vehicles for different project aspects, and allowing them to avoid joint insolvency would prejudice allottees who dealt with the project as a unified whole.

Maximization of Asset Value through Joint Insolvency Proceedings under IBC

A fundamental objective of the Insolvency and Bankruptcy Code is maximizing value of corporate debtor assets. Section 1(1) explicitly states it is enacted for reorganization and insolvency resolution in a time-bound manner for maximization of value of assets [2]. The Supreme Court’s endorsement of joint insolvency proceedings for intrinsically linked entities directly serves this objective by addressing inefficiencies that arise when functionally integrated entities are subjected to separate insolvency proceedings under the IBC.

When corporate entities are functionally integrated but subjected to separate insolvency proceedings, several inefficiencies arise. There may be duplication of costs with separate resolution professionals and administrative expenses for each entity. Resolution applicants face difficulties formulating viable plans when they cannot acquire the integrated business as a whole. Potential exists for conflicting decisions by different Committees of Creditors, leading to suboptimal outcomes.

Joint insolvency proceedings address these concerns by enabling consolidated approaches to resolution. A single resolution professional can be appointed for related entities, reducing costs and ensuring coordinated decision-making. Resolution applicants can submit plans treating the integrated business as a whole, increasing likelihood of successful resolution. The Committee of Creditors can make informed decisions considering the complete picture of assets and liabilities across related entities. These efficiencies ultimately benefit all stakeholders, including creditors, employees, and corporate debtors [1].

Implications for the Real Estate Sector

The real estate sector in India has been characterized by use of multiple corporate entities for different phases or components of integrated projects. Developers commonly establish separate special purpose vehicles for land holding, development, marketing, and facilities management. While these structures serve legitimate business purposes, they can also fragment liabilities and complicate creditor recovery.

The Supreme Court’s judgment sends a clear message to the real estate industry that corporate structures cannot be used to defeat legitimate creditor claims. Where entities are intrinsically linked in project execution and marketing, they will be treated as jointly liable for insolvency purposes [1]. This has several important implications for how real estate projects are structured and managed.

Developers will need to carefully consider insolvency implications when establishing corporate structures for projects. If entities within a group are functionally integrated and jointly answerable to creditors, they should anticipate possibility of joint insolvency proceedings. This may influence decisions about corporate governance, financial management, and risk allocation within project structures. Additionally, the judgment provides greater certainty to homebuyers and financial creditors, who can pursue joint proceedings against related entities without fear that technical arguments about separate legal personality will defeat their claims.

Conclusion

The Supreme Court’s judgment in Satinder Singh Bhasin v. Col. Gautam Mullick & Ors. represents a significant development in Indian insolvency jurisprudence by affirming that single insolvency petitions can be maintained against multiple corporate entities when they are intrinsically linked in their operations and obligations [1]. This principle ensures that objectives of the Insolvency and Bankruptcy Code, particularly maximization of asset value and efficient resolution, are not frustrated by corporate structures that fragment integrated business operations.

The judgment provides crucial protection to homebuyers and financial creditors in real estate projects by recognizing that developers cannot escape liability through use of multiple corporate entities for different aspects of unified projects. It builds on the National Company Law Appellate Tribunal’s precedent in the Edelweiss case [4] and applies principles consistent with the Supreme Court’s earlier ruling in Manish Kumar v. Union of India [3] regarding threshold requirements for real estate allottees.

The decision strengthens India’s insolvency framework by prioritizing substance over form and ensuring that the Code serves its fundamental purpose of facilitating effective resolution while protecting the interests of all stakeholders. As insolvency law continues to evolve in India, allowing joint insolvency proceedings under the IBC for intrinsically linked entities will remain an important tool for achieving efficient and equitable outcomes in complex corporate insolvency cases.

References

[1] Satinder Singh Bhasin v. Col. Gautam Mullick & Ors., 2026 INSC 104 (Supreme Court of India, February 3, 2026)

[2] Insolvency and Bankruptcy Code, 2016, Preamble and Section 7

[3] Manish Kumar v. Union of India, (2021) 5 SCC 1 (Supreme Court of India)

[4] Edelweiss Asset Reconstruction Company Limited v. Sachet Infrastructure Private Limited, Company Appeal (AT) (Insolvency) No. 377 of 2019 (National Company Law Appellate Tribunal, September 20, 2019)