Author: Ashwarya Sharma, Advocate & Co-Founder, RB LawCorp
Assisted by: Rishabh Singh, Principal Associate – IBC
Date: 18/02/2026
Introduction: When Corporate Form Cannot Defeat Commercial Reality
One of the recurring tensions under the Insolvency and Bankruptcy Code, 2016 (IBC) has been the rigid application of corporate separateness in situations where business operations are functionally unified.
Can multiple companies, though legally distinct, be subjected to a single insolvency proceeding where they operate as one economic unit?
The Hon’ble Supreme Court, in Satinder Singh Bhasin v. Col Gautam Mullick, has now provided authoritative clarity.
The answer, in appropriate cases, is Yes.
The Background: A Unified Real Estate Project Split Across Entities
The dispute arose from a large integrated real estate project executed through two corporate entities with:
- Common directors
- Interchangeable roles
- Collective communications and representations
- Unified financial dealings
Over 100 allottees approached the NCLT under Section 7 of the Insolvency and Bankruptcy Code, 2016}, alleging default arising from non-completion, non-delivery of possession, and stoppage of assured returns.
The promoters objected to the maintainability of a joint petition, arguing that each company was a separate juristic person and must face independent proceedings.
The Supreme Court rejected this technical objection.
The Core Principle: Substance Over Corporate Form
The Court held that where corporate entities are intrinsically linked and function as a single economic unit, a joint insolvency petition is legally maintainable.
Corporate separateness cannot be used as a shield where:
- Management overlaps
- Financial obligations are intertwined
- Project execution is inseparable
- Communications and assurances are collective
To artificially segregate such entities would defeat the economic reality of the transaction and undermine the objectives of the IBC.
Key Legal Principles Reaffirmed
1. Static Threshold Test
The 100-allottee requirement under Section 7 is to be assessed on the date of filing. Subsequent withdrawals or settlements do not affect maintainability at admission stage.
2. Pre-Registration Flexibility
Amendments, including changes to the party array, are permissible during the defect-curing stage prior to formal registration under NCLT Rules.
3. Recognition of Joint / Group CIRP
Though India does not yet have a codified group insolvency framework, the absence of an express provision does not prohibit consolidated proceedings in appropriate factual circumstances.
4. Default in Real Estate Matters
Symbolic or incomplete possession does not constitute valid delivery. Failure to provide a legally complete and habitable unit amounts to default.
Commercial Impact: Beyond the Immediate Case
The judgment carries significant implications for:
- Real estate projects structured through multiple SPVs
- Financial creditors and institutional lenders
- Homebuyers as recognised financial creditors
- Resolution professionals handling complex project-based insolvencies
It sends a clear message: corporate layering cannot be used to fragment liability where business operations are inseparable.
The Broader Jurisprudential Shift
This ruling reflects a continued evolution of insolvency jurisprudence toward:
- Resolution-centric interpretation
- Value maximisation
- Prevention of procedural abuse
- Alignment of law with commercial substance
Until a formal group insolvency regime is enacted, this decision will serve as a guiding precedent in cases involving interconnected corporate debtors.
Conclusion: When Businesses Operate as One
The Supreme Court’s decision marks an important doctrinal consolidation under the IBC.
It reinforces that:
- Technical separateness cannot override economic unity
- Insolvency law must reflect commercial realities
- Fragmented proceedings should not dilute stakeholder rights
- Where businesses function collectively, insolvency consequences will follow collectively
By recognising the maintainability of a single insolvency petition against intrinsically linked corporate entities, the Court has strengthened both creditor confidence and the structural integrity of India’s insolvency framework.
📎 Attached PDF for detailed reading 👉
📎 Full Published Version: https://tiolcorplaws.com/news/details/NDQ2NzE=#
(The author is a practicing advocate, Co-Founder and Legal Head of RB LawCorp.
He specializes in GST law. Suggestions or queries can be directed to
ashsharma@rblawcorp.in. The views expressed in this article are strictly
personal.)
