The New Delhi Principal Bench of the National Company Law Appellate Tribunal (NCLAT) has held that Regulation 29 of the IBBI (Liquidation Process) Regulations, 2016 permits set-off only in case of mutual dealings between the same corporate debtor and the same other party. It does not permit cross-adjustment of claims involving separate group companies, even if they belong to the same industrial group or were handled by the same liquidator. Separate legal identity continues to apply throughout CIRP and liquidation, and recoveries/distributions must remain entity-specific under the IBC framework.
The Court also reinforced that the “group of companies” argument cannot be used to bypass the basic principle that each company in insolvency is treated as a separate legal person unless the Code itself provides otherwise. Administrative convenience, shared communication, common office address, or common insolvency professional do not erase this distinct legal identity. As a result, a creditor must pursue its admitted claims in each liquidation separately and can only receive distribution under Section 53 from the relevant liquidation estate.
The Larger Bench comprising Justice N Seshasayee (Judicial Member), Arun Baroka (Technical Member), and Indevar Pandey (Technical Member) observed that Brahmaputra Rolling Mills Pvt Ltd. remained a separate juristic person and could not be merged with other BISCON group entities merely because there was a common liquidator, common correspondence, or administrative overlap. The Tribunal noted that separate CIRP and liquidation proceedings had been conducted for each entity, and this separate treatment continued to govern stakeholder rights and recoveries under the Code.
On Regulation 29, the Tribunal made it clear that set-off is available only where there are mutual dealings between the corporate debtor and the same counterparty. It cannot be invoked to adjust sums allegedly owed by third-party group entities against money payable to the present corporate debtor. Since the appellant was seeking to club liabilities of different companies, and those companies had also undergone separate proceedings and dissolution, the plea of set-off was rejected.
The Tribunal also found that the factual record did not support the appellant’s stand. It noted that the load security deposits of each entity were separately maintained, electricity bills were separately raised for each unit, and even the appellant’s own claim form before the IRP recorded “N/A” against the column dealing with mutual credits, mutual debts, or mutual dealings available for set-off. This materially weakened the later attempt to argue for a group-wide adjustment mechanism.
The NCLAT further accepted the liquidator’s justification for the calculation of the refundable amount and observed that the adjustment of the load security deposit was in consonance with the applicable electricity supply code. It also held that the appellant’s reliance on provisions of the Electricity Act could not override the Insolvency and Bankruptcy Code because Section 238 of the IBC gives the Code overriding effect in case of inconsistency.
Briefly, the appeal before the NCLAT arose from an NCLT Guwahati order dated May 27, 2025 directing Assam Power Distribution Company Ltd. to pay Rs. 37.66 lakhs along with applicable interest, to the liquidator of Brahmaputra Rolling Mills Pvt Ltd. The dispute concerned a balance load security amount which, after adjustment of electricity dues, was found payable by the power utility to the corporate debtor in liquidation. The appellant challenged this direction on the basis that other companies in the same Brahmaputra/BISCON group allegedly owed it much larger sums, and therefore the amount payable to Brahmaputra Rolling Mills should be set off against those admitted claims.
The appellant argued that the group companies had functioned as a single economic unit and that Regulation 29 of the IBBI (Liquidation Process) Regulations, 2016 should permit set-off across the group. It relied on the “group of companies” theory, the common liquidator, and its admitted claims against other Brahmaputra entities, contending that the NCLT had taken an unduly technical view by treating each company separately. It also challenged the grant of interest and argued that no crystallised demand had been raised before commencement of insolvency proceedings.
The liquidator opposed the appeal by stating that the appellant had itself admitted liability of Rs. 37.66 lakhs in its letter dated Feb 06, 2024, but had sought to avoid payment by raising a counterclaim against other group entities. The liquidator maintained that each BISCON company had undergone separate CIRP and liquidation proceedings, that they were distinct juristic persons, and that Regulation 29 only applies where mutual dealings exist between the same corporate debtor and the same counterparty. The liquidator also pointed out that the other group entities had already been dissolved, making any attempted cross-entity adjustment legally untenable.
