Parent company liable to repay dues of its wholly owned subsidiary: NCLT Kochi

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Overview: When it is found that a wholly owned subsidiary does not have any assets to its name for the purpose of CIRP, any properties, including any claims or interests of its parent company will be said to be the assets of the wholly owned subsidiary for the purpose of the CIRP. The above principle would not be applicable as a straight-jacket formula but will be applicable on a case to case basis. In the present case the relationship of principal and agent was applied as the contract was procured by the parent company whereas the work was to be carried out by the subsidiary company.


In the year 2014, Bharat Petroleum Corporation Limited (BPCL) invited global tenders for a project in Kerala. M/s Albanna Engineering LLC (AEL/parent company), a company incorporated in UAE, submitted a bid for the same, which was accepted by BPCL. AEL issued bank guarantees in favour of BPCL, and vide an agreement of sub-contract, appointed its subsidiary M/s Albanna Engineering India Pvt. Ltd. (AEIPL/Corporate Debtor) to carry out the work. The Corporate Debtor further appointed service providers and material suppliers to carry out the work. However, the Corporate Debtor defaulted in repaying their dues.

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