[Umakanth Varottil is a Professor of Corporate Law at the National University of Singapore.
Thanks to Raghav Bhatia for alerting the author to the Supreme Court ruling that forms the basis for this post]
Corporate groups, evidenced through a network of holding companies and subsidiaries, are commonplace in Indian business. Such a set up invokes significant legal issues. On the one hand, under essential principles of company law, each company forming part of a group has a separate legal personality that is responsible for its own liabilities and not that of the others in the group. On the other hand, certain anti-abuse mechanisms step in to treat the entire group of companies as a single legal organism for specific purposes.
This problem is compounded in the context of corporate insolvency. If two or more companies within the group face corporate insolvency, must they be subject to independent proceedings in respect of each company, or must they be dealt with through a combined insolvency proceeding? A more complex question arises where only one company within the group becomes insolvent. In such a circumstance, what impact does the insolvency proceeding relating to that company have on other companies within the group? For example, when a holding company becomes insolvent, does the insolvency proceeding ipso facto rein in all its subsidiaries? This last question came up for consideration before the Supreme Court in Alpha Corp Development Private Limited v. Greater Noida Industrial Development Authority (GNIDA) 2026 INSC 449 (5 May 2026). The Court found that the assets relating to the subsidiaries of a corporate debtor parent could form part of the resolution plan of the parent under the Insolvency and Bankruptcy Code, 2016 (“IBC”). It arrived at this conclusion by invoking well-known but thorny principle of piercing the corporate veil.
This post deals with the issues arising from Alpha Corp Development in two parts. The first part examines the relevant facts and lays out the reasoning of the Supreme Court on the veil piercing issue. The second analyses a number of questions that emanate from the ruling, and seeks to proffer some suggestions.
Background in Alpha Corp Development
The core of the issue pertained to insolvency proceedings initiated under section 7 of the IBC by a creditor of Earth Infrastructures Limited (“EIL”) against the corporate debtor. The National Company Law Tribunal (“NCLT”) admitted the insolvency proceedings, which led to the appointment of an interim resolution professional and, subsequently, a resolution professional. As required under the IBC, a committee of creditors was also constituted. The resolution professional invited resolution plans relating to various real estate projects being developed by the corporate debtor, EIL.
It turns out that EIL is a holding company presiding over a corporate group consisting of at least three subsidiaries, all of whom constituted special purpose companies (“SPCs”) to bid for allotment of plots by GNIDA on which real estate projects were to be pursued by the allottee. Take the example of one such subsidiary SPC, Earth Towne Infrastructures Private Limited (“ETIPL”), which was incorporated as an SPC by a consortium comprising EIL holding 79% shares in ETIPL and Raus Infras Limited and Shalini Holdings Limited each holding 11% shares in the SPC. It is noteworthy that ETIPL was incorporated as a subsidiary of EIL because the relevant scheme under which GNIDA allotted lands for development required that consortia must form an SPC to undertake real estate activity on the plot. Accordingly, GNIDA executed a 90-year lease in favour of ETIPL for the relevant lands. Soon thereafter, ETIPL entered into an unregistered development agreement with EIL under while EIL was conferred the right to develop the land leased by GNIDA to ETIPL. In a nutshell, while ETIPL (the subsidiary) is the lessee of the land from GNIDA, EIL (the parent) is undertaking real estate development activity on that land pursuant to the contractual arrangement between the two companies.
It is in such a corporate structural context that GNIDA raised objections in the insolvency proceeding pertaining to EIL. Among other grounds, GNIDA argued that not only did ETIPL fail to make payments under the lease deed with it, but that the resolution professional in EIL’s insolvency proceedings failed to keep GNIDA informed of the resolution plan. However, the NCLT rejected GNIDA’s plea and approved the resolution plan submitted by Alpha Corp Development Private Limited. Aggrieved by this decision, GNIDA preferred an appeal before the National Company Law Appellate Tribunal (“NCLAT”), which allowed the appeal. In its ruling, the NCLAT relied on Supreme Court’s judgments in Vodafone International Holdings BV v. Union of India and Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Limited to find that each entity within the corporate group holds a separate legal personality and that, in the corporate insolvency resolution process (“CIRP”) of a holding company, only its assets and not those of its subsidiaries can form part of the resolution plan. It is against this ruling that the resolution applicant, Alpha Corp Development, preferred an appeal to the Supreme Court.
Ruling of the Supreme Court on Veil Piercing
On the question of piercing the corporate veil, the Supreme Court began by noting that “[t]he sheet anchor of GNIDA’s case is that the assets of subsidiary companies cannot be made part of the assets of the holding company that was subject to CIRP” [paragraph 53]. The Court followed this by raising the question of whether “this was a fit case to lift the corporate veil” and readily answered it in the affirmative. In doing so, it relied on Life Insurance Corporation of India v. Escorts Ltd to establish the point that “when, in reality, associated or group companies are inextricably connected so as to form part of one concern, the corporate veil should be lifted” [paragraph 54]. The Court also invoked its landmark IBC ruling in ArcelorMittal India Private Limited v. Satish Kumar Gupta to suggest that although courts would disregard the veil in public interest or where “a company has been formed to evade obligations enforced by law”, the same principle would apply to a group of companies that would be treated effectively as a single economic unit.
The Court then applied these principles to the facts of the case by noting that the parent company (EIL) was a dominant shareholder of ETIPL (and its other subsidiaries) and that EIL and ETIPL shared common directors. Moreover, the only asset belonging to ETIPL was the land leased to it from GNIDA. The Court concluded by finding that whether the corporate veil ought to be pierced depends upon the facts and circumstances of individual cases, and that this case was eminently fit for undertaking judicial veil piercing. In a parting comment of sorts, the Court noted: “[T]his was an eminently fit case for lifting the corporate veil, as EIL was the main driving force in the development of the projects and in payment of GNIDA’s dues. The subsidiary companies were only a front.” [paragraph 56]
[continued here]
– Umakanth Varottil