New Delhi: The Supreme Court has held that, in an appropriate case, the corporate veil may be lifted during the Corporate Insolvency Resolution Process initiated against a holding company to treat the assets of its subsidiary companies as assets of the corporate debtor, particularly where the subsidiaries function as a mere front for the holding company and their only assets are the lands leased for execution of the holding company’s real estate projects.
The Division Bench of Justice Sanjay Kumar and Justice Alok Aradhe, while restoring the resolution plans of Alpha Corp Development Private Limited and Roma Unicon Designex Consortium for four stalled projects of Earth Infrastructures Limited in Greater Noida, held that Greater Noida Industrial Development Authority was disentitled from claiming penal interest, penal charges, and time-extension penalties on account of its own persistent inaction and failure to monitor the development of the leased plots.
The dispute arose from the CIRP initiated against Earth Infrastructures Limited, the corporate debtor, on a petition filed by financial creditor Deepak Khanna, admitted by the National Company Law Tribunal on 06.06.2018. EIL was the developer in relation to three projects on lands leased by GNIDA to its subsidiaries — Earth Towne (leased to Earth Towne Infrastructures Private Limited), Earth TechOne (leased to Neo Multimedia Limited), and Earth Sapphire Court (leased to Nishtha Software Private Limited) — and a fourth project, Earth Copia, on freehold land in Gurugram having no connection with GNIDA.
A Committee of Creditors comprising HDFC Bank and 4,229 homebuyers was constituted. The Resolution Professional invited resolution plans project-wise and, following evaluation, the CoC approved Roma’s plan for Earth Towne and Alpha’s plan for Earth TechOne, Earth Sapphire Court, and Earth Copia. The NCLT approved Roma’s plan on 05.04.2021 and Alpha’s plan on 08.06.2021.
GNIDA challenged these approvals before the National Company Law Appellate Tribunal, which, by judgment dated 30.01.2023, set aside both NCLT orders. The NCLAT held that the assets of the subsidiary lessees could not be treated as assets of EIL under the CIRP, that the resolution plans could not validly direct transfer of leasehold lands without GNIDA’s prior consent, and that the Resolution Professional had acted outside the ambit of the Code in certifying the plans. The NCLAT directed a fresh Form G to be published and made GNIDA a party to the proceedings, while directing it to waive penal interest and recalculate its dues.
Before the Supreme Court, the critical question was whether this was a fit case to lift the corporate veil and treat the subsidiary companies’ assets as those of EIL. The Court noted that Neo Multimedia Limited and Nishtha Software Private Limited were wholly-owned subsidiaries of EIL, incorporated with no business of their own beyond holding the leased lands. ETIPL was incorporated specifically because GNIDA’s own scheme required the consortium to form a Special Purpose Company, and EIL held 98% of its shareholding. All three companies shared common directors with EIL.
The Court observed that EIL was the dominant driving force behind all three projects, that GNIDA’s own letter to police authorities acknowledged EIL’s role in constructing Earth Towne, and that the building plan applications submitted by the lessees to GNIDA were based on certificates obtained by EIL itself.
Relying on the Constitution Bench’s observations in Life Insurance Corporation of India v. Escorts Ltd. and others, (1986) 1 SCC 264, and the subsequent application of that principle in ArcelorMittal India Private Limited v. Satish Kumar Gupta and others, (2019) 2 SCC 1, the Court held that where associated companies are inextricably connected so as to form, in reality, part of one concern, and where the protection of public interest is of paramount importance, the corporate veil ought to be lifted. Applying this to the facts, the Court held that the subsidiary companies were only a front for EIL and that it was an eminently fit case for lifting the corporate veil.
On the question of Earth Copia, the Court accepted the contention of Earth Copia Owners Society that GNIDA’s appeal before the NCLAT had no nexus with the Gurugram project, which stood on freehold land outside GNIDA’s purview. The NCLAT had erred in setting aside Alpha’s resolution plan in its entirety without noting that the approval of the Earth Copia component was entirely unrelated to GNIDA’s grievances.
The Court also declined to entertain the intervention sought by Earth Buyers Association for Justice, noting that its earlier challenge to Alpha’s plan had been rejected by the NCLAT and had attained finality, as it had not approached the Supreme Court against the dismissal.
On the penal interest issue, the Court affirmed the NCLAT’s direction. It found that GNIDA had received complaints from aggrieved homebuyers well before the CIRP commenced, had failed to take coercive steps against the defaulting lessees despite having the contractual obligation to monitor project development, and had issued only sporadic and intermittent notices spread over several years.
Payments by Neo Multimedia Limited had stopped as early as January 2011, yet the next notice was issued only in January 2019. Nishtha Software Private Limited defaulted from September 2010, but GNIDA’s first default notice was issued in September 2016. ETIPL defaulted in February 2013, with notices resuming only in 2015 and 2016.
After the CIRP commenced, GNIDA failed to file timely claims: it submitted no claim for Earth Sapphire Court, addressed its Earth TechOne claim to the long-departed Interim Resolution Professional in November 2021, and raised its claim for Earth Towne only after Roma’s plan had already been approved by the CoC.
The Court observed that GNIDA had significantly contributed to the imbroglio through persistent inaction and ineptitude and was not entitled to charge penal interest for this extended period of default on its own part.
Directing restoration of both resolution plans, the Court ordered GNIDA to recalculate its dues after stripping out all penal interest, penal charges, and time-extension penalties, and to communicate the revised figures to Alpha and Roma within two weeks.
The successful resolution applicants were directed to clear the recalculated dues in equated monthly instalments over twenty-four months commencing from 07.07.2026, with no interest accruing to GNIDA during this period. Both Alpha and Roma had undertaken before the Court that the dues payable to GNIDA would not be burdened upon the homebuyers and allottees.
Registration of units in favour of allottees was directed to be undertaken only after GNIDA’s dues were paid in full, conferring upon the buyers the status of sub-lessees. The project completion timelines under the resolution plans were directed to commence from 01.06.2026.
The appeals filed by Earth Buyers Association for Justice and Earth United Consumer Association were dismissed, as was the appeal of GNIDA against the denial of penal interest.
The civil appeal filed by Earth Property Buyers Association with a delay of 34 days, beyond the statutory outer limit of fifteen days’ condonable delay under Section 62(2) of the Code, was dismissed on the ground of limitation.
The Court also noted that GNIDA’s cancellation of land allotments to Neo Multimedia Limited and Nishtha Software Private Limited by order dated 16.06.2023, made in defiance of the status quo order dated 13.04.2023, was subsequently recalled on 19.08.2025 after the RP moved an interlocutory application, and that the chairman of GNIDA had tendered an apology for the same.
Case Title: Alpha Corp Development Private Limited v. Greater Noida Industrial Development Authority (GNIDA) and others [Civil Appeal No. 1526 of 2023 and connected matters] (2026 INSC 449)
