Supreme Court clarifies scope of veil piercing and group insolvency under the Code

In brief

In a recent decision¹ the Supreme Court examined whether development rights and leasehold interests held through subsidiaries and special purpose companies could be considered within the Corporate Insolvency Resolution Process (CIRP) of the holding company under the Insolvency and Bankruptcy Code, 2016 (Code). 

The dispute arose from the insolvency proceedings of A Co., which had undertaken multiple real estate projects on lands leased by the Development Authority to separate corporate entities. While the National Company Law Appellate Tribunal (NCLAT) was of the view that such entities were distinct legal persons whose assets could not form part of A Co.’s CIRP, the Supreme Court adopted a substance-over-form approach and held that the facts justified lifting the corporate veil.