List of Current Affairs

Source: Supreme Court 

Why in News? 

A Division Bench of the Supreme Court, comprising Justice Sanjay Kumar and Justice Alok Aradhe, in Alpha Corp Development Private Limited v. Greater Noida Industrial Development Authority (GNIDA) and Others (2026), set aside the order of the National Company Law Appellate Tribunal (NCLAT) which had refused to treat a subsidiary company's assets as part of the holding company's assets during the latter's Corporate Insolvency Resolution Process (CIRP). 

• The Court held that where group companies are inextricably connected and the subsidiaries function merely as a front for the holding company, lifting the corporate veil is justified to protect the rights of homebuyers and enable completion of stalled real estate projects.

What was the Background of Alpha Corp Development Pvt. Ltd. v. GNIDA (2026) Case? 

• The dispute arose from the insolvency of Earth Infrastructures Limited (EIL), a real estate developer whose multiple housing and commercial projects in the NCR region had stalled around 2016, leaving numerous homebuyers affected. 
• EIL had structured its projects through subsidiary companies, which formally held leasehold rights over land allotted by the Greater Noida Industrial Development Authority (GNIDA). 
• The Earth Towne project was developed through Earth Towne Infrastructures Pvt. Ltd., in which EIL held approximately 98% shareholding. Other projects — Earth TechOne and Earth Sapphire Court — were executed through wholly owned subsidiaries, namely Neo Multimedia Ltd. and Nishtha Software Pvt. Ltd. 
• Although these subsidiaries were the formal lessees, EIL remained the principal developer and controlling entity. The Earth Copia project in Gurugram stood on freehold land and was directly linked to EIL. 
• In 2018, insolvency proceedings were initiated against EIL under the Insolvency and Bankruptcy Code. During the CIRP, the resolution professional invited claims from creditors, including GNIDA, which was both a lessor and a secured creditor in respect of the leased lands.  
• GNIDA, however, failed to submit its claims in time, responding belatedly even after the Committee of Creditors had approved resolution plans. 
• Two resolution plans were approved — one by Roma Unicon for the Earth Towne project, and another by Alpha Corp for the remaining projects, including Earth TechOne, Earth Sapphire Court, and Earth Copia. Both plans were approved by the National Company Law Tribunal (NCLT) in 2021. 
• GNIDA challenged these approvals before the NCLAT, contending that the assets of the subsidiary companies could not be treated as assets of EIL and that leasehold rights could not be transferred without its consent. The NCLAT accepted this contention, set aside the approved resolution plans, and directed a fresh process. Aggrieved, the resolution applicants and other stakeholders approached the Supreme Court.

What were the Court's Observations? 

• On Lifting the Corporate Veil: The Court held that this 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 functioned only as a front. The Court rejected the NCLAT's view that assets of a subsidiary cannot be treated as part of the holding company's assets during the holding company's CIRP. 
• On Inextricable Connection Between Group Companies: The Court observed that where associated or group companies are inextricably connected so as to form part of one concern, the corporate veil should be lifted. The formal corporate separation between EIL and its subsidiaries could not be used to defeat the purpose of the insolvency resolution process. 
• On the Purpose of CIRP: The Court emphasised that the aim of the CIRP proceedings initiated against EIL required that the resolution plans of Alpha Corp and Roma Unicon be permitted to proceed, so as to enable completion of the stalled projects — Earth Towne, Earth Sapphire Court, and Earth TechOne — while also protecting the interests of GNIDA. 
• On GNIDA's Claim: The Court rejected GNIDA's argument that the assets of subsidiary companies could not form part of the holding company's assets in CIRP. The Court noted that GNIDA had itself failed to submit its claims within the prescribed time and could not be permitted to stall an otherwise valid resolution process on that basis. 
• On Restoration of NCLT Order: Setting aside the NCLAT's decision, the Court restored the NCLT's order permitting the resolution plans to be applied to EIL's subsidiary companies, thereby providing relief to homebuyers who had invested in the stalled housing projects. 

What is the Doctrine of Lifting the Corporate Veil? 

Meaning: 

• A company is a separate legal entity distinct from its members — established in Salomon v. A. Salomon Co. Ltd. (1897). 
• The "corporate veil" is the metaphorical barrier separating the company from its shareholders, protecting them from personal liability. 
• Lifting/piercing the corporate veil means disregarding this separate legal personality to identify and hold liable the real persons behind the corporate form. 

Statutory Basis: 

• Defined under Section 2(20), Companies Act, 2013 — a company is a legal entity with its own rights, duties, and liabilities. 
• The Supreme Court in L.I.C. India v. Escorts Ltd. (1985) held that the veil may be pierced under two broad heads — statutory provisions and judicial interpretations. 

Elements Required to Lift the Veil: 

• Control and Domination — The shareholder must have exercised complete dominance over the company's finances, policy, and business practice, leaving the company with no separate mind or will of its own. 
• Improper Purpose or Use — The dominant shareholder must have used this control to commit fraud, deceive, or violate the legal rights of another. 
• Resulting Damage or Harm — Actual damage must have been caused by the wrongful act; mere control without resulting harm is insufficient. 

Grounds — Statutory (Companies Act, 2013): 

• Section 2(60) — Officer in default personally liable for penalty/imprisonment. 
• Section 7 — Incorporation by fraud/misrepresentation — promoters and first directors liable under Section 447; Tribunal may wind up or remove the company from register. 
• Sections 34 & 35 — Criminal and civil liability for misstatements in prospectus. 
• Section 36 — Fraudulent inducement for investment — liability under Section 447. 
• Section 74(3) — Officers personally liable for failure to repay deposits. 
• Section 239 — Central Government may appoint investigating officer into company affairs. 
• Section 251 — Joint liability for fraudulent application for removal of company name. 
• Section 339 — Officers personally liable (via NCLT) for conducting business to defraud creditors during winding up. 

Grounds — Judicial: 

• Fraud — Corporate form used to shield fraudulent activity; veil lifted to fix personal liability. 
• Sham/Facade Company — Multiple companies owned by one person/group incorporated for illegal purposes treated as a single entity.  
• Tax Evasion — Veil lifted where separate legal personality is used to evade tax.  
• Mere Agency — Subsidiary acting only as agent of the holding company for undue benefit of the parent. 
• Against Public Interest — Veil may be lifted where the company's conduct is against public interest. 
• Siphoning of Assets — Companies incorporated solely to siphon assets and defraud creditors; officers held personally liable.  

Key Principle: 

• The doctrine does not destroy the concept of separate legal personality — it operates as a corrective exception. 
• Incorporating a company does not waive all liabilities of shareholders; personal liability arises whenever officers act in contravention of law. 
• The fact that the veil may be lifted for some purposes does not mean it must be lifted for all purposes. 

Source: Madhya Pradesh High Court

Why in News? 

A Single Bench of the Madhya Pradesh High Court, comprising Justice Jai Kumar Pillai, in Riteshwan v. State of Madhya Pradesh (2026), allowed the writ petition filed by Riteshwan, the son of a deceased government employee, and quashed the State's requirement of a succession certificate for processing a compassionate appointment application. 

• The Court held that compassionate appointment is not a heritable estate or property right devolving by succession, and that demanding a succession certificate for this purpose is arbitrary and without the authority of law. It further held that eligibility must be determined strictly in accordance with the applicable policy, under which the son held clear priority over a married daughter.

What was the Background of Riteshwan v. State of Madhya Pradesh (2026) Case? 

• The dispute arose following the death of Rameshvan Goswami, who had been appointed as a driver under the establishment of the Civil Surgeon cum Chief Hospital Superintendent. After his death, two of his children — a son, Riteshwan, and a daughter, Anita — separately applied for compassionate appointment. 
• Riteshwan filed his application in December 2021, followed by an application from Anita.  
• Faced with rival claims from two dependents of the same deceased employee, the State directed both parties to produce a succession certificate in order to determine entitlement to the appointment. 
• Aggrieved by this direction, Riteshwan approached the Madhya Pradesh High Court by way of a writ petition, challenging the requirement of a succession certificate as legally unsustainable.

What were the Court's Observations? 

• On the Nature of Compassionate Appointment: The Court held that compassionate appointment is not a property right or heritable estate capable of devolving among the heirs of the deceased. It is, instead, a concession extended by the employer with the specific and limited purpose of saving a bereaved family from sudden financial destitution following the death of its breadwinner. 
• On the Demand for Succession Certificate: The Court held that because compassionate appointment does not partake of the character of heritable property, the State had no legal basis to demand a succession certificate as a condition for processing the application. Such a demand was held to be arbitrary and without the authority of law. 
• On the Objective of Compassionate Appointment: The Court emphasised that the purpose of compassionate appointment is to provide immediate relief to the family of a deceased government employee. Its objective is not the adjudication of competing succession claims among heirs, and it cannot be treated as such. 
• On Determination of Eligibility: The Court held that eligibility for compassionate appointment must be determined strictly in accordance with the applicable policy — in this case, the 2014 Scheme. Under the 2014 Scheme, the hierarchy of eligible dependents flows in the following order: surviving spouse; son or unmarried daughter; widowed or divorced daughter or daughter-in-law; and married daughter. 
• On the Merits of the Present Case: Applying the 2014 Scheme, the Court noted that Anita was a married daughter, placing her in the lowest category of eligible dependents under the prescribed hierarchy. Riteshwan, as the son of the deceased, fell within a higher category. The Court accordingly held that the son held statutory priority and his claim completely superseded that of the married daughter. The requirement of a succession certificate was quashed, and the authorities were directed to reconsider Riteshwan's application. 

What is a Compassionate Appointment?   

• Compassionate Appointment is a provision that allows family members (usually spouse, son, or daughter) of a government employee who dies while in service or retires on medical grounds to be given a job in government service.  
• This is done to help the bereaved family cope with the financial crisis arising from the loss of the earning member.  

What are the Principles Relating to Compassionate Appointment?  

• Following are the 26 principles highlighted by the Supreme Court for Compassionate appointment:  
  • Compassionate appointments are an exception to equality in public employment rules.  
  • Such appointments cannot be made without proper rules or instructions in place.  
  • These appointments are typically offered in two situations: death of a breadwinner or their medical invalidation during service.  
  • The appointments should be made immediately to help families in a sudden financial crisis.   
  • Rules for compassionate appointments must be interpreted strictly as they allow side-door entry.   
  • It's a concession, not a right, and all applicants must meet the set criteria.   
  • No one can claim such appointments as inheritance.  
  • Appointment based on descent goes against constitutional principles and must be strictly limited to its intended purpose.  
  • These appointments aren't a vested right and require consideration of the family's financial condition.  
  • Applications must be made immediately or within a reasonable time after death/incapacitation.  
  • The purpose isn't to give the exact same post to a family member but to provide financial support.  
  • Financial need (indigence) is the primary requirement for consideration.  
  • Compassionate appointments aren't meant to provide endless support.  
  • Meeting eligibility criteria is necessary, beyond just proving financial distress.  
  • Vacancies cannot be reserved for minors to grow up, unless specifically provided for.  
  • Family pension or terminal benefits don't replace employment assistance.  
  • Appointments made years after death/incapacitation violate constitutional principles.  
  • Dependents who are already employed cannot be considered.  
  • Retirement benefits must be considered when determining the family's financial status.  
  • The family's complete financial condition must be evaluated to prevent misuse.  
  • All sources of family income should be considered when evaluating need.  
  • Family Benefit Scheme payments don't disqualify someone from compassionate appointments.  
  • Setting income limits helps ensure objectivity in decision-making.  
  • Courts cannot grant appointments based merely on sympathy.  
  • Courts must follow regulations and cannot make exceptions for hardship cases.  
  • Employers cannot be forced to make appointments against their policy.