diff --git a/compiler/testData/diagnostics/tests/regressions/kt14740.kt b/compiler/testData/diagnostics/tests/regressions/kt14740.kt
new file mode 100644
index 00000000000..411e8dcbe5a
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/regressions/kt14740.kt
@@ -0,0 +1,20 @@
+// FILE: Foo.java
+public abstract class Foo {
+
+    public interface Transformer<T, R> {}
+    public interface LifecycleTransformer<T> extends Transformer<T, T> {}
+
+    public class Observable<T> {
+        public <R> Observable<R> compose(Transformer<? super T, ? extends R> transformer) {
+            return null;
+        }
+    }
+
+
+    public final <T> LifecycleTransformer<T> bindToLifecycle() {
+        return null;
+    }
+}
+
+// FILE: 1.kt
+fun <T> Foo.Observable<T>.bindTo(a: Foo): Foo.Observable<T>  = compose(a.bindToLifecycle())
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/regressions/kt14740.txt b/compiler/testData/diagnostics/tests/regressions/kt14740.txt
new file mode 100644
index 00000000000..18d8e922ee1
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/regressions/kt14740.txt
@@ -0,0 +1,31 @@
+package
+
+public fun </*0*/ T> Foo.Observable<T>.bindTo(/*0*/ a: Foo): Foo.Observable<T>
+
+public abstract class Foo {
+    public constructor Foo()
+    public final fun </*0*/ T : kotlin.Any!> bindToLifecycle(): Foo.LifecycleTransformer<T!>!
+    public open override /*1*/ /*fake_override*/ fun equals(/*0*/ other: kotlin.Any?): kotlin.Boolean
+    public open override /*1*/ /*fake_override*/ fun hashCode(): kotlin.Int
+    public open override /*1*/ /*fake_override*/ fun toString(): kotlin.String
+
+    public interface LifecycleTransformer</*0*/ T : kotlin.Any!> : Foo.Transformer<T!, T!> {
+        public open override /*1*/ /*fake_override*/ fun equals(/*0*/ other: kotlin.Any?): kotlin.Boolean
+        public open override /*1*/ /*fake_override*/ fun hashCode(): kotlin.Int
+        public open override /*1*/ /*fake_override*/ fun toString(): kotlin.String
+    }
+
+    public open inner class Observable</*0*/ T : kotlin.Any!> {
+        public constructor Observable</*0*/ T : kotlin.Any!>()
+        public open fun </*0*/ R : kotlin.Any!> compose(/*0*/ transformer: Foo.Transformer<in T!, out R!>!): Foo.Observable<R!>!
+        public open override /*1*/ /*fake_override*/ fun equals(/*0*/ other: kotlin.Any?): kotlin.Boolean
+        public open override /*1*/ /*fake_override*/ fun hashCode(): kotlin.Int
+        public open override /*1*/ /*fake_override*/ fun toString(): kotlin.String
+    }
+
+    public interface Transformer</*0*/ T : kotlin.Any!, /*1*/ R : kotlin.Any!> {
+        public open override /*1*/ /*fake_override*/ fun equals(/*0*/ other: kotlin.Any?): kotlin.Boolean
+        public open override /*1*/ /*fake_override*/ fun hashCode(): kotlin.Int
+        public open override /*1*/ /*fake_override*/ fun toString(): kotlin.String
+    }
+}
diff --git a/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java b/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
index 744cd22598f..6b0353e51b9 100644
--- a/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
+++ b/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
@@ -16111,6 +16111,12 @@ public class DiagnosticsTestGenerated extends AbstractDiagnosticsTest {
                 doTest(fileName);
             }
 
+            @TestMetadata("kt14740.kt")
+            public void testKt14740() throws Exception {
+                String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/diagnostics/tests/regressions/kt14740.kt");
+                doTest(fileName);
+            }
+
             @TestMetadata("kt1489_1728.kt")
             public void testKt1489_1728() throws Exception {
                 String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/diagnostics/tests/regressions/kt1489_1728.kt");
diff --git a/core/descriptors/src/org/jetbrains/kotlin/types/checker/NewKotlinTypeChecker.kt b/core/descriptors/src/org/jetbrains/kotlin/types/checker/NewKotlinTypeChecker.kt
index 462697de3f0..86aa64d191e 100644
--- a/core/descriptors/src/org/jetbrains/kotlin/types/checker/NewKotlinTypeChecker.kt
+++ b/core/descriptors/src/org/jetbrains/kotlin/types/checker/NewKotlinTypeChecker.kt
@@ -20,6 +20,7 @@ import org.jetbrains.kotlin.builtins.KotlinBuiltIns
 import org.jetbrains.kotlin.descriptors.ClassDescriptor
 import org.jetbrains.kotlin.descriptors.TypeAliasDescriptor
 import org.jetbrains.kotlin.resolve.calls.inference.CapturedType
+import org.jetbrains.kotlin.resolve.calls.inference.CapturedTypeConstructor
 import org.jetbrains.kotlin.resolve.constants.IntegerValueTypeConstructor
 import org.jetbrains.kotlin.types.*
 import org.jetbrains.kotlin.types.checker.TypeCheckerContext.SupertypesPolicy
@@ -101,14 +102,16 @@ object NewKotlinTypeChecker : KotlinTypeChecker {
     }
 
     fun transformToNewType(type: SimpleType): SimpleType {
-        if (type is CapturedType) {
-            val lowerType = type.typeProjection.check { it.projectionKind == Variance.IN_VARIANCE }?.type?.unwrap()
+        // Type itself can be just SimpleTypeImpl, not CapturedType. see KT-16147
+        if (type.constructor is CapturedTypeConstructor) {
+            val constructor = type.constructor as CapturedTypeConstructor
+            val lowerType = constructor.typeProjection.check { it.projectionKind == Variance.IN_VARIANCE }?.type?.unwrap()
 
             // it is incorrect calculate this type directly because of recursive star projections
-            if (type.constructor.newTypeConstructor == null) {
-                type.constructor.newTypeConstructor = NewCapturedTypeConstructor(type.typeProjection, type.constructor.supertypes.map { it.unwrap() })
+            if (constructor.newTypeConstructor == null) {
+                constructor.newTypeConstructor = NewCapturedTypeConstructor(constructor.typeProjection, constructor.supertypes.map { it.unwrap() })
             }
-            val newCapturedType = NewCapturedType(CaptureStatus.FOR_SUBTYPING, type.constructor.newTypeConstructor!!,
+            val newCapturedType = NewCapturedType(CaptureStatus.FOR_SUBTYPING, constructor.newTypeConstructor!!,
                                                   lowerType, type.annotations, type.isMarkedNullable)
             return newCapturedType
         }