I've seen similar things happen, where there are certain areas that can only be worked on by the lead dev / manager because it's complicated and undocumented. It's usually because the codebase started out as a one-man job and the developer stuck with the company long enough to go into management but never got the code into a good enough state for others to work on it effectively. It's a business risk in lots of ways, including causing morale issues as you suggest.

I think a lot of developers who become more senior also really struggle with delegation. We're that used to dealing with every tiny detail that taking our hands off the wheel feels unnatural. We're that used to solving technical problems, that when somebody has a technical problem, our instinct is to solve the problem for them instead of pointing them in the right direction so they can solve it for themselves. But that doesn't scale and doesn't help more junior developers grow. Teach a man to fish and all that.