In

The Honorable Supreme Court of Swatantra

Civil Petition: _____/2016

In the matter of:

Humane Society International

(Appellant)

versus

Union of Swatantra & Ors.

(Respondent)

Written Submission on Behalf of the Respondent

Submitted By-

Memorial for Respondent Page 1

CONTENTS

S. No.
1.
2.
3.
4.
5.

Particulars
Statement of Jurisdiction
Statement of Facts
Issues Raised
Written Pleadings
Prayer for Relief

Memorial for Respondent Page 2

Page No.

STATEMENT OF JURISDICTION

The Honorable Supreme Court of Swatantra has the inherent jurisdiction to try

Memorial for Respondent Page 3

STATEMENT OF FACTS

Memorial for Respondent Page 4

Memorial for Respondent Page 5

ISSUES RAISED

I.
II. WHETHER CORPORATE VEIL BE PIERCED BY MAKING THE HOLDING COMPANY
LIABLE FOR THE ACTS OF ITS SUBSIDIARIES IN THE PRESENT MATTER?
III.

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WRITTEN PLEADINGS
I.

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II.

WHETHER CORPORATE VEIL BE PIERCED BY MAKING THE HOLDING

COMPANY LIABLE FOR THE ACTS OF ITS SUBSIDIARIES1 IN THE
PRESENT MATTER?

1. The Counsels appearing for the appellant claim that subsidiaries of Respondent No.2 did
a wrong and thus the Respondent-Holding Company must be made liable for the acts of
its subsidiaries.
In this regard, it would be pertinent to elaborate upon the concept of a subsidiary
company, its relationship with the holding company and the principle of lifting the
corporate veil.
2. Subsidiary company or subsidiary2, in relation to any other company( that is to say the
holding company), means a company in which the holding companyi.
Controls the composition of the Board of Directions; or
ii.
Exercises or controls more than one-half of the total share capital either at its own
or together with one or more of its subsidiaries:
Provided that such class or classes of holding companies as may be prescribed shall not
have layers of subsidiaries beyond such numbers as may be prescribed.
3. It is submitted before the Honorable Court that the subsidiaries, namely MetalCarbon
Technologies Pvt. Ltd. and BioCarbon Pvt. Ltd., of the Respondent No. 2 operating in the
territory of Paratantra, underwent the process of manufacturing steel pipes and meat
processing without prior permission from the Respondent- Holding Company.

1 It is a general principle of corporate law that a parent corporation (so-called because of

control through ownership of another corporation's stock) is not liable for the acts of its
subsidiaries. United States v. Bestfoods 524 U.S. 51 (1998)

2 Section 2, sub-section 87, Companies Act, 2013

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4. It is further submitted before the Honorable Court that in an important judgment3 by

K.S.P. Radhakrishnan, J., the following was observed:
257. The legal relationship between a holding company and wholly owned subsidiary is
that they are two distinct legal persons and the holding company does not own the assets
of the subsidiary and, in law, the management of the business of the subsidiary also vests
in its Board of Directors.
258. Holding company, of course, if the subsidiary is a wholly owned subsidiary, may
appoint or remove any Director if it so desires by a resolution in the general body
meeting of the subsidiary. Holding companies and subsidiaries can be considered as
single economic entity and consolidated balance sheet is the accounting relationship
between the holding company and subsidiary company, which shows the status of the
entire business enterprises. Shares of stock in the subsidiary company are held as assets
on the books of the parent company and can be issued as collateral for additional debt
financing. Holding company and subsidiary company are, however, considered as
separate legal entities, and subsidiary is allowed decentralized management. Each
subsidiary can reform its own management personnel and holding company may also
provide expert, efficient and competent services for the benefit of the subsidiaries.
5. The doctrine of piercing the veil allows the Court to disregard the separate legal
personality of a company and impose liability upon the persons exercising real control
over the said company. However, this principle has been and should be applied in a
restrictive manner, that is, only in scenarios wherein it is evident that the company was a
mere camouflage or sham deliberately created by the persons exercising control over the
said company for the purpose of avoiding liability. The intent of piercing the veil must be
such that would seek to remedy a wrong done by the persons controlling the company.4
6. In the present case, no evidence of the subsidiaries being a sham is present. The
subsidiaries were incorporated out of good faith by the Respondent No. 2.
Further, Supreme Court has held that each company is a separate and distinct legal entity
and the mere fact that two companies have common shareholders or common Board of
Directors, will not make the two companies a single entity nor will existence of common
shareholders or Directors lead to an inference that one company will be bound by the acts
of the other.5

3 Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613

4 Oil And Natural Gas Corporation v M/S. Jindal Drilling on 28 April, 2015
5 Paragraph 17, Indowind Energy Ltd v Wescare (I) Ltd.& Anr on 27 April, 2010

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7. The Delhi High Court has said that the Companies Act in India and all over the world
have statutorily recognized subsidiary company as a separate legal entity. Section 2(47)
of the Companies Act, 1956 defines subsidiary company or subsidiary, to mean a
subsidiary company within the meaning of Section 4 of the Act, 1956. For the purpose of
the Act, 1956, a company shall be, subject to the provisions of sub-section (3) of Section
4, of the Act, 1956, deemed to be subsidiary of another. Clause (1) of Section 4 of the
Act, 1956 further imposes certain preconditions for a company to be a subsidiary of
another. The other such company must exercise control over the composition of the
Board of Directors of the subsidiary company, and have a controlling interest of over
50% of the equity shares and voting rights of the given subsidiary company.
Despite being a wholly owned subsidiary of the corporation, the subsidiary and the
corporation itself are distinct legal entities. Further, for piercing the veil of incorporation,
mere ownership and control is not a sufficient ground. It should be established that the
control and impropriety by the respondent resulted in depriving the legal rights of the
Appellants.6
8. The Respondent No. 2 was never involved in the operations of its subsidiaries from the
very beginning. Failure of equipments is a technical situation that could have happened to
anything. The Respondent No. 2 has not undergone any impropriety as is required by the
six principles7, as found in paragraphs 159- 164 of the Munby J. in Ben Hashem v. Ali
Shayif8 case to pierce the veil.

6 Balwant Rai Saluja & Ors. vs Air India Ltd. & Ors. on 2 May, 2011
7 (i) ownership and control of a company were not enough to justify piercing the corporate
veil; (ii) the Court cannot pierce the corporate veil, even in the absence of third party
interests in the company, merely because it is thought to be necessary in the interests of
justice;
(iii) the corporate veil can be pierced only if there is some impropriety;
(iv) the impropriety in question must be linked to the use of the company structure to avoid
or conceal liability;
(v) to justify piercing the corporate veil, there must be both control of the company by the
wrongdoer(s) and impropriety, that is use or misuse of the company by them as a device or
facade to conceal their wrongdoing; and (vi) the company may be a 'facade' even though it
was not originally incorporated with any deceptive intent, provided that it is being used for
the purpose of deception at the time of the relevant transactions.

8 [2008] EWHC 2380 (Fam)

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9. In the view of the Counsels appearing for the Respondents, the appellant has failed to
prove that either the Respondent No. 2 HPGL or its subsidiary companies are a mere
camouflage or sham or are deliberately created by the persons exercising control over the
said company for the purpose of avoiding liability. The Counsels appearing for the
appellant has not made out any case for lifting the corporate veil in the present matter.
Hence, it is very humbly submitted before the Honorable Court that a holding company
cannot be held liable for the acts of the subsidiary company in the situation of the
subsidiary company operating independently, without the permission from holding
company. And therefore, corporate veil cannot be pierced.

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III.

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PRAYER FOR RELIEF

In light of issues raised, arguments advanced and authorities cited, it is most
humbly and respectfully requested that this Honorable Court declare that:
I.

II.
III.
IV.
V.

An assessment of cost-benefit analysis in the context of environmentdevelopment paradigm is essential before declaring any technology illegal,
which having not been done in the Public Interest petition, it is liable to be
dismissed with costs.
HPGL and its subsidiaries are different entities in law and there cannot be
any extra- territorial application of Companies Act of Swatantra.
HPGL is not responsible under the extant Swatantra law for the acts of its
subsidiaries.
Corporate veil cannot be pierced.

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