Robert Louis Stevenson

Within the same body there exists more than one distinct
personality

CORPORATE VEIL DOCTRINE - A FERTILE

GROUND FOR ACADEMIC RESEARCH?

Created to Prevent Injustice?

 The corporate veil doctrine is generally called

UK

U.S.

India

Lifting of the
corporate veil

Piercing of the
corporate veil

Both

Cracking open the corporate veil/shell

Lifting the blanket/mask
Piercing the real faade

The veil of the corporate fiction, or

The artificial personality of the corp. is
pierced, and
The Individual or corporate SH exposed to
personal or corporate liability
When a court determines that the debt in
question is not really a debt of the corp., but
ought, in fairness, to be viewed as a debt of the
individual or corporate SH or SHs.
Stephen B. Presser, Piercing The Corporate Veil 1.01, at
1-6 (1998)
Dr. Dayananda Murthy C P

Gower & Davies on

Principles of Modern Company Law

When the corporate personality is being blatantly used

as a cloak for fraud or improper conduct
Pennington: Company Law
Where the protection of public interests is of paramount
importance or where the co. has been formed to evade
obligations imposed by the law
S. Ottolenghi Prof. of Law in From peeping behind the
Corporate Veil, to ignoring it completely says
The concept of Piercing the Veil in the US is much
more developed than in the UK When the notion of
legal entity is used to Defeat Public Convenience, Justify
Wrong, Protect Fraud, or Defend Crime, the law will
regard the corp. as an Assn. of persons.
European Jurisdictions have accepted this principle

Professor L. Maurice Wormser

Piercing the Veil of Corporate Entity Columbia Law Review, 496, 517 (1912).

What general rule, if any, can be laid down?

When the conception of corporate entity is employed to

Courts will draw aside the web (i.e., veil) of entity, will
regard the corporate Co. as an association of live, up-anddoing, men & women SHs, & will do justice between
real persons.

Delhi Development Authority v Punjab National Bank

1981 DLR 4 (Del).

The courts lift the mask of

personality, as it is put, to look to the
realities that lie behind. Done in
order to take account of conduct,
particularly the performance & non performance of duties, which can only
be of individuals Courts look at the
flesh & look actors behind the
corporate facade

Doctrine has always been fact specific

& open-ended.
Veil piercing is where much of the
action is for lawyers to exercise some
care in forming the corp. & advising
the client as to its conduct.
Dr. Dayananda Murthy C P

1.Evasion/violating of the legal obligations?

Gilford Motor Co Ltd v Horne (1933) Ch 935
Clause 9 Not to solicit customers of the Co. - if he were
to leave employment
Setup - JM Horne & Co Ltd, (Wife & Howard SHs &
directors) - 8 April 1932
Spares & service for all models of Gilford vehicles. 170
Hornsey Lane, Highgate, N. 6. Opposite Crouch End
Lane... No connection with any other firm.
Formed as a device, a stratagem, in order to mask the
effect carrying on of a business of Mr EB Horne. The
purpose of it was to enable him, under what is a cloak or
sham, to engage in business which, on consideration of the
agreement was one the former employers would object
to.
VTB Capital plc v Nutritek International Corp, Marshall Capital Holdings
Ltd, Marshall Capital LLC, Konstantin Malofeev, [2012] EWCA Civ 808

Jones & Another v Lipman & Another

(1962) 1 WLR 832
Lipman - Entered into a contract to sell registered land to Jones
Repented of the bargain - Before completion Sold to a Co. which he formed)
(control - Acquired a few days after the plaintiffs had served him with a
notice to complete.

Jones sued for specific performance against both defendants

Mr Lipman wholly controlled the Co., he was in a position to
procure it to perform the contract by which he was & remained
bound.
Co. is the creature of Lipman, a device & a sham, a mask which
he holds before his face in an attempt to avoid recognition by the
eye of equity. Gilfords case illustrates that an equitable remedy
is rightly to be granted directly against the creature in such
circumstances The proper order to make is an order on both
the defendants specifically to perform the agreement between
the plaintiffs & Lipman .
A PUPPET COMPANY ?

PNB Finance Limited v Shri Shital Prasad Jain and Others,

AIR 1982 DEL 125

PNB Finance Limited -instituted a suit for the

recovery of Rs. 19, 55, 890.37
Doctorine of piercing the corporate veil may be
invoked whenever necessary by the court in the
interest of justice
To prevent the corporate entity from being used as
an instrument of fraud, &
the fundamental principle of corporate personality
itself may be disregarded having regard to the
exigencies of the situation & for the ends of
justice.

What is the Colour of a Legal Person?

Columbia Law Review, [Vol. 106:2023
People's Pleasure Park Co. v. Rohleder. 1909. [63 S. E. 981.]

Corporation was a person only in law, and in law,

there can be no such thing as a coloured
corporation.
Thinket Ink Info. Res., Inc. v. Sun Microsystems, Inc., 368 F.3d
1053, 1059 (9th Cir. 2004)
Corporation can acquire an imputed racial identity);
Bains LLC v. Arco Prod. Co., 405 F.3d 764, 770 (9th Cir. 2005)
Pourier v. S.D. Dept of Revenue, 2003 SD 21, 21, 6 N.W.2d 395,
404
Holding corporation was enrolled member of Indian tribe),
affd in part, revd in part on other grounds, 2004 SD 3, 674
N.W.2d 314, cert. denied, 541 U.S. 1064 (2005).

Dhulia Amalner Motor Transport Ltd. v Raychand Rupsi Dharamsi

(1952) 22 Comp Cas 306 (Bom): AIR 1952 Bom 337

Partners of a firm - Business of plying buses

Formed a Pvt. Ltd. Co. &
Sold to it their own buses
Other partners had legal right to sue for
accounts of the business?
Co. was altogether a third person & had an
entity of its own with a perpetual succession.

 Daimler Co. . Contl Tyre & Rubber Co.

(Great Britain) Ltd., [1916] 2 A.C. 307 (H.L.)
But it can assume enemy character when
persons in de facto control of its affairs are
residents in any enemy country or, wherever
resident, are acting under the control of
enemies.
Held that the company was an enemy
company for the purpose of trading &
therefore it was barred from maintaining the
action.

Delhi Development Authority v Skipper Construction Co. Pvt. Ltd. AIR

1996 SC 2005, 1996 (4) SCC 622;

A plot of land was put to auction by the DDA (1980)

Skipper offered the highest bid in a sum of Rs. 9.82 crores
(record bid at that time)
Conditions of auction,
25% of the amount was payable immediately & Rest
within 90 days.
Skipper deposited the 25% - not the balance.
Asked for extension repeatedly & Granted repeatedly. (7
extensions granted From January 1981 to April 1982)
Skipper failed
Proceedings were taken for cancelling the bid.
Skipper went to court - 29/5/1982 - Stay of cancellation
DDA applied for vacating the stay. Nothing happened but
usual adjournments.
Committee Revised agreement with Skipper

DDA v Skipper Construction Co

Skipper - Selling the place (proposed building) to various persons & receiving
monies (1987)
Installment under the revised agreement Delayed payment
Bank guarantees furnished - Found to be defective
HC - order permitting Skipper to commence construction (1990) (Writ by
Skipper)
DDA filed Special Leave Petitions
21-12-1990 Final hearing - HC order - Directed - Skipper to pay to DDA Rs.
8,12,88,798 (30 days) & stop construction with effect from 9-1-1991 till
payment was made.
In default Licence would stand determined & DDA would be entitled to reenter the plot. Which it failed to pay?
29-1-1991 - Skipper Spl. Leave Petition (SC) Interim order permission to
deposit money was granted.
SC - Prohibited from inducting any person in the building and from creating
any rights in favour of third parties.
Skipper issued an advertisement on 4-2-1991 in the leading newspapers of
Delhi inviting persons to purchase the space in the proposed building
Ultimately Spl. Leave Petition dismissed on 25-1-1993

DDA v Skipper Construction Co

After 29-1-1991 Skipper Advertised & collected 11 Crores agreeing to sell the space in the said building.
Same space was sold to more than one person and monies collected.
Skipper violate - orders of the SC (29-1-1991 by issuing
advertisements,)
1993 - Filed a suit in the DH Court seeking an injunction restraining
the DDA from interfering with its alleged title & possession over the
plot and for a declaration that the re-entry by DDA was illegal and
void.
Granted - Interim orders staying re-auction of the plot
DDA SLP (1993)
SC - Noticing the conduct of Skipper - Initiated suo motu contempt
proceedings against - Tejwant Singh Surinder Kaur (Wife) BOD of
Skipper.
Asked to explain (1) why did they institute Suit No. 770 of 1993 in
respect of the very same subject-matter which was already adjudicated
by this Court on 23-1-1993 and
(2) why did they enter into agreements for sale & create interest in the
third parties in defiance of the orders of this Court dated 29-1-1991?

DDA v Skipper Construction Co

Cos created by Tejwant Singh, his wife &

children - Merely fronts & devices to defraud &
defeat the claims of the purchasers.
For doing complete justice between the parties, Corporate veil should be lifted & all the said
properties, which have already been attached,
should be proceeded with to realise the amounts
necessary for paying - Pre 29-1-1991 purchasers
in full (i.e., interest) & the post-29-1-1991
purchasers.

B. P. Jeevan Reddy & K. S. Paripoornan in Para 37

Before parting with this case, we feel impelled to make a few
observations. What happened in this case is illustrative of what is
happening in our country on a fairly wide scale in diverse forms.
Some persons in the upper strata (which means the rich and the
influential class of the society) have made the property career
the sole aim of their life.
The means have become irrelevant - in a land where its greatest
son born in this century said means are more important than
the ends.
A sense of bravado prevails; everything can be managed; every
authority and every institution can be managed.
All it takes is to tackle or manage it in an appropriate manner.
They have developed an utter disregard for law - nay, a
contempt for it; the feeling that law is meant for lesser mortals
and not for them.

 The courts in the country have been trying to combat

this trend, with some success as the recent events show.
But, how many matters can we handle. How many more
of such matters are still there?
The real question is how to swing the polity into action, a
polity which has become indolent and soft in its vitals?
Can the courts alone do it? Even so, to what extent, in
the prevailing state of affairs?
Not that we wish to launch upon a diatribe against
anyone in particular but Judges of this Court are also
permitted, we presume, to ask in anguish,
What have we made of our country in less than fifty
years?
Where has the respect and regard for law gone? And
who is responsible for it?

Para 38
A person purchases a property in auction.
He does not pay as per the stipulated terms.
He obtains a series of extensions.
Still he doesnt deposit and when the vendor
proposes to cancel the allotment, the court is
approached and it stays the cancellation.
The vendor (DDA) applies for vacating it but
nothing happens except repeated adjournments.
This has happened more than once.
We find that as and when Skipper was not able to
manage the DDA, he approached the court and it
provided him a breather.
He then gets time to manage the DDA.

 This went on up to the end of 1990 when

fortunately the Delhi High Court came with a
tonne of bricks upon Skipper & which order was
affirmed two years later by this Court.
Ultimately, no doubt, Skipper has met its nemesis
but meanwhile hundreds of persons are cheated out
of their hard-earned monies; their dreams of
owning a flat are shattered rudely.
39. ALL THIS MEANS THAT EACH OF US

IN THIS LAND SHOULD WAKE UP TO HIS

DUTY AND TRY TO LIVE UP TO IT. WE
DO NOT THINK WE NEED SAY MORE.

DHN Food Distributors Ltd. v. London Borough of Tower Hamlets

(1976) 1 W.L.R. 741

Lord Denning quoted with approval the

statement in Gowers Co. law that
There is evidence of a general tendency to
ignore the separate legal entities of various
companies within a group, & to look instead at
the economic entity of the whole group.
This group is virtually the same as a
partnership in which all the three cos are
partners. He called it a case of three in one
and, alternatively, as one in three
Cited in DDA v Skipper Construction

New Horizons Ltd. v Union of India

(1995) 1 Comp LJ 100 (SC) (1995) 1 SCC 478
Even where two Cos form a partnership by entering into
a JV agreement & incorporate a Co. with their SHing
(popularly known as JVC), the third entity is a Co. with
an independent legal entity though in the nature of a
partnership; it is a not a partnership firm but a Co.
(But if is not incorporated as a Co., it is just a
partnership & not a Co.)
The SCs observation in Gammon India Ltd v
Commissioner of Customs 2011 AIR SCW 4175, that a
partnership formed by two Cos but not registered as a Co
U/T/CA is a legal entity i.e. juridical person does not
seem to be correct, since from the facts of the case as
appearing in the reported judgment the JV was not a Co.
incorporated U/T/CA unlike in the New Horizons case.

Amit Products Ltd. v Chief Engineer (O & M)

(2005) 127 Comp Cas 443 (SC)

Co. - Seeking electricity connection under the

guise of separate corporate body
In respect of the same premises - Already there
was electricity connection in its name
In respect of which a default in paying the
electricity charges was committed by it.
SC held that by changing the members of the
BOD or by changing the SHing pattern, the
appellant Co. cannot be said to have undergone
any change.
Co. cannot be said to be a different entity than
earlier one.

TELCO Ltd. v State of Bihar

(1964) 34 Comp Cas 458 (SC); AIR 1965 SC 40.

Corporation in law is equal to a natural person &

has a legal entity of its own.
Entity of the corporation is entirely separate from
that of its shareholders; it bears its own name and
has a seal of its own; its assets are separate and
distinct from those of its members; it can sue and be
sued exclusively for its own purpose; its creditors
cannot obtain satisfaction from the assets of its
members; the liability of the members or
shareholders is limited to the capital invested by
them; similarly, the creditors or the members have
no right to the assets of the corporation

 Trebanog Working Men's Club and Institute, Ltd v.

MacDonald, (1940) 1 KB. 576 at 582 (Eng.). (Court
did not pierce the veil to find SH liability, but
separate corporate personality was set aside
nonetheless. Specifically, the court found that the
incorporated co. was acting as an unincorporated
trustee for the alcohol of its members, and therefore
did not represent an illegal sale by a distinct
(incorporated) legal entity)
Rainham Chemical Works, Ltd. v. Belvedere Fish
Guano Co (1921) 2 A.C. 465 (H.L.)

Statutory Lifting of Corporate veil

Section 45
Members severally liable for debts where business carried on with
fewer than seven, or in the case of a private company, two
members
Section 147 (Sec 12 2013)
Publication of name by company
(8) If any default is made in complying with the
requirements - the Co & every officer who is in default
shall be liable to a penalty of Rs. 1000 for every day
during which the default continues Not exceeding Rs.
1 lakh

Section 212 -213

Balance-sheet of holding company to include certain particulars as
to its subsidiaries;
Financial year of holding co & subsidiary
Section 542
Liability for fraudulent conduct of business

 453 Punishment for improper use of Limited or Private Limited

That Person/Each of those persons shall
unless duly incorporated with limited liability, or
unless duly incorporated as a private company with limited liability,
Punishable with fine which shall not be less than Rs. 500 but may extend to
Rs. 2000 for every day for which that name or title has been used.

Apthorpe v. Peter Schoenhofen Brewing(1899) 15 T.L.R. 245 (A.C.)

 Salomon v Salomon (1897) A.C. 22 (H.L.)

Woolfson v Strathclyde Regional Council (1978)
S.C.(H.L.) 90
Gilford Motor Co. v Horne, [1933] Ch. 935
(A.C.) at 956 (Eng.) (Piercing the veil for
attempting to evade a legal obligation);
In re Darby, Brougham, [1911] 1 KB. 95 (Eng.)
(Piercing
the
veil
because
of
misrepresentation).

 If all of them are citizens of India the company does not

become a citizen of India any more than if all are married the
company would be a married person. personality of the
members has little to do with the persona of the incorporated
company. The persona that comes into being is not the
aggregate of the personae either in law or in metaphor. The
corporation really has no physical existence; it is a mere
abstraction of law
State Trading Corporation of India Ltd. v CTO (1963) 33 Comp Cas
1057 (SC), per Hidayatullah J.
Each company registered under the Act is a separate and distinct
legal entity and the mere fact that two companies have common
shareholders or common directors does not make them a single entity
Indowind Energy Ltd v Wescare (I) Ltd 2010 AIR SCW 2884: AIR 2010
SC 1793

Macaura . v Northern Assurance Co., (1925) A.C. 619 (H.L.)

Upholding the separate legal personality of

Macauras co. despite his complete control and
ownership, resulting in his inability to collect on
his insurance policy;
Gramophone & Typewriter, Ltd. v. Stanley, (1908)
2 K.B. 89 (A.C.) at 96 (Eng.) - Upholding
separate personality of a wholly owned
subsidiary, & holding that complete share
ownership does not automatically turn a
subsidiary into a parent Cos agent.

 Beckett Investment Management Group v. Hall

(2007) EWCA (Civ.) 613, (2007) I.C.R. 1539
(A.C.) 1545 (Maurice Kay L.J.) (Eng.).
Stone & Rolls Ltd. v Moore Stephens (2009)
UIKHL 39, (2009) 1 A.C. 1391