Piercing the Corporate Veil I

3 Judges in Balwant Rai Saluja implicitly questioned the grounds on which the SC had previously lifted the corporate veil and correctly held that the law on the point has in recent times crystallized around the six requirements set out by Munby J in Ben Hashem, approved by Lord Sumption in Prest v. Petrodel Resources.

2 Judges in Gotan Lime Sone however continued the trend of adopting an expansive set of grounds for piercing the corporate veil, particularly the one relating to ‘public interest’.

Recently, in Consortium of Titagarh Firema Adler v. Nagpur Metro Rail Corporation Ltd., [Civil Appeal Nos. 1353-1354 of 2017] it was argued that the owner of subsidiary companies, including their assets and liabilities, cannot claim their experience while submitting a tender bid and there is necessity to apply the principle of ‘lifting the corporate veil’.

The SC refused. Senior Advocate Gopal Subramaniam’s submissions were correct:

“In the current global economic regime the multinational corporations conduct their business through their subsidiaries and, therefore, there cannot be a hyper-technical approach that eligibility of the principal cannot be taken cognizance of when it speaks of the experience of the subsidiaries. In the context of fraud or evasion of legal obligations, the doctrine of “piercing the veil” or “lifting of the corporate veil” can be applied but the said principle cannot be taken recourse to in a matter of the present nature.”

The usually verbose Hon’ble Justice Dipak Misra shied away from this one.