Tuesday, September 20, 2016

The concept of lifting of corporate veil can be resorted to even in execution proceedings

The concept of lifting the corporate veil is applicable not only in the cases of holding of subsidiary companies or in the case of tax evasion but can be equally applied in execution proceedings. The corporate veil can be li􀁺ed in cases where the Court from the material on record comes to the conclusion that the Judgment Debtor is trying to defeat the execution of the Award which is passed against him

The disputed questions that arose in the instant case are:

a) In which cases corporate veil can be lifted by the Court and whether the concept of lifting of corporate veil is also available in execution proceedings?

b) Whether the learned Single Judge was justified in lifting the corporate veil in this case and whether the learned Single Judge was further justified in coming to the conclusion that Bhatia Industries and Infrastructure Limited (BIIL) and Bhatia International Limited (BIL) was a single economic entity?

c) Whether any interference is called for in the order passed by the learned Single Judge? 

The High Court held as under:


1) The concept of lifting the corporate veil is applicable not only in the cases of holding of subsidiary companies or in the case of tax evasion but can be equally applied in execution proceedings. The corporate veil can be lifted in cases where the Court from the material on record comes to the conclusion that the Judgment Debtor is trying to defeat the execution of the Award which is passed against him

2) Yes, the learned Single Judge was justified in lifting the corporate veil as the two companies viz. BIIL and BIL were not two separate legal entities but were actually the same and were trading under different names through the same person in the same goods and businesses.

3) No case could be made out against the company for interfering with the judgment and order passed by the learned Single Judge. The Appeal therefore was to be dismissed - [2016] 73 taxmann.com 215 (Bombay)
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