The concept of a company's character and legal identity being separate and independent from its members and shareholders, and having its own set of legal rights and obligations, was propounded in the celebrated English case of Salomon v A Salomon & Co Ltd.1 The essence of separate corporate personality of a company forms one of the fundamentals of company law and the bedrock of all commercial and business arrangements. Notably, a corporate veil is a metaphoric veil, which separates the company from its members, while preventing transmission of any liability on either side.

However, given the complexity of commercial transactions today and ensuing illegalities, an exception to the rule and principle of the company as a separate legal entity has developed. The doctrine of "lifting / piercing the corporate veil" disregards the separate legal personality of the company and attributes the acts of the company to those directly exercising real control over the operations of the company.2 An English court in Ben Hashem v. Ali Shayif3 has laid down certain exceptions which allow for the lifting of the veil, such as instances of impropriety, where the company structure is being used to avoid or conceal liability, or where the company is being misused / controlled by the wrong doers as a device or façade to conceal their own wrongdoing.

Indian courts have also recognized implicitly the doctrine of lifting of corporate veil and have postulated their own parameters to determine the circumstances where such a transgression would be allowed. This article explores the evolution of jurisprudence in this regard with a specific focus on instances in which the corporate veil might be lifted in execution proceedings, and whether third parties may be proceeded against while enforcing and executing an arbitral award.

In this article, we seek to examine the viability of this proposition as per the given fact situation: Party A was granted an arbitral award, for damages arising out of breach of a contract, in domestic arbitration proceedings in India, against Party B. It has however come to the knowledge of Party A that Party B has no assets in India, and that it in fact is owned and controlled wholly by third party entities incorporated in foreign jurisdictions. Therefore, upon the award becoming a decree of the Court under S. 36 of the Arbitration and Conciliation Act, 1996; in order to secure its interests in terms of the arbitral award, can party A, proceed to execute the award against these holding companies, which admittedly were neither part of the arbitral proceedings, nor the arbitral award.

Position under Indian law

The Supreme Court of India, in the landmark case of Life Insurance Corporation of India v Escorts Ltd & Others,4 while upholding the principles espoused in Salomon v A. Salomon & Co. Ltd.,5 has observed that in certain exceptional circumstances, the corporate personality of a company may be ignored; and individual members may be recognized for who they are.6 These would include instances where a statute itself would allow for lifting the veil, or to prevent fraud or improper conduct, or when a taxing statute or a beneficial statute is sought to be evaded or where associated companies are inextricably connected as to be, in reality, part of one concern. The court indicated that in order to ascertain the same, factors such as the relevant statute, object sought, conduct of the parties, level of public interest, the interest of the affected parties, amongst others would have to be considered.7 In the landmark judgment of State of UP v Renusagar Power Co.,8 the Supreme Court observed that the concept of lifting of corporate veil is a changing concept and is permissible in the expanding horizon of modern jurisprudence. In Delhi Development Authority v Skipper Construction,9 it was clarified that if the corporate character of a company is utilized to commit frauds or illegalities, defraud creditors, evade obligations, achieve or perpetuate monopoly or protect criminal activities, then the same would have to be ignored by courts, which would then have to look behind the corporate veil to ascertain the real transactions and dispense justice. Courts in India have time and again referred to Lord Denning's observation in the English judgment of DHN Food Distributers Ltd v London Borough of Tower Hamlets,10 i.e., "there exists evidence of a growing tendency by courts to ignore the separate legal entities of various companies within a group and to look instead at the economic entity of the whole group." This observation gains crucial importance, in cases where the parent company owns all the shares of the subsidiary companies, thereby controlling all movement of the said subsidiaries.

The Delhi High Court in Formosa Plastic Corporation Ltd. v. Ashok Chauhan has held that courts are empowered to lift the corporate veil or mere cloaks where devise is employed and the properties have been acquired fictitiously in others names for the purpose of committing illegalities or for defrauding others to pass appropriate orders and dispense justice. In the instant case, again a foreign decree was sought to be enforced in India and the Delhi High Court held that it was open for the Court in execution proceedings to resort to the power of lifting the corporate veil. The Punjab and Haryana High Court in Sai Sounds Private Limited v Kiran Contractors Private Limited has also affirmed this view.

Therefore, it is an established position that in certain cases, the corporate identity of companies may be examined and the corporate veil may be lifted in order to determine the true nature of transactions and establish the real control and ownership of management of the company. Specifically, and in respect of our fact situation, the three judgements below are important to consider.

  • In Bhatia Industries v. Asian Natural Resources & Anr., a division bench of the Bombay High Court affirmed in appeal the finding by a single bench and allowed lifting of the corporate veil in reference to the execution of a foreign arbitral award. In this instance, an arbitral award in favour of a foreign entity was passed pursuant to international arbitration proceedings between the said foreign entity and the judgment debtor, an Indian entity, towards damages arising out of breach of contract. The foreign entity instituted execution proceedings before the High Court contending that the Indian judgment debtor was in fact a group company belonging to the larger conglomerate of companies incorporated in India and was fraudulently siphoning off its funds to defeat execution of the foreign award. The foreign entity therefore contended that though certain goods were shown to be belonging to other entities of the judgment debtor, they in fact belonged to the same group of companies and were liable to be attached in terms of the execution proceedings. In view thereof, the said foreign entity prayed that the corporate evil be lifted to establish that the said companies were in fact a single economic entity for the purpose of execution.

    Upon a detailed examination of the facts at hand and after distinguishing the plethora of jurisprudence available on the subject, both in Indian and English law, the Court laid down parameters where the doctrine of piercing corporate veil could be made applicable to execution proceedings. These included instances inter alia, (i) where two separate corporate entities function as if they are in partnership with one company as the alter ego of the other company, where one company is bound hand in foot with the other, (ii) where the parent company's management had steering influence on the core activities of the subsidiary company, such that the latter would no longer perform those activities on the authority of its own executive directors; (iii) where the company was a creature of the group in an attempt to avoid recognition by the eye of equity or a mere cloak or sham; and (iv) lastly where two companies are inextricably inter-linked corporate entities. In view of the same, and upon an examination of materials on record, the court concluded that the corporate veil could also be lifted in execution proceedings, if it could be established that the companies were in fact a single economic entity. In this instance, the Court came to the conclusion that the judgment debtor and its Indian group companies were in fact a single economic entity, and that since the judgment debtor was trying to defeat execution of the Award passed, its group companies could be proceeded against.

    However, it is pertinent to note that this matter was taken to the Supreme Court by way of a Special Leave Petition which was disposed of, while the instant question of law was kept open. This indicates that while courts have formulated parameters and facts allowing piercing of the corporate veil, the possibility of the same being applicable to execution proceedings remains to be determined definitively. The disposal of the Special Leave Petition neither confirms nor dilutes the observations of the Bombay High Court. However, the Bombay High Court judgment in Bhatia Industries (supra), seeks to contextualise the piercing of corporate veil in terms of execution proceedings of awards succinctly and takes into consideration all factors and related jurisprudence on the subject. Hence, it is opined that the same will continue to hold persuasive value till such time as the same is reconsidered in detail by the Supreme Court.
  • In Cheran Properties v Kasturi & Sons, in a similar post-award scenario in a domestic arbitration, the Supreme Court discussed the English group of companies doctrine, under which an arbitration agreement entered into by a company within a group of corporate entities in certain circumstances would also bind non-signatory affiliates, if the circumstances demonstrate that the mutual intention of all the parties was to bind both signatories and non-signatory affiliates. It was observed that modern business transactions often contain multiple layers and agreements which must be unravelled to arrive at the true essence of the business arrangement: an intent to bind someone who despite being a non-signatory has assumed the obligation to be bound by the actions of the signatory. Courts must ascertain the circumstances under which such transactions were executed and examine factors such as the directness of the relationship between the non-signatory and signatory to the agreement and the nature of such business transactions, whether the same is composite in nature. The Court also delved upon S. 35 of the Arbitration and Conciliation Act, 1996 to ascertain that the term "persons claiming under them" is a legislative recognition of the doctrine that besides the parties, an arbitral award binds every person whose capacity or position is derived from and is the same as a party to the proceedings.

    The Court observed that while this doctrine is applied to pierce the corporate veil, it is also significant to target the creditworthy member of a group of companies. It has been clarified that though the extension of this doctrine is met with resistance because it is a significant departure from the fundamentals of the sanctity of a separate legal / corporate personality, the application of the same, is dependent on the construction of the arbitration agreement and the circumstances relating to the entry and performance of the underlying contract.
  • Lastly, in a recent judgment of the Bombay High Court in Mitsui OSK Lines Ltd. v Orient Ship Agency Pvt Ltd & Ors.,16 enforcement and execution of a foreign award against the judgment debtor and against third party entities (associate companies) / persons in their personal capacity (all Indian entities), was not allowed. The said foreign award was passed in 2009 against the judgment debtor and accepted as a decree of the Bombay High Court in 2014. However, by way of a chamber summons filed in 2019, the award holder sought leave of the court to amend its execution proceedings filed against the judgment debtor, to make certain associate companies of the judgment debtor and individual third parties personally liable to satisfy the award. The award holder sought to lift the corporate veil by inter alia relying on financial statements to show that the assets of the judgment debtor were being depleted and funds were being siphoned off to avoid execution.

    However, in this case, the Bombay High Court refrained from lifting the corporate veil of the judgement debtor, because of several reasons, including limitation. It was opined that since the third party entities were not parties to the arbitration proceedings and / or the foreign award, their personal liability can only be determined by way of a separate substantial suit, as the present reliefs sought in the chamber summons proceedings were beyond the scope of the executing court and the decree. The High Court also distinguished the decision of the above-mentioned Bhatia Industries (supra) judgment as in the present scenario, the award holder did not go against the third party companies, in respect of particular assets, claiming that they belonged to the judgment debtor as was the case in Bhatia Industries (supra), but in fact chose to make these said third parties personally liable in respect of the foreign award passed against the judgment debtor.

    Upon a detailed analysis, it was concluded that to justify piercing of corporate veil, courts will have to be satisfied that there is some impropriety in question and that there must be both control of the company by the wrong doer and some evidence of impropriety, that is, the use and misuse by the company by them as a devise or facade to conceal their wrongdoings. As an alternate finding, the Court, observed that the award holder had failed to satisfy the principles allowing lifting of corporate veil, and the same could not be justified in the facts and circumstances of the present case. This finding however was made without prejudice to the finding that these third parties were not parties to the arbitration agreement or award, and as such could not be proceeded against. Further it was also observed that they were not legal representatives of the judgment debtor within the meaning of the Civil Procedure Code, 1908. Since at the outset, the court was satisfied with the preliminary objections raised by the judgment debtor and the third parties, it did not delve into the factual assertions of the award holder, which in any event could not be accepted without being established in trial, which was not allowed as the chamber summons proceedings could not establish the claim for execution against third parties.

It is to be noted, that while distinguishing the position laid down in Bhatia Industries (supra), this judgment also makes note of the Supreme Court's observation, leaving open the question whether execution proceedings are available against third party entities.


Upon perusal of the judgments above, it is well established that the doctrine of lifting the corporate veil is an exception and not a rule to the general principles of company law. Pertinently in Balwant Rai Saluja (supra), the Supreme Court has expressly clarified that the doctrine of piercing of the corporate veil stands only as an exception to the principle of the company being a separate legal entity, and must be applied restrictively and only in cases where it is evident that the company was a camouflage or a sham deliberately created by the persons exercising real control over the company, to avoid liability.

In India, while the parameters of lifting the corporate veil have been discussed and enlisted in the judgments pronounced by the courts, the same are not exhaustive and at the most hold persuasive value given the facts and circumstances of different cases. In respect of our fact situation, and basis the analysis of above-mentioned judgments, if Party A can argue and establish that Party B forms a single economic entity with its holding / group companies, it may be able to execute the arbitral award against Party B and its holding companies. However, courts will have to consider all aspects in such an instance, including the fact that the said third party entities are incorporated abroad, and that logistical difficulties may arise despite an order of execution of award in a foreign jurisdiction.

To conclude, any application to pierce the corporate veil would depend on the facts and circumstances of the case set out therein and courts would be likely to consider the same only to the extent of remedying the wrong done by the persons controlling the company. If parties are allowed to execute awards / decrees against third party entities, there could be significant ramifications to businesses and transactions. This will also however, add credence and restore the faith of the business community in arbitration proceedings, as this will ensure that parties are not constrained in executing an award in India.


1 1897 AC 22

2 Balwant Rai Saluja & Anr v Air India Limited & Ors (2014) 9 SCC 407

3 2008 EWHC 2380 (Fam)

4 (1986) 1 SCC 264 Para 90

5 Supra; pls refer No. 1

6 Ibid

7 Ibid

8 (1988) 4 SCC 59

9 (1996) 4 SCC 622

10 (1976) 3 All ER 462: (1976) 1 WLR 852

11 1998 SCC OnLine Del 743

12 2016 SCC OnLine P&H 4830

13 (2016) 6 AIR Bom R 132

14 Ibid

15 (2018) 16 SCC 413

16 2020 SCC OnLine Bom 217

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