TY - JOUR
AU - Singh, Vijay, P
AB - Abstract Separate legal personality, independent from its member, is a peculiar characteristic of a corporation. Because of this characteristic, members and shareholders enjoy limited liability and get financial protection. However, the principle of separate legal entity is sometimes used or misused by the members of the corporations to escape their liabilities. Thus, in order to fix their liabilities and dispense justice, the court propounded the rule of ‘Lifting the Corporate Veil.’ With time, a new doctrine emerged in the USA. This new doctrine is known as the ‘Doctrine of Reverse Piercing of the Corporate Veil.’ The doctrine, though recognised by the courts in the USA, is not recognised in several jurisdictions, including India. The present article analyses the concept and relevance of this doctrine under the current economic developments in India. Further, the article discusses recent legal developments to illustrate that ‘reverse piercing’ is already in effect in India, and provide suggestions to make the doctrine of ‘reverse piercing’ more productive and proactive. Introduction It is a well-known principle that shareholders are liable for the debts of the corporation as a corporation is a separate legal entity and carries its own business life.1 The principle of separate legal entity and the principle of limited liability of a corporation is ‘firmly rooted’ in the corporate law of India.2 However, the doctrine of the limited liability of a corporation has its limitations.3 When the limited liability of a corporation is used to shield the liability or to carry on an illegal business, courts exercise their authority and apply the ‘equity principle’ of piercing the veil of the corporation.4 Thus, the corporation veil is said to be pierced when the court overlooks the corporation as a separate entity and deals directly with the members or managers to make them liable. As a matter of fact, a relief given to the aggrieved person by the court is nothing but a piece of paper if there is no asset to recover the debts. Thus, the need for resources to recover the dues evolved the principle of disrespecting the corporate personality. This principle is popularly known as piercing the corporate veil.5 The principal objective of the corporate veil piercing is to achieve an equitable result.6 The doctrine of the piercing of the corporate veil is deeply rooted and, irrespective of diverse approaches adopted by the courts, the courts across the world widely recognise this doctrine. However, with an increase in socio-economiccomplexities, a new mode of perpetrating corporate frauds became apparent. Consequently, it compelled the courts to look beyond the traditional system of providing justice. Thus, a new doctrine was evolved by the courts, that is, the doctrine of reverse piercing the corporate veil. The new doctrine is not as established and recognised by the courts as compared to the traditional doctrine of piercing the corporate veil. The doctrine of the piercing of the corporate veil is deeply rooted and, irrespective of diverse approaches adopted by the courts, the courts across the world widely recognise this doctrine. However, with an increase in socio-economic complexities, a new mode of perpetrating corporate frauds became apparent. Consequently, it compelled the courts to look beyond the traditional system of providing justice Nevertheless, the courts, in several cases, applied the principle of reverse piercing as a mechanism for recovery of the liabilities of a particular shareholder from the asset of the corporation.7 Thus it can be concluded that there are two approaches to disregard the principle of the separate legal entity of the corporation. The first approach deals with the piercing of the corporate veil in order to attach the assets of the shareholder for the liability of the company, while the other one is to transfer the obligations of the shareholder to the corporation.8 Overview of lifting/piercing the corporate veil The elementary rule of corporate law that a corporation is a separate legal entity independent from its shareholders is well established and universally recognised.9 In the well-known case of Salomon v A Salomon & Co. Ltd.,10 it was established beyond doubt that the corporation is a separate legal personality, independent from the members who incorporated it. Lord Macnaghten, in this case, observed that: ‘The company is at law a different person altogether from the subscribers…; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustee for them. Nor are the subscribers, as members, liable in any shape or form, except to the extent and in the manner provided by the Act.’11 There exists a metaphoric veil popularly known as ‘corporate veil’ which separates the corporation and the members.12 This corporate veil provides strength to the notion that the act of the corporation is distinct from its members, and the corporation is an independent entity.13 Thus, corporate veil ensures that ‘shareholders in a corporation are not liable for the obligations of the corporation beyond the capital that they contribute in exchange of their shares.’14 While the Salomon case firmly laid down the principle that a corporation is a distinct legal entity, there have been circumstances wherein the separate legal personality created obstacles in ascertaining the liability. Thus, it became essential for the courts to pierce the corporate veil and see-through the real culprit. Therefore, piercing the corporate veil refers to ‘averment of evidence upon the satisfaction of which the court imposes obligations of the corporation on its owners.’15 This doctrine is ‘a limitation on the principle that a corporation exists independently of its owners, as a separate legal entity, that the owners are normally not liable for the debts of the corporation, and that it is perfectly legal to incorporate for the express purpose of limiting the liability of the company owners.’16 In other words, the doctrine of piercing the corporate veil overlooks the principle that a corporation is a separate legal entity.17 This doctrine balances the interests of corporation, shareholders, and other stakeholders.18 While applying the doctrine of piercing the corporate veil, the court endeavours to protect the honest investor as well as prevents the misuse of the corporation incorporated to effectuate acts prohibited by law.19 The concept of reverse piercing Unlike, the doctrine of piercing the corporate veil, wherein an individual shareholder is held liable for the corporate wrongs under certain circumstances, the doctrine of reverse piercing the veil of the corporation makes corporation liable for the acts of an individual member.20 This ‘specific progress’ plainly reverses the vector of piercing.21 In other words, reverse piercing is just an antithesis to the piercing veil of the corporation.22 The main objective of the doctrine of the reverse piercing is to protect the plaintiff’s interest by expanding the resources to discharge the liabilities of an individual.23 This doctrine also checks the misuse of the corporation by its owners.24 However, it is notable that for the application of reverse piercing, two essential elements are required, one is the domination and the second element is the perpetration of fraud or injustice.25 The main objective of the doctrine of the reverse piercing is to protect the plaintiff☳ interest by expanding the resources to discharge the liabilities of an individual. This doctrine also checks the misuse of the corporation by its owners. However, it is notable that for the application of reverse piercing, two essential elements are required, one is the domination and the second element is the perpetration of fraud or injustice The significance of this doctrine arises due to different complicated circumstances. For example, suppose the litigant is forbidden to reverse piercing the veil, in such a case. In that case, his dues will only bank on the personal assets of the shareholder and may not be sufficient to satisfy the liabilities. Thus, reverse piercing ensures that in cases where the assets of the shareholders, fell short of, to meet the claim of the creditor, the corporation’s assets will be utilised to safeguard the interest of the creditors provided the essential requirements have complied.26 This doctrine for the first time emerged in the case of Kingston Dry Dock Co. v Lake Champlain Transportation Co.27 In this case, the plaintiff (Kingston Dry Dock Co.) entered into the contract to repair ships owned by the subsidiary of the defendant (Lake Champlain Transportation Co.). The board of directors of the defendant and its subsidiary were almost the same. On default of payment by the defendant, the plaintiff sued and pleaded to attach the properties of the subsidiary of the defendant to satisfy its claim. The court allowed the assertion made by the plaintiff; however, the appellate court adopted a narrow view towards reverse piercing of the corporate veil and held that making a subsidiary liable for the actions of its parent company should only be done on rare occasions. Justice Hands observed that One corporation may, however, become an actor in a given transaction, or in part of a business, or in a whole business, and, when it has, will be legally responsible. To become so, it must take the immediate direction of the transaction through its officers, by whom alone it can act at all… At times this is put as though the subsidiary then became an agent of the parent. This may no doubt be true, but only in quite other situations; that is, when both intend that relation to arise, for the agency is consensual. This seldom is true, and liability normally must depend upon the parent’s direct intervention in the transaction, ignoring the subsidiary’s paraphernalia of incorporation, directors and officers. The test is therefore rather in the form than in the substance of the control; in whether it is exercised immediately, or by means of a board of directors and officers, left to their own initiative and responsibility in respect of each transaction as it arises. Some such line must obviously be drawn if shareholding alone does not fuse the corporations in every case. Much of the metaphor in the books merely impedes discourse, as Judge Cardozo well observes in Berkey v Third Avenue Ry.; here, as elsewhere, it is ordinarily a symptom of confused thinking.28 This observation of Justice Hands remained the only authority on reverse piercing of the corporate veil for the next three decades.29 In the case of W.G. Platts v Platts,30 the doctrine of reverse piercing re-surfaced. In this case, the court authorised a divorced wife to seize the assets of the company of her husband to satisfy her entitlements. The court observed that the corporation was an ‘alter-ego’ of the person managing it. In the landmark case of Shamrock Oil & Gas v Ethridge,31 the doctrine was further applied. In this case, the owner (plaintiff) of an oil-drilling rig formed a one-person company and transferred the rig to it. Thereafter, leased it back and operated it on behalf of the company. The company so created had no assets and no other business. Thus, the existence of the company was only on paper. The defendant obtained a judgement against the plaintiff and acquired the oil-drilling rig at an execution sale; however, the company then replevied the oil-drilling rig. The court overlooked the separate existence of the company and held that the company was just an alter-ego of the plaintiff. Hence, the company was bound by the execution sale. Furthermore, the court observed that acknowledging the plaintiff and the company as two distinct personalities would lead to a miscarriage of justice and ‘the abstraction of the corporate entity should never be allowed to bar out and pervert the real and obvious truth.’32 Types of reverse piercing Reverse piercing is classified under two categories, namely, inside reverse piercing and outside reverse piercing.33 Inside reverse piercing The owner or insider seeks to pierce the corporate veil to avail the advantages of the corporation which they cannot realise in their personal capacities.34 The case of Macaurra v Northern Assurance Co.35 is a perfect example illustrating the inside reverse piercing. In this case, the owner of the company sought to pierce the corporate veil (in reverse) to claim the insured amount through the fire insurance policy held in his name. However, the owner of the damaged property was the company. The court rejected his claim and observed that no shareholder has any right to any property owned by the company even if he has all the shares of the company, as he has no legal or equitable interest therein. Further, the Supreme Court of Canada in the case of Kosmopoulous v Constitution Insurance Co.36 technically did not pierce the veil. Still, it could be viewed that ‘it was a distinction without a difference.’ The court, in effect, declared that what was the corporation’s property was also the plaintiff’s property. The result was that the principle of separate corporate personality was ignored. In this case, the plaintiff, Mr Kosmopoulous, had inadvertently insured his business property in his name. The property was legally owned by a corporation of which he was the sole owner. The property was destroyed in a fire, and the insurance company refused to provide compensation because it had no contract with the legal owner of the property, which was the corporation. The plaintiff pleaded before the court to ignore the principle of separate legal personality, and to consider the property owned by the corporation as the property of the plaintiff. Perhaps, in this case, the court did not consider to pierce the corporate veil but instead decided the case by applying alternative means to achieve an equitable outcome. The court rejected the narrow interpretation of the insurance contract to bring about the result that accorded with the legitimate expectation of the parties. The court reinterpreted the agreement to make it cover the plaintiff’s loss. In the same vein, the High Court of Delhi in Prem Lata Bhatia v Union of India37 considered the corporation and the owner as inseparable from averting prejudice inflicted to the lessee due to the acts of the respondents. In this case, the petitioner, Prem Lata Bhatia, was granted a license in a property by the Union of India in the year 1975 at a monthly rent of Rs. 901. Clause 8 of the license deed provided that: ‘The Licensee (s) shall not permit the said premises or any part thereof being used by any other person for any purpose whatsoever without the previous consent in writing of the Government and, in default thereof shall be liable for ejectment. The licensee (s) shall not introduce any partner nor shall he/they transfer possession of the premises or part thereof or otherwise carry on the business in the premises with any other person or assign, transfer, charge, otherwise alienate his interest in the premises.’ In November 1976, the petitioner along with her husband incorporated a company ‘Romika World Travel Pvt. Ltd.’ The petitioner and her husband held 97.3% of the shares of the said company. Further, the said premise was used to carry-out business managed by the company. Thus, the government sought to revoke the license on the ground that petitioner violated Clause 8 of the deed, as the licensee and the company are two separate entities. The court lifted the corporate veil and observed that ‘the principle of piercing the veil of corporate personality should be utilised not to prevent somebody from doing any wrong, but merely in order to recognise the reality of the situation.’38 Outside reverse piercing In this type of reverse piercing, the assets of the corporation are looked upon in order to discharge the obligations of the owner of the corporation.39 In other words, this type of reverse piercing is applied by the courts when the third party demands to consider the corporate’s property as to settle the dues of the shareholder.40 The best example is the case of Shamrock Oil & Gas v Ethridge.41 Similarly, in Curci Investments v James Baldwin,42 the California Court of Appeal held that a judgement creditor was not precluded from outside reverse piercing to make liable a Delaware Limited Liability Company (LLC) as a judgement debtor on a judgement against a shareholder of the LLC. Thus, the outside reverse piercing of the corporate veil is applied by the third party to satisfy his debts. Consequently, it can be concluded that classifying the reverse veil piercing into an inside and outside veil piercing is based on the relationship of the party seeking to pierce the corporate veil.43 Requirements for the application of the doctrine of reverse piercing As a general rule, to enforce this doctrine, the following four factors are taken into consideration. First, to determine the extent of individuality between the corporation and the shareholders by applying the doctrine of alter-ego. Secondly, assessing whether piercing the veil is against the public policy or not. Thirdly, ascertaining the intention to commit fraud and lastly to assure that no alternative remedy is available to invoke justice. Nevertheless, the scope of implementation of the doctrine of reversing piercing is very ruminative, depending on the facts and circumstances of the case. These four factors are known as the ‘hybrid test’. The doctrine of alter-ego The corporation is said to be the alter-ego of the person if a person’s will controls the corporation. Two essential elements are required to apply the doctrine of alter-ego, one unity of interest and the other ownership. Accordingly, reverse piercing of the corporate veil is suitable in cases where there exist unity of interest and ownership, which reflects alter-ego relationship. The same element is also looked for when applying the traditional doctrine of the piercing the corporate veil. However, according to Allen, ‘the direction of piercing was immaterial where the general tests supporting the doctrine had been met.’44 Perhaps, Kingston Dry Dock Co. v Lake Champlain Transportation Co.45 is the earliest case wherein the court applied the two-prong test of determining the alter-ego in reverse piercing the corporate veil.46 public policy To apply the doctrine of reverse piercing the veil, the court will ascertain that such an action is not against the public policy. In other words, the application of this doctrine should yield ‘an equitable result.’47 Thus, courts will inquire and ascertain whether ‘innocent shareholders or creditors would be prejudiced or not by reverse piercing.’48 Therefore, on several occasions, the court, after considering the positions of other stakeholders, refused to apply this doctrine. For instance, the court in the case of Floyd v Internal Revenue Service49 did not apply the doctrine because there was the probability of unjustness to innocent non-litigant parties. However, the issue related with this doctrine is less grave in case of a single shareholder as compared to corporate having two or more shareholders because in the former case, there would be no other shareholders affected by the application of the doctrine of the reverse piercing.50 Intention to commit acts forbidden by law The doctrine of reverse piercing will be applied in case the dominating person uses the controlled entity to commit acts forbidden by law, and try to protect himself under the façade of a corporation.51 However, the employment of the doctrine should only be in certain specific circumstances and not in every situation—for instance, a person taking advantage of independent corporate existence to execute the fraudulent act. The court observed in the case of State v Easton52 that perpetration of an offence such as fraud is a vital element for applying the doctrine of reverse piercing the corporate veil. Thus, to apply this doctrine, it has to be proved that the corporation was used to avoid personal liabilities or to commit fraud or an act forbidden by law. Absence of adequate remedy The doctrine of reverse piercing provides the equitable remedy. Thus, it is applied ‘only in the absence of adequate remedies at law.’53 As in the case of the doctrine of piercing the corporate veil, the plaintiff must generally exhaust all the available remedy before piercing the veil. The same rule is applied in case of the reverse piercing. The plaintiff must initially attempt to execute the judgement against the defendant; however, if the personal asset of the defendant is not enough to satisfy the claim, it is only then the court may entertain a request of the reverse piercing.54 Reverse piercing of corporate veil in india Primarily, the doctrine of reverse piercing the veil is of American origin and emerged from the court’s decision.55 Under English law, the doctrine is yet not well recognised. However, there are several instances where this doctrine has been invoked. Specifically, in cases concerning the matrimonial disputes, wherein the assets of a corporation were charged to satisfy the matrimonial claims.56 In the USA also, the doctrine primarily emerged from matrimonial disputes.57 However, recent trends demonstrate that its application has been widened in scope.58 The court applied this doctrine in various areas, for instance, tax recovery,59 bankruptcy proceedings,60 in cases of family law,61 and matters relating to tort.62 In India, this doctrine is yet not applied. Courts and tribunals in India have divided opinion regarding the application of reverse piercing of the corporate veil. There is no specific case wherein the courts actively applied the doctrine of the reverse piercing. Moreover, in the case of NEPC (National Energy Processing Company) India Ltd. v Securities and Excnage Board of India (SEBI),63 the Securities Appellate Tribunal observed that ‘doctrine of the reverse piercing of the corporate veil as argued by the respondent was not only outlandish but inconceivable.’ However, this doctrine cannot be kept aside by terming it as too radical, and not compatible with the necessary corporate law principles, as observed by High Court of Singapore, this doctrine demanded full consideration and should not be straightaway kept aside.64 It may be argued that the judicial abhorrence or disinclination against the new doctrine is perhaps due to the observance of the traditional and well-rooted principle of the separate legal entity. Nevertheless, with the increasing growth of economic and commercial structure of the country, the blind observance of the old tenets of corporate law needs to be modified with the present-day development.65 Further, the concept of artificial personality and the separate legal entity has been used in several cases to commit frauds, money laundering, white-collar crimes, and tax evasions. Even though there are laws in India, such as Criminal Law (Amendment) Ordinance of 1944, Customs Act of 1962, Law of Criminal Procedure Code of 1973, Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act of 1976, SEBI Act of 1992 etc., to deal with such issues, however, some alterations in the old principles of corporate laws are required to ensure that it is compatible with the changing modern corporate world.66 With time, it was made clear by the courts in the USA that the doctrine of reverse piercing would be applied only under those circumstances where the law is inadequate to deal with the circumstances.67 Thus, the exercise or implementation of this doctrine should not be the rule but only be used in such specific situation, wherein the individual takes benefit of a corporation’s distinct legal personality in order to execute fraudulent activities, and there is no law to regulate it. Such deceptive practices can be restricted if courts initiate to disregard the facade of the company’s distinct legal existence and by applying the doctrine of the reverse piercing. Nevertheless, two Indian cases can be cited wherein it was strongly pleaded to apply the doctrine of the reverse piercing.68 The first is the Kingfisher Airlines case, which concerns with the recovery of debt from Vijay Mallya by a consortium of banks. The Industrial Development Bank of India (IDBI) Bank argued that the personal properties of Mallya should be attached to recover the dues. The bank sought to apply the doctrine of the reverse piercing on the ground that Mallya being a chief promoter has the controlling interests in all the companies. Therefore, all his companies should be put together at one platform, and Mallya should be considered as a common denominator, to settle the dues of Rs. 1746 crores.69 Thus, the liability of Mallya was pleaded to be settled by applying the doctrine of reverse piercing as Mallya has drained his resources by stepping down from the companies he owned, and thereby shielded his liabilities. Similarly, in the case of Punjab and Sindh Bank v Skippers Builders Pvt. Ltd.,70 the appellant (the bank) pleaded to attach a property owned by Tej Properties Pvt. Ltd. to settle the liabilities of Mr Tejwant Singh, who controlled and managed the affairs of the company. The Debt Recovery Appellate Tribunal allowed the attachment of the property owned by the company on the ground that once the veil of corporate is lifted to determine that Mr Tejwant Singh is behind all the affairs of the companies, the reverse logic also holds good. Thus, in this case, the court, although not explicitly addressed in this doctrine, however, the factual background of this case suggests the application of the said doctrine. The Supreme Court of India has not yet applied this doctrine in any case nor laid down any guidelines for its application, and the statutes are also silent with respect to the implementation of this doctrine. Thus, in the absence of any guidelines, it becomes difficult for the courts and tribunals to implement this doctrine properly. Notwithstanding, the courts in India have applied the doctrine of reverse piercing (though not plainly) in few cases to fix criminal liability. For example, in the case of Iridium India Telecom Ltd. v Motorola Incorporation and Others,71 the court pointed out that guilty intent of a person or association of persons would be attributed to the corporation in case it is found that they are the alter-ego of the corporation. In this case, a criminal complaint was registered by Iridium India Ltd against Motorola, under Sections 420 and 120 of the Indian Penal Code, 1862. Thereupon, the magistrate initiated the trial against Motorola. However, aggrieved by the act of magistrate action, Motorola applied to the Bombay High Court to set aside the actions undertaken by the magistrate against it. The Bombay High Court quashed the proceedings of the magistrate against Motorola on the ground that a corporation incapable of having mensrea; thus, the magistrate cannot initiate criminal proceedings against Motorola. On appeal by Iridium, the Supreme Court observed that mensrea could be attributed to corporation provided that the control of an individual over the affairs of the company is so strong that the business of the company is recognised as the business of the individual. Further, the Supreme Court recognised the application of alter-ego in the case of Standard Chartered Bank v Directorate of Enforcement.72 The court, in this case, observed that a corporation could be held liable for the acts of the owner of a corporation. Subsequently, the Supreme Court in the case Aneeta Handa & Ors v God-father Travels73 confirmed that a company can be held accountable by the application of the rule of alter-ego and the criminal act of the owner can be attributed to the company. In this case, a company (International Travels Limited) authorised the appellant Anita Handa to issue a cheque on behalf of the company. The appellant issued a cheque in favour of the respondent (Godfather Travels Limited). The cheque issued by the appellant got dishonoured. Thus, the respondent filed a criminal complaint before the concerned authority under Section 138 of the Negotiable Instrument Act. Thereafter, the magistrate initiated the proceedings against the accused-appellant. The appellant, aggrieved by the criminal proceedings initiated by the magistrate, filed an appeal in the High Court to quash the proceedings on the ground that the company was not arrayed as an accused. However, the appellant did not get relief from the high court. Subsequently, the appellant moved to the Supreme Court. The question before the Supreme Court to determine was whether a complaint under Section 138 of the Negotiable Instrument Act (NI Act)74 read with Section 141 of the NI Act75 against the director or authorised signatory of a cheque without joining a company as an accused was maintainable. The Hon’ble court allowing the appeal of the appellant observed that ‘The company can have criminal liability fastened on it, and if a group of persons that guide the business of the companies have the criminal intent that would be attributed to the body corporate. Section 141 of the NI Act clearly stipulates that when a company commits an offence, then certain categories of persons in-charge as well as the company would be deemed to be liable for the offences under Section 138 of NI Act.’ Thus, the criminal intent of a person or group of individuals is attributed to the company is well recognised and applied by the courts in India. Conclusion The doctrine of reverse piercing the corporate veil is an exception to the fundamental principle of separate legal personality and is premised upon the principle of equity and justice. This doctrine facilitates the court to assess the interests of all the stakeholders and provides a befitting remedy to the aggrieved person. However, the doctrine of reverse piercing the veil is yet not applied by the Indian courts, unlike the traditional doctrine of piercing the corporate veil, which is a well-recognised doctrine in India. The increasing number of corporate scams illustrates that the application of traditional rules is becoming inadequate to restrain the new mode of committing the corporate frauds as these are designed by ‘the fertility of man’s invention.’76 Thus, with time, new rules and doctrines need to be adopted and applied. Conventional remedies such as piercing the corporate veil are becoming ineffective to address the kinds of scams executed in the present era, and this necessitates the claims for the application of the doctrine of reverse piercing in India. Moreover, non-recognition and non-implementation of the doctrine of reverse piercing will deprive justice to the aggrieved party and rewards the guilty party by providing him to protect his assets by exploiting the principle of a separate legal entity of corporation. Thus, it is essential to evaluate and apply the doctrine of reverse piercing the corporate veil to ensure that the rights of the stakeholders are not prejudiced. Dr Vijay P. Singh is working as an Assistant Professor in Indian Institute of Management, Lucknow. His area of specialisation is Business Law, Cyber Law, and IPR. His area of interest is Environment Law, Human Rights and Labour, and Industrial Law. He has more than 10 years of teaching experience. He has served in Banaras Hindu University, Faculty of Law and University of Petroleum and Energy Studies. E-mail: vijaypalsingh3@gmail.com; vpsingh@iiml.ac.in. Footnotes 1 United States v Best foods, 524 US 51, 61–62. 2 A.P. State Transport Corporation v The Income tax officer, AIR (1964) SC 1486; State Trading Corporation of India v CTO (1964) 4 SCR 99; LIC v Escorts Ltd. (1986) 1 SCC 264; Subhra Mukerjee v Bharat Coking Coal (2000) 3 SCC 312; New Horizons Ltd. v Union of India (1995) 1 SCC 478; Vodafone International Holdings v Union of India (2012) 6 SCC 613; State of Rajasthan v Gotan Limestone Udyog Pvt. Ltd. (2016) 4 SCC 469; Titagarh Wagons Ltd. v Nagpur Metro Rail Corporation Ltd. (2017) 7 SCC 486; Wave Hospitality Pvt. Ltd. v Union of India (2019) SCC OnLine Del 8855; Ois Advanced Technology Pvt. Ltd. v State NCT of Delhi (2020) SCC OnLine Del 338. 3 Aiella M. Lvov, Preserving Limited Liability: Mitigating the Inequities of Reverse Veil Piercing with a Comprehensive Framework, US Davis Business Law Journal, Vol. 18. (2), 161–193 4 Supra N. 1. 5 Collin E. Flora, When, How, and Why of piercing the corporate veil in Indiana. Available at https://cdn.ymaws.com/www.inbar.org/resource/resmgr/publications/RG-11.16_Flora.pdf. Accessed on 20-12-2019. 6 See, W. Flectcher, Cyclopedia of the Law of Private Corporations, § 41.70, at 458–59 (1983 and Supp 1989). 7 Michael Gaertner, Reverse Piercing the Corporate Veil: Should Corporation Owners Have It Both Ways?, William and Mary Law Review, Vol. 30, 667 (1989). 8 Supra N. 1. 9 Stephen M. Bainbridge, A Critique of the Corporate Law Professors’ Amicus Brief in Hobby Lobby and Conestoga Wood, Virginia Law Review Online, Vol. 100, No. 1 (2014), 1–21; See also, Cindy Schipani, ‘Infiltration of Enterprise Theory into Environmental Jurisprudence’ (Spring 1997) Journal of Corporation Law, Vol. 22. (3), 599–620 10 (1897) AC 22 (HL). 11 (1897) AC 22 (HL), at 49, per Lord Macnaghten. 12 Supra N. 9 13 Timothy P. Glynn, ‘Beyond “Unlimiting” Shareholder Liability: Vicarious Tort Liability for Corporate Officers,’ Vanderbilt Law Review, Vol. 57, No. 2, 329–433. 14 Robert B. Thompson, Piercing the Corporate Veil: An Empirical Study, Cornell Law Review, Vol. 76, 1039 (1991). 15 See, Nicholas B. Allen, Reverse Piercing of the Corporate Veil: A Straightforward Path to Justice, St. John’s Law Review, Vol. 85. (3), 1147–1187 16 Morris v New York State Department of Taxation and Finance, 623 NE 2d 1157 (NY 1993). Available at https://casetext.com/pdf-email?slug=morris-v-dept-of-taxation. Accesses on 03-01-2020 17 YaraslauKryvoi, Piercing the Corporate Veil in International Arbitration, Global Business Law Review, Vol. 1, No. 69, 170. 18 Supra N. 2. 19 Ibid; Gregory S. Crespi, The Reverse Pierce Doctrine: Applying Appropriate Standards, Journal of Corporation Law, Vol. 16, 33 (1990). 20 See, In Re Phillips, 139 P.3d 639, 644 (Colo.2006); Kurtis A. Kemper, ‘Acceptance and Application of Reverse Veil-Piercing–Third-Party Claimant’ American Law Reports, 2, 6th 195 (2002). 21 Supra N. 2. 22 Tim Prudhoe and Jessica Notebaert, Piercing the Veil—An American Introduction, Trust & Trustees, Vol. 16, No. 9 (2010). 23 Sam F. Halbi, Veil-Piercing’s Procedure, Rutgers University Law Review, Vol. 67 (2015); Supra N. 2. 24 Ibid. 25 See, State v Easton, 647 NYS 2d 904. 26 Supra N. 1. 27 31 F. 2d 265 (2d Cir. 1929). 28 31 F. (2d) 265 (C. C. A. 2d, 1929). 29 Michael Richardson, The HelterSkelter Application of the Reverse Piercing Doctrine, University of Cincinnati Law Review, Vol. 79 (2011). 30 49 Wn 2d 203 (1956). 31 159 F Supp 693 (1958). 32 Ibid. 33 Supra N. 16. 34 Ibid. 35 (1925) AC 619 (HL) (UK). 36 [1987] 1 S.C.R. 2. 37 (2006) 128 DLT 24; 2006 71 SCL 142 Delhi. 38 Ibid. 39 CF Trust Inc. v First Flight Ltd. 266 Va. 3 (Va. 2003). 40 Supra N. 2. 41 159 F. Supp. 693 (D. Colo. 1958). 42 14 Cal. App. 5th 214 (2017). 43 Supra N. 16. 44 Ibid. 45 31. F. 2d 265. 46 Supra N. 2. 47 Ibid; See also, Supra N. 20. 48 Ibid. 49 151 F 3d 1295 (10th Cir. 1998). 50 Supra N. 20; See also, Kathryn Hespe, Preserving Entity Shielding: How Corporations Should respond to Reverse Piercing of the Corporate Veil, Journal of Business and Securities Law, Vol. 14, No. 69 (2013). 51 Select Creations, Inc. v. Paliafito America, Inc., 852 F. Supp. 740 (E.D. Wis. 1994). 52 169 Misc. 2d 282 (N.Y. Sup. Ct. 1995) decided on June 28, 1995. 53 Elham Youabian, Reverse Piercing of the Corporate Veil: The implications of Bypassing ‘Ownership’ Interest, South Western University Law Review, Vol. 33, 573 (2004). 54 Supra N. 5. 55 Peter S. Spiro, Piercing the Corporate veil in Reverse: Comment on Yaigujev Chevron Corporation, Canadian Business Law Journal (2019), Available at https://ssrn.com/abstract=3223136. Accessed on 18-12-2019 56 Edwin Mujih, Piercing the Corporate Veil: Where is the Reverse Gear?, Available at https://www.semanticscholar.org/paper/Piercing-the-Corporate-Veil-%3A-Where-is-the-Reverse/042df6886a4deeacedd1d8361c4b225f2ef3f4f2. Accesed on 20-12-2019 57 Supra N. 22. 58 Supra N. 15. 59 G.M. Leasing Corp v United States, 514. F. 2d 935 (10th Cir. 1975); Shades Ridge Holding Co. v United States, 888 F. 2d 725. 60 Valley Finance, Inc. v United States, 629 F. 2d 162, 172 (D.C. Cir. 1980); Goya Foods, Inc v Unanue-Casal, 982 F Supp 103 (DPR 1997); Shamrock Oil and Gas Co. v Ethridge, 159 F Supp 693. 61 Zisblatt v Zisblatt, 693 S.W. 2d 944; W. G Platts, Inc v Platss, 298 P 2d 1107. 62 Theberge v Darbro, Inc., 684 A.2d 1298, 1303 (1996); contra Penn Nat. Gaming, Inc. v Ratli, 954 So.2d 427. 63 (2003) 3 Comp L.J 170 SAT. 64 Koh Kim Teck v Credit Suisse Ag (2015) SGHC 52 (Singapore). See, Hans Tjio and Clara Tung, Reverse Veil-Piercing in Singapore and Its Consequences, Singapore Academy of Law Journal, Vol. 30, 1133 (2018). 65 Supra N. 7. 66 NamanKamdar and Akash Srinivasan, Solving the Bad Loan Crisis in the Unconventional Way: Is Reverse Piercing the Corporate Veil a Solution, NUJS Law Review, Vol. 12, No. 2 (2019). 67 See, Commissioner of Environmental Protection v State Five Industrial Park Inc., 304 Conn. 128 (Conn. 2012). 68 State Bank of India v Kingfisher Airlines, Debt Recovery Tribunal (Karnataka, Banglore) (19 January 2017, and Punjab and Sindh v skippers Builders Pvt. Ltd. 69 Banks to file objections to Heineken’s impleadment plea in Vijay Mallya case, Available at https://economictimes.indiatimes.com/industry/cons-products/liquor/banks-to-file-objections-to-heinekens-impleadment-plea-in-vijay-mallya-case/articleshow/52857899.cms?from=mdr. Accessed on 21-12-2019 70 Punjab and Sind Bank v Skippers Builders Pvt. Ltd., II BC 124 (2016). 71 (2011) 1 SCC 74. 72 AIR 2005 SC 2622. 73 (2012) 5 SCC 661; Appeal (Crl.), 838 of 2008, Judgment Date: 27 April 2012. 74 Section 138 of NI Act provides that: ‘Where any cheque drawn by a person on account maintained by him with a banker for the payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an arrangement made with the bank, such person shall be deemed to have committed an offence and shall without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with a fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless – a. the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier, b. the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid, and c. the drawer of such cheque fails to make the payment of said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.’ 75 Section 141 of the NI Act provides that ‘(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly; Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence: Provided further that where a person is nominated as a Director of a Company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act, has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.’ 76 Supra N. 16. © The Author(s) (2021). Published by Oxford University Press. All rights reserved. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model)
TI - The doctrine of reverse piercing of corporate veil: its applicability in India
JF - Trusts & Trustees
DO - 10.1093/tandt/ttaa108
DA - 0011-07-14
UR - https://www.deepdyve.com/lp/oxford-university-press/the-doctrine-of-reverse-piercing-of-corporate-veil-its-applicability-2RmWECzj82
SP - 1
EP - 1
VL - Advance Article
IS - 
DP - DeepDyve
ER -