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TMI Blog2006 (3) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... s that M/s. BVM Engineering Industry (P.) Limited was the registered consumer of electricity connection granted at the factory premises A-20, Mohan Co-operative Industrial Estate, Mathura Road, New Delhi. Petitioner No. 1, M/s. J. B. Exports Limited owns the entire share capital of M/s. BVM Engineering Industry (P.) Limited. 5. In the inspection carried out in the premises in question on 8-8-1991, it is alleged that it was found that electricity was being consumed by M/s. J. B. Exports Limited. On these facts a show-cause notice was issued and thereafter the impugned order dated 23-5-1995, was passed demanding sub-letting charges and load violation charges retrospectively from M/s. BVM Engineering Industry (P.) Ltd. 6. The learned S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired by appellant No. 1, M/s. J. B. Exports Ltd. Thus, almost the entire share capital was acquired by appellant No. 1 which became the holding company. 10. Although appellant No. 2 had been sanctioned the electricity load for the said premises and was technically the registered consumer, but after almost its entire share capital was acquired by appellant No. 1, the appellant No. 2 company has not been carrying on any regular business or commercial activity of its own. In fact, from the beginning all the property taxes, water and electricity charges with respect to the said premises con- structed on Plot No. A-20, Mohan Co-operative Industrial Estate, Mathura Estate, New Delhi have been borne by appellant No. 1 as is reflected in it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany. A company was held to be a distinct legal entity separate from its shareholders and directors. This legal principle gave protection to businessmen who were otherwise reluctant to start new industrial ventures due to the risk involved. Thus this legal principle was of great help to industrialisation in Europe (where industrialisation first began during the Industrial Revolution) and thereafter all over the world. 14. Subsequently, however, an exception was carved out to the above principle, viz., the doctrine of piercing the veil of corporate personality. 15. In a very recent Division Bench decision of this Court in Prem Lata Bhatia v. Union of India [2006] 134 Comp. Cas. 92, we have considered the entire case law on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertakings and Government companies had not been paid salaries for a long time which caused hardship to them and their families. The State submitted that it cannot be made liable since these undertakings were registered as companies under the Companies Act and were, therefore, distinct entities. The Supreme Court rejected this submission and further observed in para 25 of the judgment that the principle behind the doctrine is a changing concept and it is expanding its horizon. 19. The same view was taken in State of UP v. Renusagar Power Co. AIR 1988 SC 1737 vide para 66 where it was observed : "66. It appears to us, however, that as mentioned the concept of lifting the corporate veil is a changing concept and is of expanding hor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observation from its earlier decision in Tata Engg. Locomotive Co. Ltd. v. State of Bihar [1964] 34 Comp. Cas. 458 : ". . .The doctrine of the lifting of the veil thus marks a change in the attitude that law had originally adopted towards the concept of the separate entity or personality of the corporation. As a result of the impact of the complexity of economic factors, judicial decisions have sometimes recognised exceptions to the rule about the juristic personality of the corporation. It may be that in course of time these exceptions may grow in number and to meet the requirements of different economic problems, the theory about the personality of the corporation may be confined more and more." (p. 469) 22. In recent decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facilitate industrialisation, not to obstruct it. Hence a mechanical interpretation of the principle of corporate personality is to be avoided, as it may frustrate the very purpose for which it was made, viz., to promote growth of industries. Consequently, the exception to the principle, namely, the doctrine of piercing the veil of corporate personality should be adopted not merely in cases of fraud or evasion of legal obligations but also in a large number of cases where it would promote the growth of industry. In this way, both the principle of corporate personality as well as its exception, viz., the doctrine of piercing the veil of corporate personality will serve a common complementary purpose, namely, to promote industrialisation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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