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TMI Blog2019 (11) TMI 1458X X X X Extracts X X X X X X X X Extracts X X X X ..... or obligations imposed by law, the theory of lifting of corporate veil has to be made applicable, so as to protect the interests of the persons who approach the court seeking for a valid relief. When there was failure to comply with the terms of the agreement entered into by the parties, the suit was filed and a favourable decree was obtained by the decree holder. So, the facts of the case would show that the intention of the judgment debtor company was to evade the reasonable or valuable right of one of its customers by hiding behind the veil and raising a contention that the claim petitioner is not liable to compensate its customer as it is a separate corporate entity. A case is made out by the decree holder to execute the decree by attachment sale of the assets of the claim petitioner, company and that the corporate personality cannot be used to evade or resist the obligation imposed by law. Therefore, applying the principle of lifting of corporate veil, the property owned by the claim petitioner company is definitely liable to be attached for realization of the decree debt legally obtained by the decree holder, a customer. The finding of the court below that the corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttachment. 4. Before the court below, the Director of the claim petitioner was examined as PW 1 and Exts. A1, A2 and A4 to A6 were marked. No oral or documentary evidence was adduced on the side of the respondent/decree holder. The court below, on appreciation of the evidence, allowed the claim petition and lifted the attachment of the property . 5. Heard Adv. K. Ramakumar, the learned Senior Counsel for the appellant/decree holder, Adv. Vinay V. Menon, the learned counsel for the first respondent/claim petitioner and Adv. George Cherian Karipparambil, the learned counsel for the 2nd respondent/Judgment debtor. 6. The appellant is the decree holder in the execution petition (herein after referred to as the appellant). M/s. Infra Housing Pvt. Ltd is the defendant in the suit as well the judgment debtor, represented by its Director Sri. George E. George. As per Ext.A2 Sale Deed No.2892/2008, the property attached was purchased along with a larger extent by M/s. Nippon Infra Project (P) Ltd, a company registered under the Companies Act,1956. Ext.AI is the certificate of incorporation of M/s. Nippon Infra Project (P) Ltd. As borne out from Ext.A2, Sri.George E. George, the Dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property. But, by the impugned order the claim petition was allowed by the Court below. The decree holder felt aggrieved, filed this appeal. The main question mooted for consideration in this appeal is whether the execution court was justified in holding that the claim petition filed by M/s. Nippon Infra Project (P) Ltd, is liable to be allowed. 7. The term 'corporate veil' has got significance in this issue as two companies are involved in the dispute. In Black's Law Dictionary, 'corporate veil' is defined as thus: corporate veil. The legal assumption that the acts of a corporation are not the actions of its shareholders, so that the shareholders are exempt from liability for the corporation's actions. Lifting the corporate veil is a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders. When there is deliberate attempt to avoid a legal obligation or to avoid force of law, or when the formation of companies are merely to defy the law as well to defeat the rights of the customers dealing with them, the court will break through the corporate shell and apply the principle of lifting of cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e corporate veil has to apply when the law is sought to be circumvented. In expanding horizons of modern jurisprudence, it is certainly permissible. Its frontiers are unlimited. The horizon of the doctrine is expanding. While the company is a separate entity, the Court has come to recognise several exceptions to this rule. One exception is where corporate personality is used as a cloak for fraud or improper conduct or for violation of law. Protection of public interest being of paramount importance, if the corporate personality is to be used to evade obligations imposed by law, the real state of affairs needs to be seen........ 11. In State of U.P. v. Renusagar Power Co. [(1988) 4 SCC 59] the Apex Court observed in para 66 as follows: 66. It is high time to reiterate that in the expanding horizon of modern jurisprudence, lifting of corporate veil is permissible. Its frontiers are unlimited. It must, however, depend primarily on the realities of the situation. The aim of the legislation is to do justice to all the parties. The horizon of the doctrine of lifting of corporate veil is expanding.........'' . In para 67, it was held as follows: 67. In the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (supra) the Apex Court stressed that the horizon of the doctrine of lifting the corporate veil is expanding and its frontiers are unlimited. Needless to say that, the Directors of both the companies are common and they are brothers and they are doing the business as a joint venture though the projects are different. It has to be borne in mind that the Memorandum and Articles of Association of the aforesaid companies have been kept away by the claim petitioner. When the circumstances in entirety are appreciated, I am of the opinion that a case is made out by the decree holder to execute the decree by attachment sale of the assets of the claim petitioner, company and that the corporate personality cannot be used to evade or resist the obligation imposed by law. Therefore, applying the principle of lifting of corporate veil, the property owned by the claim petitioner company is definitely liable to be attached for realization of the decree debt legally obtained by the decree holder, a customer. Therefore, the finding of the court below that the corporate veil cannot be lifted as the judgment debtor is engaged in housing projects whereas the claim petitioner is engaged in constru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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