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2014 (2) TMI 1382 - HC - Indian LawsSeeking return of security on the basis that the suit was filed and security obtained for the plaintiff's claim in arbitration - Lifting of Corporate Veil - HELD THAT:- It is trite law that a company is a separate juristic entity distinct from the shareholders; its assets are separate and distinct from those of its members; it can sue and be sued exclusively for its own purpose; its creditors cannot obtain satisfaction from the assets of its members; the liability of the members or shareholders is limited to the capital invested by them; similarly, the creditors of the members have no right to the assets of the corporation and unless fraud is asserted or at least alleged in the plaint, as required under Order VI Rule 4 and in such a way that it will be sustained at the time of trial, the question of lifting a corporate veil does not arise. To accept the plaintiff's submissions that there need not be any fraud or underlying element of dishonesty in formation of corporate entities would amount to violating and shaking these fundamental tenets of corporate law. Simply because the shareholders, the Directors (in this case were not common) the addresses of the two companies that own the two ships are common or the constituted attorney who was appointed to buy the vessel is the same or that both the ships were purchased pursuant to the board meeting on the same day does not mean that the efforts of the subscribers were to conceal that fact and does not automatically mean that the intention to register the two ships in different names was to play a fraud. There is no bar in purchasing ships in different names if that is the way a person wants to do his business. There is of course an exception that the intention was to mask the true owners and the companies are a sham - Under order VI Rule 4 of Code of Civil Procedure, it is provided that if party pleading relies on any fraud then particulars with dates and time and the nature of fraud has to be stated in the pleading, i.e., the plaint. There are no particulars as required under Order VI Rule 4 of CPC of fraud stated in the plaint. Moreover, all these factors were known to the plaintiff or the plaintiff is deemed to have known prior to entering into the management agreement with the plaintiff. It is not the plaintiff's case that they would not have entered into the management agreement otherwise. The plaintiff has not made out a case for lifting or piercing the corporate veil and hence defendant no. 1 cannot be a sister of M.V. Eastern Light. The foundation of the plaintiff's case that defendant no. 1 and M.V. Eastern Light are sister ships itself is not sustainable, let alone security to be continued till the suit is heard and disposed. The notice of motion is allowed.
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