Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + Tri Insolvency and Bankruptcy - 2020 (10) TMI Tri This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (10) TMI 347 - NATIONAL COMPANY LAW TRIBUNAL, KOCHI BENCHCIRP proceedings - piercing of Corporate Veil - seeking invoking the Bank Guarantee furnished by the parent company - HELD THAT:- The corporate veil between the subsidiaries and holding company are to be lifted depending on facts of each case and no straight formula can be defined. As held in various judgments, the corporate veil can be lifted for unlimited reasons and it is not only limited to the extent of the cases of fraud, impropriator. Each case needs to be tested with the unique facts of arrangement applicable to it. In the recent case of ArcelorMittal India, [2018 (10) TMI 312 - SUPREME COURT ] Hon'ble Apex Court has held that there is a limited principle of English Law which applies and the Court may pierce the corporate veil for the purpose, and only for the purpose of depriving company or its controller of the advantage that they would otherwise have obtained by company's separate legal personality - It is also held in the said Judgment that where a statute itself lifts the corporate veil, or where protection of public interest is of paramount importance, or where a company has been formed to evade obligations imposed by the law, the court will disregard the corporate veil. Further, this principle is applied even to group companies, so that one is able to look at the economic entity of the group as a whole. In Hindustan Construction Company Limited and Ors. Vs. Union of India (UOI) and Ors. [2019 (12) TMI 5 - SUPREME COURT ], where the Hon'ble Supreme Court have referred to their judgment in Mobilox Innovations Pvt Ltd. v. Kirusa Software Pvt Ltd. [2017 (9) TMI 1270 - SUPREME COURT ] and stated that Section 5(6) of the Insolvency Code, which defines 'disputes', read with Section 8(2) of the Insolvency Code, would make it clear that there is no bar to applying an Order Vlll-A of the Code of Civil Procedure type procedure to proceedings under the Insolvency Code, so that when his client's sub- contractor triggers the Insolvency Code against his client, his client in-turn should be able to make its principal employer a party to such proceedings, so that the subcontractor may then recover these amounts from the principal employer directly, thereby absolving his client from the clutches of the Insolvency Code. Thus, it can be concluded that the instant application is a fit case for piercing 'Corporate Veil'. Accordingly, we came to the same view that lifting of Corporate Veil is very much needed and permitted in the instant case as the promoters/ directors of a company diversify the business in various field by creating several independent entities, call it subsidiaries, with the constitution of common directors and at some point of time if the Group gets financially stressed due to default in repayment of debt, at that juncture a right of recourse is required to be adopted. That is why, the right recourse shall be to examine the necessity of 'Consolidation' as there is a clear case of principal-agent relationship. The assets and properties, including any claim, interest therein, of Albanna Engineering LLC (Dubai) held through M/s. Albanna Engineering (India) Private Limited will have to be said to be the property of the Corporate Debtor, for the purpose of the present CIRP. Further, the bank guarantee of parent company for completing the work for BPCL is done by M/s. Albanna Engineering (India) Private Limited (sub-contractors), wherein the applicants, i.e., Sanghvi Movers Limited, MNB Nair, Kerala Metal Distributors and Brothers Engineering are the service providers and material suppliers for engineering projects for BPCL. Therefore, the assets held by them can be said to be "its" assets i.e. the assets of present Corporate Debtor, which is under the CIRP. The Corporate Insolvency Resolution Process was initiated and moratorium was passed on 25.10.2019, therefore, it prohibits the institution of suits or continuation of pending suits or proceedings against the Corporate Debtor or its parent company, including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority. Section 14 read with Section 238 of Insolvency & Bankruptcy Code, 2016 is applicable - Respondent No. 4, i.e., BPCL is directed to invoke both the Bank Guarantees immediately provided by the parent company of the Corporate Debtor, i.e., Albanna Engineering LLC, and to keep the proceeds in an interest-bearing fixed deposit with itself in the name and style of "Bharat Petroleum Corporation Limited - Account Albanna Engineering" until further orders - Respondent No. 4, i.e., BPCL is hereby directed to produce the original receipt of such deposit before the Registry of this Tribunal. Application disposed off.
|