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Subject: Corporate Law-I
In the eyes of law, a company is a legal person with a separate entity distinct from its members of
shareholders. In essence it means that there is a veil or curtain separating the legal entity of the
company from its members or shareholders. When any fraudulent and dishonest use is made of
the legal entity, the individuals concerned will not be allowed to take shelter behind the corporate
personality. The Courts will break through the corporate shell and apply the principle of Lifting
or Piercing the Corporate Veil. The Court will make the members or the controlling persons
liable for debts and obligations of the company.
But in certain situations, the lifting of corporate veil is done for positive things or for the benefit
of the company. This happened in the case of New Horizon Ltd. v. UOI, where New Horizon
Ltd., was a joint venture company, which had submitted a tender for printing of telephone
directories for the Department of Telecommunications, Telecom District, Hyderabad. Even
though the company had requisite experience, the Department rejected the offer on the ground of
non-fulfillment of the condition that it had no experience. It was upheld by the High Court. But
the Supreme Court set aside the judgment given by the High Court and said that once it is held
that NHL is a joint venture, the experience of its various constituents, namely TPI, LMI, WML
and IIPL, had to be taken into consideration. The Supreme Court set aside the contracts awarded
in respect of the directories for the years 1993 and 1994 and fresh tenders may be invited for
award of the contract for the directory for the year 1995.
In this project I would like to analyse this judgment relating it to the concept of Lifting of
Corporate Veil with the help of some other judicial decisions.
L. Ashish Kumar,
201108, VII Semester.