NAME : RAKSHITH H J

SRN : PES1202102889

TOPIC : Salomon vs Salomon Company Ltd CS3

1 . "Corporate Veil" refers to the idea that business members are protected from liabilities
arising from the corporation's acts. The corporate veil notion states that members should
not be held accountable for the company's debts or violations of the law.
• In Cheran Properties v Kasturi & Sons, the Supreme Court discussed the English
group of companies doctrine, which states that in certain circumstances, an
arbitration agreement entered into by a company within a group of corporate
entities will also bind non-signatory affiliates if the circumstances demonstrate that
the mutual intention of all parties was to bind both signatories and non-signatory
affiliates. Modern business transactions, it was discovered, frequently contain
multiple layers and agreements that must be dismantled in order to get to the true
essence of the business arrangement: an intent to bind someone who, despite not
being a signatory, has assumed the obligation to be bound by the actions of the
signatory.
• In Bhatia Industries v. Asian Natural Resources & Anr. A division bench of the
Bombay High Court confirmed in appeal the verdict of a single bench and authorised
lifting of the corporate veil in relation to the execution of a foreign arbitral award in
Bhatia Industries v. Asian Natural Resources & Anr. In this case, an arbitral award
was issued in favour of a foreign entity in international arbitration proceedings
between the foreign entity and the judgement debtor, an Indian entity, for damages
deriving from a breach of contract. The foreign business filed an application for
execution with the High Court, claiming that the Indian judgement debtor was
actually a group company linked to a bigger conglomerate of Indian firms that was
fraudulently syphoning off monies to avoid execution.

2. Salomon vs Salomon company ltd was most important case which laid down the principal
Of corporate veil. this firm upheld the doctrine of corporate identity as a separate
legal entity was affirmed, meaning that stockholders could not be held personally
accountable if the business went bankrupt. It was discovered that a business was
founded in accordance with the Companies Act's regulations, and as a result, it was
granted a certificate of incorporation.

The Court found no evidence that the appellant behaved illegally or dishonestly
because all of the criteria were met in accordance with the Act's provisions, and the
firm was treated as a distinct legal entity.

The Court held that, while the judgement may appear unjust or unfair, it cannot be
denied that a business is a different entity from the people who make up its
membership, highlighting the most basic premise of company law.
3.
The corporate veil can be lifted in following sutation :
• Public interest : If a corporation was formed against the public interest, the Court
may enable the corporate veil to be lifted in order to establish the truth. It does not
give limited liability protection to the company's members in such instances.
• Tax : When a corporate organisation is employed in defence actions, as a shield to
mask wrongdoings in tax affairs, or to commit tax evasion, the corporate veil can be
removed. As a result of the use of a corporate veil to facilitate avoidance of legal
responsibilities such as tax payments or denial of statutory benefits to workers, the
Court has enabled the corporate veil to be lifted.
• Diversion of funds : The court has permitted for the piercing of the corporate veil in
instances when a company's sale of property to the wives of its directors is claimed
to be sham or collusive. As a result, promoter cooperation and the diversion of
company cash for personal gain are examples in which the corporate veil can be
pierced to bring justice.
• Fraud : "The purpose of a corporate body is to stimulate and promote trade and
commerce, not to perform criminal acts or cheat people," the Supreme Court of
India has stated. When a corporate character is used to perpetrate wrongdoing or
mislead others, the court will disregard the corporate character and look at the facts
behind the corporate curtain in order to impose appropriate orders to ensure that
the parties involved are treated fairly.