TaxTMI 
TaxTMI 
2020 (10) TMI 347
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....seek injunction/ direction to the Respondent No. 4 (i.e., Bharat Petroleum Corporation Limited (herein after referred as 'BPCL')) to invoke the Bank Guarantee furnished by the parent company- M/s. Albanna Engineering LLC Dubai (herein after referred as 'parent company/ AELLC'). Corporate Debtor is a 100% subsidiary of M/s. Albanna Engineering LLC Dubai, having its address at Industrial Area No. 4, ALQUOZ, Bur-Dubai. The Corporate Debtor herein is incorporated under the provisions of Companies Act, 1956 and having its registered office at XIV 305 A4(4) 3E, Noel Focus, Seaport Airport Road, Chittethukara, CSEZ P.O, Kakkanad, Cochin- 682 037. The parent company has issued a Bank Guarantee in favour of Respondent No. 4 as security for performance of the contract. 3. We found that the parent company got contract from BPCL for carrying out certain structural work in refinery at Cochin. Solely for executing the said structural work at refinery, the parent company incorporated the Corporate Debtor under the Companies Act, 1956 in Cochin. The parent company executed the said work by subcontracting the work to its subsidiary 'Corporate Debtor'. For executing the wo....
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....orporate Debtor for realization of money in various courts. It is respectfully submitted that the 4th Respondent does not have any contractual obligations with the 1st Respondent or any of the Applicants herein. 8. The counsel for BPCL has submitted that the entire amount, if any, payable to AELLC (Dubai) which is currently retained with the 4th Respondent by way of the Bank Guarantees and the final bill amount which is to be paid to parent company by the 4th Respondent, has been attached by various courts in several pending suits/garnishee proceedings and is restrained from parting with the amounts due to the judgment debtor therein i.e. the 1st Respondent/Corporate Debtor. However, there is no privity of contract between the Corporate Debtor and BPCL. 9. The counsel further stated that any direction from this Tribunal to the 4th Respondent to invoke the Bank Guarantees provided by AELLC and/or to deposit the money in the bank account of the 1st Respondent, would render the 4th Respondent liable for contempt and the 4th Respondent stands the risk of facing prosecution for violation of injunction orders from other courts if at all any amount is disbursed from the monies avail....
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.... sought from the Mr. Mathew Kavalan as to why the Promotor and representative of the Holding Company had resigned without the approval of the Financial Creditor since the contract with the M/s. BPCL is with the holding Company, which is the only source of revenue to the Corporate Debtor, he had not furnished any explanation for the same. 12. It is understood from the records that Mr. Saeed Ahmad Mohammad Saleh Albanna is the Promoter and Mr. Mathew Kavalan is the Director of M/s. Albanna Engineering LLC, Dubai, UAE ("LLC"). Mr. Mathew Kavalan, is the Key Management Personnel of the LLC and instrumental in winning the contract for mechanical works of VGO HDT unit for Integrated Refinery Expansion Project with the 4th Respondent M/s. BPCL-Kochi Refinery vide PO-4504660618 dated 19.5.2014. As per the said agreement M/s. Albanna Engineering LLC, Dubai, UAE ("LLC") signed back to back basis with Corporate Debtor for sub-contractor services for the above-mentioned project only. As per the agreement the Corporate Debtor gets 7% of the amount received by M/s. Albanna Engineering LLC, Dubai, UAE ("LLC") from the 4th respondent M/s. BPCL Kochi Refinery. 13. Further, as disclosed by BPC....
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....il to the Registry and was placed on record. 16. Circumstances being as above, the applicants quoted the case of State Bank of India Versus Videocon Industries Limited (VIL) & Ors. (MA/2385/2019 in C.P.(IB)-02/MB/2018 dated 12.02.2020 of NCLT, Mumbai Bench) for piercing the corporate veil of the company and considering the group companies as one. It was their contention that the assets of the subsidiaries and assets of holding Company are not different and distinct, as there is common control, management and 100% shareholding by the parent Company. The Corporate Debtor was floated by the same directors of parent company, which was evident from the shareholding pattern and the signatories of Memorandum of Association of the Corporate Debtor. Further, it is also evident from the Agreement entered between the parent company and Corporate Debtor on 19th May, 2014 that Albanna Engineering (India) Pvt Ltd. has been identified by Albanna Engineering LLC as a potential subcontractor. This is a typical instance of a "see through provision", so that one is able to arrive at persons who are actually in "control", whether jointly, or in concert, with other persons. In such cases, the princi....
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....s approach shall not be appreciated being against the natural justice. Equity demands to give a verdict on an issue raised by the litigants before a court of law, but definitely within the four corners of the Law without transgressing the jurisdiction as prevalent currently. It goes without saying that the decision hereinbelow is going to be based upon the merits of this case; supported by case-laws pronounced in the past and evidence on record. Undoubtedly the treatment of 'group companies' for the Insolvency purpose is a complex subject, as appropriately observed in the 'Report'. That lifting of corporate veil for Insolvency purpose may affect Corporate Debtor's entity significantly, but considering the high stakes of the stakeholders and the lengthy arguments raised by various parties demanding a verdict urgently on the issue of ' Consolidation', no choice is left but to take the call, although with due care that not to exceed the jurisdiction enshrined in the Insolvency Code." 19. We relied on various case laws on the subject of lifting of corporate veil mentioned in State Bank of India Versus Videocon Industries Limited (VIL) & Ors. (Supra). The ....
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.... especially the case when a parent company owns all the shares of the subsidiaries, so much so that it can control every movement of the subsidiaries. These subsidiaries are bound hand and foot to the parent company and must do just what the parent company says. A striking instance is the decision of the House of Lords in Harold Holdsworth and Co. (Wakefield) Ltd. v. Caddies (1955 (1) All ER 725). So here. This group is virtually the same as a partnership in which all the three companies are partners. They should not be treated separately so as to be defeated on a technical point. They should not be deprived of the compensation which should justly be payable for disturbance. The three companies should, for present purposes, be treated as one, and the parent company, DHN, should be treated as that one. So that DHN are entitled to claim compensation accordingly. It was not necessary for them to go through a conveyancing device to get it. I realise that the President of the Lands Tribunal, in view of previous cases, felt it necessary to decide as he did. But now that the matter has been fully discussed in this court, we must decide differently from him. These companies as a group are ....
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....lar reasons but has to be judged on unique facts applicable to each case. In our opinion the facts pertaining to present case and relationship of Respondent No. 1 to 5 is also unique and which is also to the knowledge of the Lenders and BPCL. All stakeholders, despite frequent change in holding structure, were/are treating it as property, assets held by VIL through the Respondent No. 2 to 5, for exclusive benefit of parent company i.e. VIL and not VOVL." 20. It is clear from the aforesaid Judgments 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 aforesaid 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, 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 t....
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....volved in this instant application. The Invoicing & Payment Terms in Agreement dated 19.05.2014 between the Prime Contractor (Albanna Engineering LLC) and Subcontractor (Albanna Engineering (India) Pvt. Ltd) clearly states that: " M/s. Albanna engineering LLC, shall raise the invoice on Client based on the measurement sheet provided by the Sub Contractor. The sub-contractor shall subsequently raise invoice on Albanna LLC for the duly accepted measurement sheet by the Client." As already pointed out, the management and ownership of these companies are same. We have also come to a conclusion that there is no other fall back mechanism for recovery of dues from the parent company unless they are not ready to settle the dues. It is evidently interconnected, interwoven and interlaced to much greater extent. As there is no revenue for M/s. Albanna Engineering (India) Private Limited, the due amount could not be recoverable. So, we are of the view that the obligations of each other are also intermingled and is treated as one single economic entity. 24. In the backdrop of aforesaid discussion, it has to be held that the assets and properties, including any claim, interest the....