TaxTMI 
TaxTMI 
2026 (5) TMI 1731
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....ated 31.07.2025 passed by learned Commercial Court - I, Lucknow in Execution Case No.277 of 2021 (M/s Adani Enterprises v. UCM Coal Company and Ors.) whereby the objections of the petitioners were dismissed. The said execution proceedings were initiated by respondent no.1 for execution of the interim award dated 31.01.2017. 2. As the facts and issues are same and the parties are also same, both the petitions are being decided together by this common judgment. 3. For the sake of brevity, facts of Writ Petition being Matters Under Article 227 No.6089 of 2025 are being recorded for deciding the matters. FACTS OF THE CASE : 4. Ministry of Coal invited bids for allocation of coal mines and petitioner nos.1, 2 & 3 being desirous of participating applied and were allocated coal mines at Chandipada - I and Chendipada - II coal blocks at Odisha vide allocation dated 25.07.2007 (Annexure - 2). In terms of the allocation letter, the allottees were entitled to float a company for excavation and development of the coal block and in pursuance to the said provision, the petitioner nos.1, 2 & 3 formed a company known as UCM Coal Company Ltd. (hereinafter referred to as 'SPV'). The peti....
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.... award for payment of Rs. 73.94 crores which was granted in favour of respondent no.1 against respondent no.2 on 31.01.2017. Subsequently, the Arbitral Tribunal proceeded and ultimately a final award came to be passed on 20.11.2018 in favour of respondent no.1 against respondent no.2. The interim award and the final award are contained in Annexures - 8 & 9. The final award dated 20.11.2018 was challenged before the Commercial Court under Section 34 of Arbitration and Conciliation Act (hereinafter referred to as 'the Act') which was dismissed on 31.03.2023. The said order of dismissal came to be challenged before the High Court under Section 37 of the Act in an appeal being Appeal Under Section 37 of Arbitration and Conciliation Act 1996 No. - 52 of 2023. Subsequently, it bears from record that the said appeal also came to be dismissed on 23.09.2025 and SLP preferred by respondent no.2 was dismissed on 19.01.2026. 9. It also bears from record that the interim award passed in favour of respondent no.1 on 31.01.2017 was never challenged by respondent no.2 through separate objections under Section 34 and in fact, a partial payment out of the said amount awarded has also been paid by....
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.... in proceedings inter se between respondent no.1 and respondent no.2 and the petitioners were not parties. It is argued that it is well settled that an executing Court cannot go behind the decree. The Commercial Court has failed to appreciate the settled principles governing the doctrine of 'alter ego' and 'lifting of corporate veil' as well as limited scope of persons "claiming under a party" under Section 35 of the Act as well as the parameters for invoking the doctrine of 'group of companies' and has erred in directing the enforcement of the award against the petitioners who were not the parties in the arbitration agreement or the proceedings. 14. It is argued that Section 35 of the Act cannot come to the rescue to bind non-signatories to an arbitration agreement or award by invoking Section 35 of the Act as their scope, foundation and legal tests are different. The alter ego doctrine to lift or pierce the corporation veil can be applied only on satisfying the proof of alter ego. It is argued that respondent no.1 for filing the execution proceedings against the petitioners had argued that petitioner nos.1, 2 & 3 are the promoters and share holders of respondent no.2 - SPV - a....
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....go beyond it, reliance is placed upon judgment of the following judgments: Topanmal Chhotmal v. Kundomal Gangaram; AIR 1960 SC 388; Meenakshi Sadena v. ECGC Limited; (2018) 7 SCC 479; Sanwarlal Agarwal v. Ashok Kumar; (2023) 7 SCC 307; Dhanush Vir v. Dr. Ila Sharma; 2024 SCC OnLine All 3693; V.K. Uppal v. Akshay International Pvt.; 2010 SCC OnLine Del 538; Anirban Roy and Anr. v. Ram Kishna Gupta; 2017 SCC OnLine Delhi 12867 21. It is argued that the company is separate and distinct legal entity from its shareholders. It is argued that the shareholders cannot be treated as company and vice versa, and shareholders cannot be proceeded against for the liabilities of the company, except in situations recognized by law, and thus, the properties and liabilities of the company are its own and not that of the shareholders even if the shareholders hold majority of the shareholding. For the said proposition, reliance is placed upon the following judgments: Electronics Corpn. of India Ltd. v. Secy., Revenue Deptt. Govt. of A.P.; (1999) 4 SCC 458 Meekin Transmission Ltd. v. State of U.P.; 2008 SCC OnLine All 161 22. ....
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.... was made to argue that the execution of the award was barred by the provisions of the Coal Mines (Special Provisions) Act, 2015, however, as no pleadings were existing, the said argument was not pressed very fairly by learned A.S.G. and thus, did not even form a part of the written arguments. 26. Shri Vikram Nankani, learned Senior Advocate assisted by Shri Pranjal Krishna, Shri Abhishek Dwivedi and Shri Sumeet Nankani, learned counsel for respondents extensively drew my attention to the initial bids by petitioner nos.1, 2 & 3 and the events leading to allocation of coal blocks. 27. It is argued that the coal blocks were jointly allocated to petitioner nos.1, 2 & 3 who were required to carry out the mining activity and were solely to be used for the benefit of power stations owned by petitioner nos.1, 2 & 3 only. Mining leases were to be executed by petitioner nos.1, 2 & 3 and the bank guarantees were also submitted by them. It is argued that respondent no.2 was only an SPV created by petitioner nos.1, 2 & 3 for sole purpose of exploiting the coal blocks through a shareholders agreement for holding the shares in the ratio of 50%, 31.47% and 18.53% respectively by petitioner ....
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....nt petition, has been signed by the same Company Secretary. 34. It is further argued that this Court had formulated four questions of law vide its order dated 24.09.2025 in writ petition being Mattes Under Article 227 No.5333 of 2025 to be decided, however, as the issues are identical, the same are being answered collectively. 35. It is argued that the arbitral award can be executed between a party which is not party to the arbitral proceeding and the executing Court has the power to lift the corporate veil by execution of an award against non-parties. As respondent no.2 - the SPV - is nothing but an alter ego of the petitioners which is recognized both under Section 35 of the Act as well as Order XXI Rule 11 and Order XXI Rule 41 of CPC. Reliance is placed upon the judgment of the Cheran Properties Ltd. v. Kasturi & Sons; (2018) 16 SCC 413. 36. It is argued that in terms of the mandate of Order XXI Rule 11 of CPC, there is a provision for including the name of the persons against whom the execution of the decree is sought and in terms of the mandate of Order XXI Rule 41 of CPC, a decree holder has a right to apply for examination of not only the judgment debtor but also a....
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....before this Court in Indowind [Indowind Energy Ltd. v. Wescare (India) Ltd., (2010) 5 SCC 306 : (2010) 2 SCC (Civ) 397]. The present case relates to a post award situation. The enforcement of the arbitral award has been sought against the appellant on the basis that it claims under KCP and is bound by the award. Section 35 of the Arbitration and Conciliation Act, 1996 postulates that an arbitral award "shall be final and binding on the parties and persons claiming under them respectively" (emphasis supplied). The expression "claiming under", in its ordinary meaning, directs attention to the source of the right. The expression includes cases of devolution and assignment of interest (Advanced Law Lexicon by P. Ramanatha Aiyar [ 3rd Edn., Vol. I, p. 818.] ). The expression "persons claiming under them" in Section 35 widens the net of those whom the arbitral award binds. It does so by reaching out not only to the parties but to those who claim under them, as well. The expression "persons claiming under them" is a legislative recognition of the doctrine that besides the parties, an arbitral award binds every person whose capacity or position is derived from and is the same as a party to....
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....ion was not eo nomine party but interested in such right, that means the other persons i.e. Kolkata Municipal Corporation and the Commissioner of Kolkata Municipal Corporation must come under the same title as those represented by names. The reason is that, if we read the provisions of Code of Civil Procedure in a technical or a restricted sense then the difficulty would be that the persons who are really entitled to the benefits of a decree or persons who are really burdened by a decree would escape the benefit or a liability under the decree and, therefore, the decree would be in-fructuous." 44. It is reiterated by learned counsel for the respondents that from the Memorandum of Association of respondent no.2 it is clear that the same was incorporated as a vehicle for the purpose of exploiting coal for the power plant owned by the petitioners, and for their benefits, rights and entitlements and respondent no.2 has no independent business or existence of its own. The main object of the company - respondent no.2 - as per their Memorandum of Association is as under: "A. THE MAIN OBJECTS TO BE PURSUED BY THE COMPANY ON ITS INCORPORATION ARE:- 1. The Company shall ....
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....siderations of equity and fairness, which mandate disregarding an entity's separate legal identity in specified circumstances." 47. In short, it is submitted that the most crucial element of the factual matrix available on record is the complete inseparability of respondent no.2 with the petitioners. The shareholding of respondent no.2 is based on the same proportion as per the ratio of coal allocation given in the Letter of Allocation. The entire management of respondent no.2 - the SPV - are derived from the petitioners and all the key managerial positions are manned by the persons either working with the petitioners or nominated by them. The entire action on behalf of respondent no.2 and the petitioners have been carried out as a single economic entity. 48. It is argued that the broad parameters for lifting the corporate veil were laid down by a Constitution Bench of the Supreme Court in the case of Life Insurance Corporation of India v. Escorts Ltd.; (1986) 1 SCC 264, which reads as under: "90. It was submitted that the thirteen Caparo companies were thirteen companies in name only; they were but one and that one was an individual, Mr Swraj Paul. One had only ....
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....ompany has been formed to evade obligations imposed by the law, and by the courts implying in certain cases that a company is an agent or trustee for its members." In Palmer's Company Law (23rd Edn.), the present position in England is stated and the occasions when the corporate veil may be lifted have been enumerated and classified into fourteen categories. Similarly in Gower's Company Law (4th Edn.), a chapter is devoted to 'lifting the veil' and the various occasions when that may be done are discussed. In Tata Engineering and Locomotive Co. Ltd. [AIR 1965 SC 40 : (1964) 6 SCR 885] the company wanted the corporate veil to be lifted so as to sustain the maintainability of the petition, filed by the company under Article 32 of the Constitution, by treating it as one filed by the shareholders of the company. The request of the company was turned down on the ground that it was not possible to treat the company as a citizen for the purposes of Article 19. In CIT v. Sri Meenakshi Mills Ltd. [AIR 1967 SC 819 : (1967) 1 SCR 934 : (1967) 63 ITR 609] the corporate veil was lifted and evasion of income tax prevented by paying regard to the economic realities behind the leg....
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.... State or the Board have themselves lifted the corporate veil and have treated Renusagar and Hindalco as one concern and the generation in Renusagar as the own source of generation of Hindalco. In the impugned order the profits of Renusagar have been treated as the profits of Hindalco. 68. The veil on corporate personality even though not lifted sometimes, is becoming more and more transparent in modern company jurisprudence. The ghost of Salomon case [1897 AC 22] still visits frequently the hounds of Company Law but the veil has been pierced in many cases. Some of these have been noted by Justice P.B. Mukharji in the New Jurisprudence [ Tagore Law Lectures, p. 183]." 50. It is also argued that the attempt to argue on the basis of enactment of the Coal Mines Act, 2015 was untenable as the same relate to disputes between the mine developers and the prior allottees of the mine and does not address or govern the dispute inter se in between prior allottees and the subsequent allottees. 51. In the light of the said, it is argued that the petition under Art. 227 of Constitution having limited scope is liable to be dismissed. DISCUSSION : 52. Considering the submissio....
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.... for the execution of the decree, the dates of such applications and their results; (g) the amount with interest (if any) due upon the decree, or other relief granted thereby, together with particulars of any cross decree, whether passed before or after the date of the decree sought to be executed; (h) the amount of the costs (if any) awarded; (i) the name of the person against whom execution of the decree is sought; and (j) the mode in which the assistance of the Court is required whether- (i) by the delivery of any property specifically decreed; (ii) by the attachment, or by the attachment and sale, or by the sale without attachment, of any property; (iii) by the arrest and detention in prison of any person; (iv) by the appointment of a receiver; (v) otherwise, as the nature of the relief granted may require. (3) The Court to which an application is made under sub-rule (2) may require the applicant to produce a certified copy of the decree. XXX XXX XXX 36. Enforcement.-(1) Where the time for making an application to set aside the arbitral award under section 34 has expired,....
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....the said judgment, the arguments with regard to separate legal personality of the companies separate from its shareholder and director were considered after analyzing judgments in the cases starting from Aron Salomon (Pauper) v. A. Salomon & Co. Ltd.; 1897 AC 22 (HL) uptil the judgment of the Supreme Court in the case of Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 : (2012) 3 SCC (Civ) 867. The Supreme Court analyzed and crystallized, after discussing the case-laws with regard to separate legal personality of a company in Para 94, which is as under: "94. From the above discussion, we can infer that entities within a corporate group have separate legal personality, which cannot be ignored save in exceptional circumstances such as fraud. The distinction between a parent company and its subsidiary is fundamental, and cannot be easily abridged by taking recourse to economic convenience. [Bank of Tokyo Ltd. v. Karoon, 1987 AC 45 : (1986) 3 WLR 414 (CA)] Legally, the rights and liabilities of a parent company cannot be transferred to the subsidiary company, and vice versa, unless, there is a strong legal basis for doing so." 56. To that extent, there....
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....mmercial arrangements, an intent to bind someone who is not formally a signatory but has assumed the obligation to be bound by the actions of a signatory. 29. The decision in Indowind [Indowind Energy Ltd. v. Wescare (India) Ltd., (2010) 5 SCC 306 : (2010) 2 SCC (Civ) 397] arose from an application under Section 11 of the Arbitration and Conciliation Act, 1996. Indowind was not a signatory to the contract and was held not to be a party to the agreement to refer disputes to arbitration. Indowind [Indowind Energy Ltd. v. Wescare (India) Ltd., (2010) 5 SCC 306 : (2010) 2 SCC (Civ) 397] held that an application under Section 11 was not maintainable. The present case does not envisage a situation of the kind which prevailed before this Court in Indowind [Indowind Energy Ltd. v. Wescare (India) Ltd., (2010) 5 SCC 306 : (2010) 2 SCC (Civ) 397]. The present case relates to a post award situation. The enforcement of the arbitral award has been sought against the appellant on the basis that it claims under KCP and is bound by the award. Section 35 of the Arbitration and Conciliation Act, 1996 postulates that an arbitral award "shall be final and binding on the parties and persons cl....
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....isses the central facet of Section 35, which is that a person who claims under a party is bound by the award. The fact that the appellant was not a party to the arbitral proceedings will not conclude the question as to whether the award can be enforced against it on the ground that it claims under a party. Essentially, the Court is called upon to consider whether the test embodied in Section 35 is fulfilled in the present case, so as to bind the appellant. " 59. The said principle was further discussed and affirmed in the case of Cox and Kings Limited (supra) in the context of Section 35 in the following paragraphs: "145. Section 35 of the Arbitration Act provides that an arbitral award shall be final and binding on the parties and persons claiming under them respectively. In Cheran Properties [Cheran Properties Ltd. v. Kasturi & Sons Ltd., (2018) 16 SCC 413 : (2019) 1 SCC (Civ) 486], this Court rightly observed that the expression "persons claiming under them" is "a legislative recognition of the doctrine that besides the parties, an arbitral award binds every person whose capacity or position is derived from and is the same as a party to the proceedings". It was furth....
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.... through or under him" has been interpreted by the Supreme Court to hold that the arbitral award binds every person whose capacity or possession is derived from and is the same as party to the proceedings, leaves no room for interpretation that the petitioners would be persons falling within the phrase "any person claiming through or under". 62. In the present case, what emerges from the pleadings is that from the stage of shareholders agreement, all the petitioners and their officers were involved. The SPV was created in terms of the mandate of the Ministry of Coal and all the officers of petitioner nos.1, 2 & 3 were involved from the process of creation of the SPV, which was created for the sole purpose of dealing with the allocated coal. The company was created for the benefit of petitioner nos.1, 2 & 3. The Company Secretaries of petitioner no.1 and respondent no.2 are the same. Respondent no.2 is nothing but a skeletal company drawing all its funds from its three major shareholders namely petitioner nos.1, 2 & 3. In fact, the office bearers of respondent no.2 who are also the office bearers of petitioner nos.1, 2 & 3 participated before the arbitral proceedings and at all s....