The Companies Act, 2013 does not provide statutory recognition to the doctrine of lifting of corporate veil. Only judicial interpretations disregard the concept of separate personality.

It is not correct to state that the Companies Act, 2013 does not provide statutory recognition to the doctrine of lifting of corporate veil and only judicial interpretation disregard the concept of separate personality. The Companies Act, 2013 itself contains some provisions in Sections 7(7), 251(1) and 339 which lift the corporate veil to reach the real forces of action. Section 7(7) of Companies Act, 2013 deals with punishment for incorporation of company by furnishing false information; Section 251(1) of Companies Act, 2013 deals with liability for making fraudulent application for removal of name of company from the register of companies and Section 339 of Companies Act, 2013 deals with liability for fraudulent conduct of business during the course of winding up. Ever since the decision in Salomon v. Salomon & Co. Ltd. , normally Courts are reluctant or at least very cautious to lift the veil of corporate personality to see the real persons behind it. Nevertheless, Courts have found it necessary to disregard the separate personality of a company in the following situations: Where the corporate veil has been used for commission of fraud or improper conduct. In such a situation, Courts have lifted the veil and looked at the realities of the situation. (Case Law: Jones vs. Lipman ) Where a corporate facade is really only an agency instrumentality. (Case Law: R.G. Films Ltd ) Where the conduct conflicts with public policy, courts lifted the corporate veil for protecting the public policy. (Case Law: Connors Bros. v. Connors ) A company will be regarded as having enemy character, if the persons having de facto control of its affairs are resident in an enemy country or, wherever they may be, are acting under instructions from or on behalf of the enemy. (Case Law: Daimler Co. Ltd. v. Continental Tyre & Rubber Co. ) Where it was found that the sole purpose for which the company was formed was to evade taxes the Court will ignore the concept of separate entity and make the individuals concerned liable to pay the taxes which they would have paid but for the formation of the company. (Case Law: Sir Dinshaw Maneckjee Petit, Vodafone case ) Avoidance of welfare legislation is as common as avoidance of taxation and the approach in considering problems arising out of such avoidance has necessarily to be the same and, therefore, where it was found that the sole purpose for the formation of the new company was to use it as a device to reduce the amount to be paid by way of bonus to workmen, the Supreme Court upheld the piercing of the veil to look at the real transaction. (Case Law: The Workmen Employed in Associated Rubber Industries Limited, Bhavnagar v. The Associated Rubber Industries Ltd., Bhavnagar and another ) Another instance of corporate veil arrived at by the Court arose in Kapila Hingorani v. State of Bihar . Where it is found that a company has abused its corporate personality for an unjust and inequitable purpose, the court would not hesitate to lift the corporate veil. Further, the corporate veil could be lifted when acts of a corporation are allegedly opposed to justice, convenience and interests of revenue or workmen or are against public interest.