Lifting the corporate veil can only be done in extraordinary circumstances and by due adjudicatory process. An executing court cannot enforce a decree against entities not mentioned in the decree unless there is evidence of fraud or improper conduct.

EA (OS) No. 340/2013

1. The above captioned petition has been filed under Section 36 of the Arbitration and Conciliation Act, 1996 for enforcing the arbitral award dated 24.07.2000 entered in favour of the Decree Holder (DH) and against the Judgment Debtor (JD) described as “Saraswathi Chemicals, Proprietors Sawaswati Leathers Chemicals (P) Ltd.”

2. This is an application filed on behalf of the DH, inter-alia, praying for amending the execution petition. Essentially, the DH seeks to implead the Directors of JD Shri Shanker Mundhra, Shri Vijay Mundhra, Shri Krishan Mundhra and Shri Arun Mundhra, all sons of Late Shri G.D. Mundhra as JD Nos. 2, 3, 4 & 5.

3. The DH alleges that the JD is essentially a concern of the Mundhra family and all sons of Late Shri G.D. Mundhra are involved in the business. It is further alleged that the DH had acted on the representations of the Late Shri G.D. Mundhra and Shri Krishan Mundhra and, consequently, Shri Krishan Mundhra and legal heirs of Late G.D. Mundhra are responsible for satisfying the arbitral award.

4. The DH has also alleges that the proposed JDs have siphoned off the assets of the JD company and, therefore, ought to be held responsible for satisfying the arbitral award.

5. Mr. Singh, the learned counsel for the petitioner submitted that the JD's description varies in several documents. He submitted that in the Stockist Agreement dated 01.08.1995, the JD was described as "M/s Saraswathi Chemicals, Partnership firm having Office at 7, Deputy Ganj, Sadar Bazar, Delhi-110006" but in other documents, M/s Saraswati Chemicals has been described as a proprietorship concern of Saraswati Leather Chemicals Pvt. Ltd. He contended that in the circumstances, the proposed JD's were the real persons behind the corporate facade.

6. It is seen that the present petition is for enforcement of the arbitral award dated 24.07.2000, which was rendered in the context of disputes that had arisen, inter-alia, in relation to the ‘Stockist Agreement’ dated 01.08.1995. A bare perusal of the said agreement indicates that M/s Saraswati Chemicals was described as partnership firm. However, this was corrected as recorded in the Minutes of the Meeting held between the parties on 15.01.1993. The relevant extract of which reads as under:-

“(6) The 6th line of the Stockist agreement, page no. 1, should be read as M/s Saraswati Chemicals (Proprietor: Saraswati Leather Chem. Pvt. Ltd.), having their office........... (Not as M/s Saraswati Chemicals, partnership firm, but as Saraswati Leather Chemicals Pvt. Ltd.).”

7. The said minutes have been produced and bear the signatures on behalf of DH. Further there is no dispute as to the genuineness of the said minutes. It is also pointed out that on 20.03.1996, the parties entered into another Stockist Agreement, where the JD was correctly described as a proprietorship concern of M/s Saraswati Leather Chemicals Private Limited.

8. It is also not disputed that all bills and invoices were raised by the DH in the name of the JD as a company and this was also true in respect of all business correspondence between the parties. It is also asserted that the statutory sales tax forms issued by the JD to the DH reflected the JD as a company and not as a firm of the proposed JDs.

9. There is no indication in the arbitral award as to the constitution or the nature of the JD's entity. However, it is not disputed that the DH had instituted the proceedings against JD as a company and not as a firm.

10. It is relevant to note that the JD had filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 before the Madras High Court and the same was disposed of by an order dated 08.04.2011. A perusal of the said order also indicates that the JD had filed the said petition as "Saraswathi Chemicals, Proprietor, Saraswathi Leather Chemicals (P) Ltd."

11. Thus, there can be no dispute that JD is a company and not a firm. It is also not the case of DH that the JD is not a private company;