ARBITRATION AND CORPORATE VEIL

It is established that the corporate veil can only be lifted in certain cases where it is necessary. Only under certain circumstances can the corporate veil be lifted. In recent times, the Court has held that an arbitrator cannot pass a judgment for a company to lift its corporate veil in their arbitration proceedings.

Sudhir Gopi v. Indira Gandhi National Open University[1] was a case where the rights of an arbitral tribunal regarding the lifting of the corporate veil have been established.

Parties:- 

In this case, the petitioner is the Chairman was UEIT (Universal Empire Institute of Technology) which has been incorporated in UAE as a limited liability company. The Respondent in this case is a university that was established under the Indira Gandhi National Open University, 1985.

Facts of the case:- 

UEIT and IGNOU agreed to collaborate for various distance learning courses and the criteria would be decided as laid down by IGNOU. The agreement was for 3 years, after which it would have been extended. It was decided that the parties would be accepting fees from the students. 

The issue arose when UEIT defaulted on the payments as claimed by IGNOU. UEIT held that students were enrolled through IGNOU from institutions that were operating unlawfully outside Trade Free Zones and due to that, UEIT suffered losses. Therefore, IGNOU revoked the agreement between the two parties and claimed that they suffered losses for which the Chairman and Managing Director of IGNOU must be held responsible. UEIT claimed that the Chairman was not a part of the agreement and that including him would lead to a misjoinder of parties. Judgment and Reasoning:- 

The Arbitral tribunal gave the judgment in favor of IGNOU and lifted the corporate veil. The judgment was given against Mr. Gopi and UEIT, joint and severally. Aggrieved by the decision of the Tribunal, the respondents approached the Bombay High Court. The Court held that an arbitral tribunal cannot pierce the corporate veil as it is against the Indian Laws which recognize a company as a juristic person and give them a separate legal identity.

The situation in India as per the powers of an arbitral tribunal concerning the lifting of the corporate veil is currently unclear and confusing. It can be seen that the judgments delivered by High Courts cannot be binding on one another and therefore, this subject lacks clarity.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.