PUBLIC INTEREST:-

Public Interest is also considered as a ground for invoking the lifting of the corporate veil and therefore, this chapter focuses on the case- State of Rajasthan & Ors. v Gotan Lime Stone Khanji Udyog Pvt. Ltd. & Ors[1].

Facts of the case:-

The Rajasthan Government had granted a mining lease for extraction of limestone to the Respondent firm. The Respondents filed an application to transfer the mining lease to a private company instead. The application was allowed since it involved no extra expenses and the Board of Directors would remain the same. Eventually, the respondent company sold all its shares to Ultra Tech Cement Limited and became a wholly-owned subsidiary. The government alleged that the share price which was approximately Rs. 160 crores were only a consideration that was given for the sale of the mining lease. The case was put forth in the Rajasthan High Court where the Court held that they would be no interference from the judiciary as a company is a juristic person. The High Court believed that the mere transfer of shares would not affect the mining lease agreement between the petitioners and the respondents. The judgment delivered was further appealed in the Supreme Court.

Judgment and Reasoning:-

The bench set aside the judgment given by the High Court. They took no notice of the lifting of the corporate veil by going through the transactions. It was established that there were two transactions. These transactions in isolation seem legal and fairly executed whereas seen as a whole, they would be considered unlawful. The Court held that the respondent had clearly and smartly transferred the mining lease to Ultra-Tech by changing the price of shares. Therefore, the transaction should be declared void as the mining lease was transferred without prior permission from the government.

The Court further believed the ground of public interest to lift the corporate veil. The ownership of mining rights was a subject matter of the state which concerns the public of the state as well. Therefore, it must regulate in accordance with the public trust doctrine.

The Indian Jurisprudence and the English Jurisprudence:-

In the landmark case of Prest v. Petrodel[2], the Supreme Court held that the doctrine of the lifting of the corporate veil has often been applied incorrectly, for vague reasons. In the case of Ben Hashem v. Ali Shayif[3], the judge held the opinion that lifting of corporate veil must be rare, and only when it is absolutely necessary. Judges believed that unless an evasion principle is clear in the case and there are no other remedies, only then the corporate veil must be lifted. 

Therefore, in England, the public interest is not considered as a ground to lift the corporate veil. The Courts have laid down certain grounds under which a company’s corporate veil can be lifted. This has been done to protect the rights of a company.

In India, the laws are more focused on balancing the rights and interests of the shareholders and other third parties that would have invested in the companies. This is in consideration of the fact that the decision of the court to lift the corporate veil would affect the third parties as well. Therefore, In India, public interest can be considered as a ground under which the corporate veil can be lifted. Although it may be evident that the application of public interest has been evoked on different explanations while citing various English case laws without the proper application. Hence, when considered, there is no precedent for the case of public interest.

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.