The foundation of corporate governance rests on the principle that a company is a separate legal entity, distinct from its members and its shareholders offering them financial protection. Gradually, Courts realized that this ensured limited liability of individuals is often abused to achieve their selfish goals. The necessary ascent of an equitable doctrine of “piercing of corporate veil” so as to affix liabilities precisely on guilty individuals, who act under the shield of corporate form, was hence welcomed. The theory though is tightly regulated, is widely accepted since maintenance of separate existence is still a rule, which must not be broken ordinarily. This orthodoxy has been reinforced by legal authors, practitioners, jurists and legal curriculum. Such constricted view has created a disparaged usage which lacks direction and rarely conforms to logical application in certain cases.
“Reverse piercing of corporate veil” is one curious development by the American courts stretching the theory to meet more equitable needs. However, in India the term is unheard of. There has not been a single Indian case wherein a Court has inflicted a member’s personal liability on corporation assets by ‘reversely lifting’ the veil. The law is still unsettled as to how Courts should handle cases where only reverse piercing can secure justice in relevant market situations. The Article is an attempt to portray the viability of doctrine of reverse piercing which is based on an exhaustive review of judicial pronouncements. It also establishes its Contemporary relevance in the backdrop of economic advancements India is seeking to achieve. It also demonstrates some recent developments of Indian corporate law revealing that ‘reverse’ piercing is already in practice. The Authors finally seek to provide a “hybrid, more integrative approach” which may allow ‘reverse’ piercing of corporate veil to make its place in the existing legal system.
Part I: The Corporate Veil: Rule That Must Not Be Broken
The company is considered as an entity distinct from its members as an artificial person, hence enjoying and responsible for all the rights and duties arising as a consequence of law. Thus, the company is neither an agent nor a trustee of its members and hence they are not liable for the acts of each other, in any shape or form, except those as provided by the statute governing the corporate. That means, the company after incorporation is not liable for any act or omission of the members or shareholders and vice versa. This protection or shell between the company and its members/shareholders is known as the ‘corporate veil’ in legal context.
This idea of corporate veil is not new to corporate governance. As early as in the year 1897 the case of Salomon v. Salomon & Co. Ltd. the House of Lords unanimously propounded that a validly constituted company is distinct from its shareholders. This case has served as the authority for courts and legislatures around the world to form the foundation of corporate law which provides a separate identity to such incorporated associations independent of its shareholders or members. It must be noted that, even before the famous Solomon’s case, the first case on this subject was that of In Re., Kondoli Tea Co. Ltd wherein the Calcutta High Court rejected the plea of the shareholders for exemption from the ad valorem duty. The Hon’ble Court observed that the Company was a separate body altogether from its shareholders and hence, the transfer of tea estate to shareholders had been as if they were totally different persons. Hence, even though a shareholder owns all the shares of the company, the business of the company does not become his until the company is treated as an agent of that sole shareholder. The shareholder must be differentiated from the company. Such was a holding in the famous case of Macaura v. Northern Assurance Co. Ltd..
As a result of this veil distinguishing the corporate from its members, the former enjoys various rights primarily the right to sue, or be sued in its own name; the constitutional right to own property under Article 300A of the Indian Constitution. It is to be noted that the company is yet not a citizen according to Article 5 of Indian Constitution and Indian Citizenship Act of 1955. Hence, the Company cannot enjoy any Fundamental Right granted to citizens as under Article 19, etc. though there is a scope for the Company to avail rights granted under Article 14 which provides for right to equality and equality before law to any person. Furthermore, Right to life under Article 21 of the Constitution is also available to body corporate as per the ruling of Supreme Court in Chitranjital v. Union of India since every ‘person’ is entitled to the same and every company is a legal person.
The Authors acknowledge these legal consequences of an incorporated Company as something wherein the “doctrine of harmonious construction” is on its work. Since the law has struggled to grant a distinct ‘corpus’ and identity to the companies incorporated, while on the other hand it works to strike a balance between the entitlements to natural and artificial persons. The law has been harmonized between the conflicting effects of assigning separate identity, while restricting the availability of rights to such artificial bodies. The Authors illustrate the statement made as follows: Article 19(1)(g) of the Indian Constitution entitles every citizen a right to freedom of trade, commerce and business. It has been expounded in judgments like Bennet Coleman Co. v. Union of India that such rights are not available to the corporate but these rights are not lost for the Indian shareholders if they associate to form a Company. The reason the Hon’ble Court advances is that the shareholders’ rights are equally and necessarily affected if the rights of the company is affected. In this context, the Authors point out that though textually these fundamental rights are not secured to the companies; pragmatically such rights must be made available to them because a company is numb without its shareholders, members, etc. to operationalize it. It is inevitable that a company’s rights are curbed without affecting the same of the shareholders/members. Thus, the provisions of the Constitution are harmoniously interpreted with the provisions of statutory law so as to attain justice for all.
Part II: Piercing of Corporate Veil: An Equitable Exception
This corporate veil has been held to be maintained in all circumstances as a general rule, rather than those extraordinary situations which justify the lifting or piercing of this veil to affix the liability on the exact members/shareholders guilty of their misdoings. This suggests that the corporate veil is not impermeable or unbreakable to protect the innocent parties connected to an act or omission. The Courts across the globe and even in India has time and again acknowledged that there are certain situations that require the lifting of corporate veil for achieving the ends of justice. Thus, in other words, piercing of corporate veil refers to the liability imposed by the Courts on those persons who are actually guilty of the wrongful act or omission under the garb of corporation. The two main reasons for allowing such an exception to the rule are:
- Firstly, since the corporation is an artificial person, it cannot be treated like any other independent natural person, as highlighted above. It is numb and powerless without its members. For an instance, the company cannot be said to have mens rea or motive to commit a tort for appending liability. The Court must determine the intention of the persons involved in such commissions;
- Secondly, in the interest of justice and public policy, it is necessary for the Courts to adopt a flexible approach as the circumstances demand. The wrongdoers cannot be allowed to shroud themselves behind the covers of corporate veil and continue exploiting it for their interests.
The piercing of corporate veil is governed by various theories, which shall be elaborated by the Authors as follows. These theories have, according to Justice Cardozo, deteriorated to the “status of metaphors”. Such most commonly advanced theories are theory of agency, instrumentality, identity or alter ego and inequitable use of corporate form. It is to be noted that though there are such varieties of theory, they bear a number of similarities, and hence works on the generally accepted rule that, “the party seeking to pierce the corporate veil must satisfy the two prong test:
- There be such unity of interest and ownership that the separate personalities of the company and individual (member/shareholder) do not exist, and
- That if the impugned acts are treated of the corporation alone, then an inequitable result shall follow.”
This test is strictly applied by the courts in order to ensure that the peculiar fact of the case make out a sufficient ground for the piercing of corporate veil. Otherwise the very basis of the corporate law will be shaken at the interest of parties by way of wangling. This rule is generally referred to as the “traditional corporate veil piercing theory”. The Authors shall now proceed to elaborate the traditional piercing with reference to various relevant case laws:
Case 1: Gilford Motor Company v. Horne
In the instant case, the ex-employee of Gilford Co. was bound by his contract that he could not solicit the customers of the company. In order to defeat this provision, he incorporated a company in the name of his wife and started soliciting the customers of that company. The Court of Appeal viewed the second company in Mr. Horne’s wife’s name as a mere device or sham. The main purpose of incorporating the company was to perpetuate fraud. Hence, the Court lifted the corporate veil on that ground. The Authors find the case a welcome under the theory of ‘instrumentality’ for perpetuating fraud. Other cases include the case of Jones v. Lipman against such abuse of corporate form. The Court has time and again warranted that whenever such abuse occurs, the Courts are not powerless and hence, must step in. hence, the Court also allowed the specific performance both against Mr. Lipman and the Company. Mr. Lipman was charged since he had worn a mask before his face to avoid the “eye of equity”. Hence, any such abuse of form shall compel the Courts to remove the veil and charge the ones involved.
Case 2: Ben Hashem v. Ali Shayif
In essence this case was matrimonial dispute before the England and Wales High Court, the facts of which bear astounding similarities to Prest the circumstances required an in depth discourse on piercing the corporate veil. There emerged six famous tests regarding any piercing (traditional or reverse) of the corporate veil which have now crystallized themselves in English and Indian law emanating from the judgment being;
- Ownership and control are not in themselves sufficient for the court’s satisfaction to pierce the corporate veil.
- Even in the absence unconnected third party interest, piercing may only take place because it is necessary in the interests of justice.
- The veil may only be pierced if impropriety in usage is proved.
- The impropriety must be in the usage of corporate form and not impropriety per se.
- Control by the wrongdoer does not suffice in isolation, impropriety must be established simultaneously.
- Even though a mere façade later on, it may be the case that a company may be originally incorporated without deceptive intent; this is not sufficient in defense of the corporation from piercing.
Case 3: Balwant Rai Saluja v. Air India Ltd. & Ors.
In this case, the appellant-canteen workmen sought to pierce the corporate veil between the parent Air India Ltd. and its wholly owned subsidiary Hotels Corporation of India Ltd. The Supreme Court rejected the appeal. It relied on ‘complete administrative control’ to be a proper test for the piercing of corporate veil. According to the Authors, such a test is still questionable. The court has itself emphasized that mere ownership and control does not justify the piercing. The Authors submit that even when there’s absolute control over the management of another company, it should not be the sole criteria for the piercing of corporate veil. Cases like Ben Hashem v. Ali Shayif and Life Insurance Corpn. of India v. Escorts Ltd. it has been reiterated by the Courts that the piercing of corporate veil must be rarely exercised, and that too only when justice demands it. It is to be noted that, the piercing of corporate veil being still a phenomenon rarely applied in India is still a newbie practice with a number of inadequacies that shall be highlighted further.
Case 4: Vodafone International Holdings B.V. v. Union of India & Ors.
In the instant case, the Supreme Court acknowledged that the corporate veil can be disregarded and lifted in the cases of tax evasions or liberal schemes of tax avoidance without any legislative authority. The Hon’ble Court warned the difference between tax avoidance and tax planning, hence withdrew from piercing the corporate veil against Vodafone International Holdings B.V. on a transaction of acquisition of CGP Investments (Holdings) Ltd. The Revenue sought to tax the capital gains from such sale of CGP that had underlying assets in India. The Revenue claimed that the HTML based in Mauritius was a mere agent of the VIH and hence the corporate veil must be pierced to tax the original gainers. The Court took into account the context of transactions and referred to the transaction coming under FDI to be considered as a whole and not in isolated parts. The Court also referred to the principle of internal correlation and grouping enterprises wherein the tax legislations can lift the corporate veil if the same is sham, fraud or tax avoidant. However, a strategic tax planning has not been ruled as a ground for lifting the corporate veil.
The Authors analyzed that the case reflected upon the transaction in the light of prevailing practices to enter Indian market, the Direct Taxes Code in India, throwing light upon the General Anti Avoidance Rules (GAAR) that shall make the lifting of corporate veil simpler, and even the motives of the corporation owners while making such transactions. This goes to show that the ground for piercing the corporate veil has been narrowly construed so as to limit the practice of piercing by the tax authorities. Authors found that the Court had alerted the tax authorities that by ignoring the existence of multiple parties separating the entities and ascribing the motive of purchase of shares of a company as an acquisition of the company as a whole is a very wide interpretation which is both undesirable and unjust. Hence, the Court had refused to pierce the corporate veil since there was no agency involved nor group enterprises created to avoid taxes.
Apart from the judicial action to lift corporate veil in appropriate cases, there are various statutory provisions under the Companies Act, 2013 that authorize the lifting of corporate veil. These primarily include:
- Section 45 of the Act: when the statutory minimum number of the company members (seven members in public and two in case of private companies, respectively) is reduced below the said requirement.
- Section 147 (4) of the Act that provides that in cases where an officer of the Company has improperly used its name in any negotiable instrument, then such officer can be made personally liable for the same.
- Section 542 of the Act provides for cases of fraudulent conduct of business that may be identified during the liquidation proceedings. Any such involved person of the Company can be made personally liable for the same without any limit.
It is to be noted that there are various other provisions under Company law that makes the lifting of corporate veil permissible in the given circumstances such as under Sections 34 and 35 of the Act for misstatement in prospectus. The Authors submit that the statute itself has the provisions for piercing the corporate veil only and no such mechanism has been envisaged for reverse piercing under the statute. This marks the start of the Article’s focus on the unemployed phenomenon of “reverse piercing of corporate veil” in India.
Part III: Reverse Piercing of Corporate Veil: Disparaged & Unsettled
Reverse piercing of corporate veil is just an antithesis to the traditional piercing of corporate veil as discussed hereinabove. Therefore, this concept refers to the liability imposed on the corporation for the acts or omissions of the individual’s (member’s or shareholders) obligation. That means, the reverse situation of corporate veil lifting refers to ‘reverse piercing’ since in this case, the creditor of the shareholder/member tries to make the corporation liable for his debts as opposed to the more familiar “forward corporate veil piercing” applied by Courts to hold the individual members liable for company’s debts. It is to be mentioned that the reverse piercing is applied by Courts based on the same test as that of the traditional veil piercing. In 1992 the first time the New York Court held that the piercing the corporate veil in reverse is permissible.
It is pertinent to mention as to why reverse piercing has emerged an important principle recently in corporate governance in the States of Florida, etc. in United States. It is argued that its importance arises in varied complex situations. One such situation is, if the creditor of the shareholder is not allowed to reverse pierce then his claim would only depend on the personal ability of the person to pay back, which in turn also depends on the amount received by him from the company. However, the reverse piercing is still controversial in situations when there are multiple shareholders of the company or in those situations when the creditors are given the higher pedestal, like that of corporation’s creditors, which they normally would not have. As a result, the reverse piercing is less universally accepted than the traditional veil piercing.
There are two types of reverse piercing, namely ‘inside’ and ‘outside’ veil piercing, depending on the status of parties who seek to reverse pierce the veil. Thus, the inside piercing is done by the corporation owners or insiders to take advantage of the corporation claims that they could not take in their individual capacity. While outside piercing is done by the third parties to satisfy his debts as is illustrated in the above example of a shareholder’s creditor’s attempt to affix liability on the corporation assets for individual debt satisfaction. The Authors suggest that while ‘outside reverse piercing’ should not be the normal rule, but the same must be applied in times when it is the only resort to ensure justice. In other words, we submit that the outside reverse piercing must be allowed when the Court is satisfied that other methods are insufficient or unsuitable to the case. Inside piercing has been rejected because corporation owners cannot have it “both the ways” which will be discussed by the Authors in later section of the Article.
Hence, reverse piercing is primarily an American term and concept emerging out of the laws pronounced in a few states of the USA. In English Law, the term is unheard of, but it seems that instances where in effect, reverse piercing seemed to have been invoked are present. Notably in cases where the assets of a company are claimed in marital disputes, one spouse having interests therein, or being the equitable owner. In the USA too, the doctrine seems to have primarily emerged from matrimonial disputes. The Authors shall now proceed to discuss the reverse piercing both inside and outside with reference to relevant case laws to establish that the reverse pierce theory is one of growing in use in contemporary corporate environment:
Case 1: Kingston Dry Dock Co. v. Lake Champlain Transportation Co.:
The concept of reverse pierce first came up in this case, though Justice Hand did not explicitly use the term in his judgment. In the instant case, the K Co. had repaired some of the boats of the subsidiary of Lake Co. The agreement was entered into by the Lake Co. itself, which defaulted in making payments to the K Co., who in turn attached Lake Co’s boats for the satisfaction of its payment. The trial court allowed the same, however Justice Hand reversed the reverse piercing on the reasoning that such situations where the subsidiaries are liable for the default of parent companies must be rare. This greatly limited the scope of reverse corporate veil lifting for about 30 years.
The doctrine finally re-emerged in W.G. Platts, Inc. v. Platts, wherein the Washington Court allowed the plaintiff wife to reverse pierce the corporate veil by imposing the liability on corporation to satisfy her share of assets per their divorce decree. The Court held that such reverse pierce was permissible since the corporation was an alter-ego and to deny the wife to do so “would be unconscionable and denial of justice”. Two years later following the Platts case, a Colorado Court in Shamrock Oil & Gas v. Ethridge, wherein the creditor of a corporation owner possessed an unsatisfied judgment in his favor. The Court allowed the creditor to reverse pierce and attach the main asset, an oil drilling rig, of the corporation, since it was found that it was a mere dummy of the corporation owner who diverted all his assets to the company and usually immixed funds. Quoting the relevant emphasis of the Court, “the abstraction of corporate entity should never be allowed to bar our and pervert the real and obvious truth.”
The Authors find that there was a very wide interpretation of the reverse piercing of corporate veil in the Shamrock case. The case is also a proof of the fact that the Courts rely on the same test as that of traditional piercing. The Court has emphasized that the reverse piercing is not prohibited when such circumstances exist.
Case 2: G.M. Leasing Corporation v. United States:
The Authors have also found that there is least resistance presented by the Courts when reverse piercing is sought by the government. In the instant case, the Court allowed the reverse piercing of corporate veil even where the individual was not even a director, owner or incorporator of the Company, on the grounds that the person is an equitable owner of the Company. Another instance in the case Valley Finance Inc. v. United States further strengthens the recognition to the practice of reverse piercing by the government. The Court stressed that the inability of the government to recover taxes or legitimate tax debts is a “sound ground for reverse piercing of corporate veil”. It is pertinent to point that the practice is an accepted one for tax authorities especially in United Kingdom and United States to recover the taxes.
The Authors submit that the GAAR as referred under the Vodafone I.H. case hereinabove, is also intended to provide a simpler path to the tax authorities to pierce the corporate veil, read with the Direct Tax Code to be introduced in India. It is submitted that in the contemporary market scenarios, it is not inevitable n the light of the referred United States cases that India will also be on the similar path of easier reverse piercing by the tax authorities in near future, especially under Foreign Direct Investments. However it is submitted that, this practice renders the concept of corporate veil pretty unpredictable from the investors’ standpoint.
Case 3: William G. Schwab v. Damenti’s Inc. & Ors.:
The Pennsylvanian Bankruptcy Court had an opportunity to deal with the claims of the Plaintiff-trustee to first pierce the corporate veil by making shareholders liable for the debt of the company (LMcD), and subsequently, reverse pierce the corporate veil to make another company (Damenti’s) of the shareholders liable for shareholders’ debt for LMcD. The Court held that for reverse piercing the corporate veil the same factors are taken into account that of forward piercing. However, the plea of the trustee for piercing, both reverse and traditional, was rejected by the Court. It found that there was no evidence to prove either that there was commingling of funds, or undercapitalization, or perpetuation of fraud, or failure to follow corporate formalities, or applicability of the single entity theory. The Court categorically found that though there was an interchangeability of identities between the shareholders and Companies in their dealings; it is insufficient to prove that they were single entities. Hence, it kept upright the separate legal existence of both the companies from their shareholders.
The Authors upon analysis found that the Pennsylvanian Courts have rejected the reverse piercing of corporate veil in majority of its cases. Even the instant case is a fine example of the same. It was also concluded that though both the concepts of piercing have the same tests to be satisfied namely, fraud, commingling of funds, corporate formalities, etc. their acceptability vary greatly viz., traditional upheld and reverse refused on various grounds. However, it is submitted that such approach of the Courts is devoid of market realities today. Though reverse piercing has a tendency to be used in “both ways” by the incorporators, it cannot be ousted from corporate governance in totality. The Damenti’s Inc. case above has relied on the availability of evidence in this regard for deciding the piercing issue. It is submitted that the Court’s demeanor was definitely correct in taking up the issue however, it is warned that the rejection of piercing of corporate veil is very subjective and depends on the evidence in a case. Hence, we suggest that there have been many instances where the reverse piercing becomes really important in other cases. The legal professionals must not follow the cases rejecting or upholding the piercing blindly and must seek ways to achieve justice for concerned parties.
Case 4: C.F. Trust Inc. v. First Flight Ltd. Partnership:
In the instant Virginian case, two judgment creditors sought to collect their debts on judgments from the corporate entity, claiming it to be the alter ego of the individual-debtor. The Court allowed the reverse piercing by stating that the Virginian law allows the same as it treats the dominant owner as same as the corporation itself under the “alter-ego” doctrine as practiced under the traditional corporate veil piercing theory. Therefore, the creditors could reach the assets of the company by reverse piercing. It also relied on the proposition laid in the case Fox v. Fox, that the separate legal existence has to be protected for economic growth, and when that form is abused by individuals to escape the existing liabilities, the court may disregard this legal fiction either in reverse or traditional way of piercing. In that case, the husband had created the company and diverted his assets so as to escape his post-marital obligations. The court allowed the wife to reach the assets of the corporation of the husband pronouncing the aforesaid line of reasoning.
Thus, the reverse piercing is not a problem in Virginia as per the referred decisions. The Authors find that these cases tend to ease the evoking of reverse piercing as much as that of traditional piercing, unlike other States in the United States. It is also concluded that the “alter-ego” doctrine is nearer to reverse piercing than any other mode because of the fact that in such cases, there are least harm done to the other shareholders or members or creditors. That’s the reason how Virginian courts gave a liberal handling to the reverse piercing on being satisfied of the alter-ego allegations of the plaintiffs. Nevertheless, the other factors except the alter-ego doctrine are no less to invoke its application provided that inequitable results follow from abstaining from reverse pierce.
Case 5: Prest v. Petrodel Resources Ltd.:
The ruling in this case has quickly become the back-bone of present day view on corporate structures and especially on piercing of the corporate veil in general. The Supreme Court of India in its detailed discussion on the piercing of corporate veil had relied heavily on this judgment in Balwant Rai Saluja’s case. Its factual matrix is simple and straightforward, that as per UK family law (s.24 of the Matrimonial Clauses Act, 1973) the wife was entitled to certain sums of money which she sought to recover out of the properties incidentally in the name of the husband’s company. This required a ‘piercing’ of the veil separating the husband and the company, the wife alleging that the company was under complete control of the husband and no one else as was in the case of Ben Hashem. The trial ended in the Court piercing the veil under the said section 24 of the Act. The Court of Appeal however allowed the appeal filed by the companies, presenting an elaborate discourse on the law relating to the corporate veil and its piercing, holding that mere control and administration over the assets of the company is not a reason enough for the courts to go about with piercing the corporate veil. It was important to establish the impropriety of the usage of such interposition of corporate form as an evasive means by the husband, meaning that the husband had knowingly engaged the property under the company’s name to evade his post-marital liabilities. When the matter had reached the Supreme Court, the final verdict on the matter was that piercing was not required in this case, that the husband was actually entitled by means of a special trust and hence the matrimonial itself had the effect of transferring half the husband’s property to the wife.
A full bench of the UK Supreme Court heard the matter, Lady Hale recognized that this indeed was a case converse of the common element of such cases which generally is “that the separate legal personality is being disregarded in order to obtain a remedy against someone other than the company in respect of a liability which would otherwise be that of the company alone (if it existed at all)“. This emphasizes that even English Common Law recognized that the ‘traditional’ way of piercing is not the only exception to the separate legal entity doctrine. Sumptious L. attributed the basic need of the principle is to curb the abuse of rights in Civil law, whereas in Common law he found best the reasoning behind the principle in Lord Denning’s famous ‘Fraud unravels everything’ rule. Hence, his disposition on the matter unravelled the core of the principle which is on the bases of any abuse of rights or anything done which amounts to fraud.
To Neuberger L. it seemed clear that even in other Commonwealth countries such as Australia there seemed to be little juristic consensus, to him ” there is no common, unifying principle, which underlies the occasional decision of courts to pierce the corporate veil”. Same is the case with New Zealand, Canada, and South Africa. But most notably Walker L, concluded with these words: “for my part I consider that ‘piercing the corporate veil’ is not a doctrine at all… It is simply a label… to describe the disparate occasions on which some rule of law produces apparent exceptions to the principle of the separate juristic personality of a body corporate… These may result from a statutory provision or from joint liability in tort, or from the law of unjust enrichment, or from principles of equity and the law of trusts…”
To the Authors the ruling very justly has established that the concept of ‘piercing of corporate veil’ is not strait-jacketed in its application although it may be concerned to qualifications in terms of procedure. It is a matter of interpretation as to the direction of the ‘pierce’ as long as it stays true to its core principle, as per the Authors, the courts have not disregarded reverse piercing. Rather if in this case if the husband had made transfers of property to his company particularly to evade his liability, the case for piercing would definitely have been made out as per the ruling laid down.
Case 6: Lorcom Thirteen (P) Ltd. v. Zurich Insurance Co. South Africa Ltd.:
This case of 2013 is one of the most recent and relevant examples of the contemporary necessity of applying reverse piercing of corporate veil. In the instant matter, L insured the ship vessel (“Buccaneer”), hull equipment and machinery against sea perils. The vessel sunk on one of the covered grounds and L claimed total amount from the Insurance Company. Moreover, L was the sole shareholder of the Company and was under factual expectation (though not a legal right) of the same. The Insurer argued that the asset vested in the company and hence, there was no insurable interest on the part of the shareholder. Declining the plea and applying reverse piercing, Rogers J. held that a cent percent holding in a company rationally gives a sufficient right to the shareholder to insure the assets of the corporation in his personal capacity. Hence, the South African High Court granted the claims of L by reversely lifting the corporate veil. Recognizing the impact of loss to assets especially in pecuniary terms to shareholders, similar was a holding by the Missouri Court of Appeals in Jam Inc. v. Nautilus Insurance Co.
It is submitted that the instant case has similarity with the landmark case of Macaura v. Northern Assurance Co. Ltd. which shall be analyzed in the next section of the Article to show that reverse piercing could have been a more straightforward path to justice. Furthermore, the Authors point out that this South African case is another illustration to the proximity between the alter-ego doctrine and reverse piercing. It is submitted that corporate law around the world is dynamic in nature and cannot be made a standstill, clinging to obsolete concepts blindly. Even in a case of Supreme Court of Canada, Constitution Institution of Canada v. Kosmopoulos, wherein a person K had converted his business into a company and became its sole shareholder while retaining the insurance of assets of the company in his own name. On a subsequent loss, K was allowed indemnification by the Supreme Court. It held that, “the rule of indemnity was better served by the notion of an interest wider than the rule laid down in the Macaura’s case since the latter is too restrictive of legitimate insurance”. Therefore, we can conclude that the Courts of America and South Africa have been constantly alert of the changing commercial situation and acknowledging at the same time that business environment is too busy to keep clinging to erstwhile concepts without application of facts and mind to them.
Case 7: Floyd v. Internal Revenue Service of the USA:
In the instant case, one Thomas was indebted to three parties namely the IRS, the State of Kansas and the Floyd, the private judgment creditors (plaintiffs). The government recovered the amount by invoking the “outside reverse piercing theory of corporate veil”. Floyd urged to reject this reverse piercing and the Court accepted the plea of Floyd on two reasons, that the theory shunts the normal debt collection processes and that there is a possibility of prejudice against the third parties such as the other shareholders of the corporation who is sought to make payment for the debts of liable shareholders. It held after referring to Hamilton v. Hamilton Properties Corpn., that the reverse piercing was “an aberration which if invoked would result in prejudice against innocent creditors of the corporation who dealt with it on the basis of separate legal entity.” Hence, the reverse piercing was rejected in the instant case.
The Authors submit that on the reading of the judgment, it is found that the instant Court again found itself bound by the Supreme Court of Kansas which in turn had laid no proposition of law that reverse piercing was acceptable in the State hence the Federal court could not reinforce the step of the District court on reverse piercing. Moreover, the Court pondered the unjust harms to the corporation creditors who believe that their debts to the company are secured by assets or otherwise of the corporation. It is submitted that the Court considered the likelihood of reduction in the credit raising ability of companies by allowing outsider reverse piercing of corporate veil.
We concede that the reasoning of the Courts is truly correct yet regard must be given to the “equitable status” of the “reverse piercing doctrine”. The Authors acknowledge the possible apprehensions of the Courts, but it is submitted that similar apprehensions rested at the rise of the “traditional theory” of piercing as well. We submit that the current corporate climate has become a complex structure and it has become increasingly difficult for the courts to administer justice without any uniform code or law or rule in this respect. We suggest that there is no harm in considering the following three elements before applying the reverse piercing doctrine –
- The degree of identity between the shareholder/member/corporate officer and the corporation by taking into account the ‘alter ego’, or ‘agency’ or ‘instrumentality’ doctrines.
- Public policy by considering any fraudulent or illegal intent or conduct, and that whether a pierce would harm other innocent parties by using the cost-benefit analysis;
- That whether any other remedy can be sought to rectify or solve the situation or not. If not, then this equitable doctrine must be invoked to promote justice.
The Authors intend to name the above mentioned test as a “Hybrid approach/test” since it integrates all the necessary implications of the commercial cases vital for a decisive and precise examination. It is submitted that the Authors suggest that the above three elements must exist simultaneously before applying the reverse pierce. Any factor absent in a case would then build a strong negative case against the party seeking the reverse pierce. The above has been recommended by the Authors, taking into account the discernments of various Courts in rejecting the reverse piercing doctrine of corporate veil. The Authors shall deal with the efficiency of proposed “Hybrid approach” in the next section of the Article under “Scope of Applicability in India”.
It seems that recent rulings in India regarding the lifting of corporate veil have only paid lip service to the concept. Generally the High courts have relied on the test that whether the company was a fraudulent front or a mere sham and have failed to probe beyond the test of control practised over the company in terms of shares. Only in rare instances before the Supreme Court has lifting of corporate veil found deserved spot light. In Balwant Rai Saluja’s case the Court has discussed the rule in depth and has adopted a method similar to that laid in Prest, stating it should apply to scenarios wherein “it is evident that the company was a mere camouflage or sham deliberately created by the persons exercising control over the said company for the purpose of avoiding liability.” This is in essence wider in application than English Law for what is a ‘sham’ is a question of reality whether legal or economic. This provides scope for the applicability of the Reverse piercing of corporate veil in as much as any other procedure of piercing the corporate veil as an exception to the separate legal entity doctrine.
Part IV: Scope of Applicability of Reverse Piercing in India & Proposed ‘Hybrid Test’
Keeping in mind the findings from the above analysis; ‘piercing of corporate veil’ in ‘reverse’ and generally must logically co-exist with the separate legal entity doctrine. There are a plethora of situations where its application furthers the cause of justice and provides equitable outcomes. These situations may also be applied while viewing classical cases from a different perspective as well. For example, in hindsight, reference may be made to the Macuara v. Northern Assurance Co. Ltd., in which the significant contribution to the ‘separate legal entity doctrine’ was made by the Court.
In the Macaura’s case, M was a creditor as well as a sole shareholder of the Company. The only asset of the Company was a licence to cut timber on M’s land. The timber had been taken away by the Company with some of them still lying at M’s land i.e. in his possession. M sought to insure the said timber against the fire. Later, a fire broke out and damaged the entire timber. On a claim against the insurance company, the matter went before the Court. The House of Lords held that, the insurance was against the loss or damage to the plantation of the Company, but the shares of the shareholder M was not exposed to such risk. Hence, their Lordships rejected the appeal of M and held that the asset belonged too the Company alone and M had no insurable interest. This case laid the basis of “separate legal existence” of the Company as a rule which must not be done away in any circumstance.
However, it is to be noted that the facts of the case may suggest that ‘equitable interest’ would require that logically the company to be seen as a mere ‘alter-ego’ of M, he being the sole shareholder and creditor of the Company. It is submitted that if the concept of ‘piercing of the corporate veil’ had been advanced at the time, the Court surely would have come up with a different holding. This, to the Authors would make a case of “inside reverse piercing”. In the 21st century, there have been advancements and incidents which prefer this course. We seek to establish the same with a similar scenario as in Macaura’s case. Since M was a sole shareholder and creditor of the company, he would be the most affected person with any loss incurred by it. In the contemporary commercial environment, where investors and corporation owners are encouraged to do business, it is neither desirable nor affordable to allow such a strict adherence to the maintenance of separate legal identity of the corporation and overlook the necessity of applying the reverse pierce in the case. Thus, it is argued that reverse piercing equitably takes into account the balancing of relevant interests, much needed to ensure justice, faith and stability in the system. It is pertinent to point out that the effect of Macaura’s case on insurable interest has also been criticized. If reference is made to Sections 16 and 17 of the Australian Insurance Contract Act, 1984 it is found that scope of insurable interest has been widened since a restrictive approach as in Macaura’s rule “was seen to result in injustice in certain circumstances”. This substantial reform was recommended and later applied by the Australia Law Reform Commission quoting Macaura’s case as one such circumstance.
The Indian scenario requires it to be analyzed in both how the courts have applied the concept so far and also the prospect that the approach holds in the context of present Indian context as a matter of contemporary economic reality and legal implications. As highlighted above, Balwant Rai Saluja case summarises that, in essence a wider application has been made in India than English Law providing scope for the applicability of the reverse piercing of corporate veil as an exception to the separate legal entity doctrine. Hence, preponderance over the issues which are being raised, and also hypothetical situations which might rise up is imminent.
A. Emulating the Reverse Pierce: Application & Consequences of Proposed Hybrid Approach–
In the dearth of actual case law and materials regarding reverse piercing, it must still be possible to sift and weight its pros and cons through examples and hypothetical situations. As it has already been established that there is no distinction in reverse and traditional piercing when it comes to procedure, hence all tests applied to traditional veil piercing apply to this concept as well. The reverse pierce, like the traditional pierce, requires the courts to use this power sparingly and only in cases where alternative remedies are unavailable or already exhausted.
- Degree of Identity–
This is significant for a court to observe as it is the foremost prerequisite of the various tests including the “hybrid approach”. A person seeking to pierce the corporate veil in reverse must satisfy the court with significant factual showing of the degree of identity between the owner and company, which is highly subjective. The modern corporation is quite complex and classical cases may not apply to the ‘economic reality of the modern marketplace’. The interests of the owner and corporation are bound to meet, more predominantly now the interests of the parent company and the subsidiary too for that matter are bound in the same direction. It must now be pertinent to visualize the various ways this situation may arise through examples:
Example (a) – Suppose a person X is running a sports equipment store and forms a private company G Pvt. Ltd. dealing exclusively in the wholesale of Gym equipments; the board of directors appointed for the company are his/her sibling and a relative who had provided funds to X in exchange of which they are offered this post. The shares are split between only the two directors.
Suppose a Judgment Creditor is seeking to pierce the corporate veil and hold G Pvt. Ltd. liable for the acts X; X has turned insolvent by this time. This shall be a case of reverse piercing of the corporate veil. The Judgment Creditor’s action has stemmed not out of some case where law already envisaging a remedy against company’s assets like the specific relief but say is special damages arising out of say, a tort. X’s dealings with the corporation are important in determining whether the situations satisfy a court to pierce the veil.
The nature of the case is such that there are rarely any meetings held; the directors do not attend them and have not received any dividend as shareholders. X conducted business in the company’s name, has purchased a sedan and a studio apartment in the name of company yet only for personal usage. X also uses its funds for dispensing with personal expenses. These factors contribute to the fact that there is a great degree of unity in the economic interest of X and G Pvt. Ltd., that all funds seem to be for the sole purpose of X. G Pvt. Ltd. is indeed an ‘alter ego’ of X and after other considerations (for which this example shall again be considered) the reverse piercing may be permitted for the interests of the Judgment Creditor.
Example (b) – Suppose a new legislation by the Parliament of India is passed in furtherance of the policy to promote resource exploration, an exemption is provided to mining companies having mining rights from government through leases or otherwise from being subjected to damage claims from third parties when incurred in course of the contract. Secondary Ltd. is a company made party to certain claims by locals which fall in such category. However, Secondary is a wholly owned subsidiary of Primary Ltd., and it is Primary who entered into the contract with the Government. Secondary seeks to reverse pierce the corporate veil to claim exemption under the said legislation which would only grant exemption to Primary.
In one scenario, almost 90% of the revenue generated by Secondary is through the services provided to Primary. Under the present contract, all mines of Primary were set-up and operated by Secondary. Secondary’s CEO is a former high level employee of Primary and also a member of Primary’s Board of Directors. Most of Secondary’s Directors are former employees of Primary, and several other key employees transferred from Primary to Secondary. The relationship is one of far-reaching reciprocity between them; this creates doubt as to the free will of Secondary’s Corporate Structure. There is a great degree of identity between the two companies and this satisfies the first test of reverse piercing of corporate veil. In another scenario, presume that as a subsidiary, Secondary is only recently acquired, and the extent of Primary’s control over it is much more limited, Secondary maintains a fairly independent management structure and is free to associate in other markets as it wills. This would result in the company to fail the degree of identity test to reverse pierce.
Hence, as is evident the ‘degree of identity test’ requires the claimant to prove satisfactorily that the two entities are so greatly intertwined in matters of economic interests or control that it may be safe to say that in reality they are one and the same. The Supreme Court in Balwant Raicase had analyzed the Articles of Association of the Hotels Corporation of India Ltd., to determine whether one was the alter-ego of Air India Ltd., or a mere corporate interposition to evade certain liability. It is clear that this is a subjective test, which shall most definitely develop only with the passage of time.
- Public Policy and Equitable Considerations –
Standing authorities on the subject agree that piercing of corporate veil is an equitable doctrine. The most oft-cited of critiques of reverse piercing in America is that it affects innocent third parties aversely the Authors too submit that no case of reverse piercing is made if injuries are caused to innocent shareholders or investors.
In Example (a) passing the first test of unity of identity and interests would be followed by the following consideration. Whether allowing the JC’s plea would cause most definite injuries to the two shareholders? There are multiple approaches to this problem. First, the court may deny their interest altogether to allow the JC to recover, this is grounded still on the first showing of facts that they were least interested in the matters of the company. Secondly, the court may balance the interests of the two shareholders and the Judgment Creditor, by first settling their interests by setting aside their investments. Thirdly, hold that the presence of the two shareholders acts as an absolute bar on JC’s plea. A retrospective analysis of cases reveals a disparaged view of courts regarding this question, mostly in preclusion of judgment in favor of the JC.
It is submitted that such an equitable view-point is not equitable at all, as it fails to provide even a single chance to a genuine plaintiff seeking to reverse pierce the veil. It can be envisaged that X, in the above example could get away from his/her liability completely showing the interests of the sibling and relative involved with the Company. The Authors opine that the hybrid approach requires ‘weighing’ the equitable concerns of the claimant and the affected innocent third parties, and not put deterrence on the claimant’s plea even in the slightest presence of third party interests. This requires a subjective analysis of the facts and relations, after all the whole principle of “piercing of corporate veil” is grounded in ‘reality’. In the above illustration the Authors submit that the second alternative is most appropriate, the directors/shareholders could be established to be mere facades for the company, this should not deter the claims of the JC, hence the investments of the two shareholders set aside, he should be allowed to reverse pierce.
Referring to Example (b) it was the legislative intent of the Government to provide protection of interest to Companies who contracted with the Government for Mining resources, a part of its policy. To allow Secondary to the exemption, would definitely secure the interests of the parent company, Primary who was the contracting party which is the vision of the policy. The courts must allow the reverse pierce to achieve the goals of this policy.
Example (c) – A wholly different policy would be one which promotes a Manufacturing Company’s accountability to the public at large. Kuzushi is a prominent car manufacturing company; it forms Xena an exclusive dealership for the luxury cars it produces in metropolitan cities across the nation. Suppose, Xena has sold a car to a customer that had undergone several repairs to the chassis at the factory of Kuzushi; this fact had not been conveyed to the customer at the time of the sale. The customer discovers it later, and brings upon an action against Xena under the above statute. Xena now seeks to reverse the corporate veil between it and Kuzushi as defense, to avail of the exemption provided in the statute itself.
Even if whole of Xena’s capital is owned by Kuzushi, its profits accrue to Kuzushi. Moreover, every Xena executive works at Kuzushi’s directives. All factors tend to satisfy the degree of identity test in the reciprocal relationship of Kuzushi and Xena, hence it may pass the first test. But public policy emanating from the statute dictating the legislative intent to protect the consumers’ interests by providing them information of the car’s manufacturing history cannot be frustrated by allowing the reverse pierce in this case. Thus, Xena cannot claim to reverse pierce the corporate veil even though they are essentially the same economic enterprise.
- Presence of Other Alternative Remedies –
Being an equitable remedy, lifting of corporate veil, both forward and reverse, must be the last resort to the claimant in a company lawsuit. In existence of valid and viable alternative remedies available to the claimant, reverse piercing cannot be claimed, the Authors submit. As has already been discussed above, the first disposition of the court must be to uphold the distinct identity of the Company, so in cases where the distinct identity may be upheld while resorting to alternatives which provide remedy to the claimant, piercing cannot be permitted. This is also done to protect the interests of the company and its shareholders.
It is submitted that every viable opportunity which is either provided by the law or more traditionally accepted must have been exhausted by the claimant before invoking the reverse piercing of corporate veil. Through the cases referred in this Article, we acknowledge the reasoning of Courts behind their apprehension of adopting the reverse pierce which states that this doctrine would make the corporation owners have veil pierced at their own option, leaving the law obscure and invalid. Therefore, we suggest that the presence of alternative remedies would both ensure rare exercise of this power by the Courts and claimants, and justice.
In Example (a) if X had been a promoter, and the Judgment Creditor sought relief against a breach of contract which was entered prior to incorporation of G Pvt. Ltd. the provisions of Specific Relief Act would have applied and the Company could be made a party. In Prest, Company’s assets owned by husband under a trust where used to satisfy a judgment debt held by the wife, the court in that case denied the applicability of piercing of corporate veil because the case was governed by a special law relating to matrimonial disputes, and not a general principal such as piercing the corporate veil.
With the above discussion, the proposed hybrid test/approach is explicated as comprehensively as possible with a reminder that these three essentials must coexist so as to allow reverse piercing in a particular case.
B. Corporate Criminal Liability: An Interesting Case of Reverse Piercing Already In Practice:
In this section, a special mention must be made to the concept of Corporate Criminal Liability which it is submitted, is proof of reverse piercing already in practise though under a different name.
Corporate Criminal Liability is one very interesting analogy for holding the body corporate responsible for the actions of its owners. ‘Piercing of veil’ may simply be used to denote the disregarding of the separate legal identity of the company, a metaphor at best. Corporate Criminal Liability is emerging in India in the background of the increasing influence of corporations over the economy and the society at large; this gives greater power to corporate bodies to be mischievous in conduct and at the same time is less amenable to punishment and ignominy.
In Sunil Bharti Mittal v. Central Bureau of Investigation the trial court made the directors of the involved company accused, stating in application, piercing of corporate veil. This was reasoned to be the case because of the dominant control over the business in the hands of the directors being the ‘alter ego’. The Supreme Court however on appeal, dismissed the applicability of the veil piercing doctrine and discussed in depth the principal of Corporate Criminal Liability, under which the corporate itself is held liable for certain offences, though finding no case made out in the facts therein. “Respondaet Superior” is upheld to be the guiding principal towards corporate criminal liability, and the Supreme Court of India has held that the Company may be held liable for the acts of agents/employees which may categorized as offences which involve mens rea as a necessary ingredient. However it may be argued that criminal intent is one which is practically inapplicable to fictitious persons like corporations despite this it is developed as a policy matter that companies be held criminally liable for both the deterrent and retributive effects it holds towards the society. It is also the case that corporations cannot be imprisoned, the primary punitive means of deterring the society of crime.
It is argued by the Authors that this practise indeed is one which is not guided by the principle of vicarious liability but one which is a pragmatic exception to the separate legal entity doctrine. If it may be put so, it is reverse piercing of corporate veil in action. This is established on the following grounds:
- It is based on the broader interests of public policy;
- It seeks to make the company liable for acts which obviously are a result of the mens rea of its members;
- Also, it is based on the degree of identity that the guilty members hold common with that of the company, so that a punitive action against a company may also prove to be a punishment for the members guilty.
- Moreover, it emerges in the light of basic principles of criminal law failing to recognize this measure as deterrence to the society because of the need to establish criminal intent.
Justice Benjamin Cardozo (Later Chief Justice) wrote in 1926 that, “Metaphors in law are to be narrowly watched, for starting as devices to liberate thought; they end often by enslaving it.” The concept of piercing of corporate veil is one such metaphor which has faced disparity in its application and conception. Courts must be willing to give up undue reluctance to offer the parties a viable alternative in the form of “reverse piercing of corporate veil”. New avenues opening up in India require for a better arsenal of weapons to tackle impropriety by the usage of corporate veil. Opposed to archaic views, recent rulings provide wide definition to piercing of corporate given it is used in the right manner.
The Authors though concede that as a remedy, reverse piercing of corporate veil must come as a last resort. But clearly the proposed “Hybrid approach” is integrative of the interests of all, and offers much needed relief to those who may genuinely be left aggrieved and without recourse in the absence of the reverse pierce. The degree of identity test enables courts to identify the unity of economic interests and stresses on the real relation between the persons. Public Policy and all concurrent interests are concerns which cannot be done away with at any costs. The Courts must allow the concept of reverse piercing of corporate veil in circumstances which allow so. Parochial adherence to the separate legal entity doctrine does not necessarily address the problems of complex economic realities which are abundant in this day and age in India. Hence, the reverse piercing through ‘Hybrid approach’ can help shape Indian corporate law, which is still under budding stage, to cater justice, equality and stability to contemporary needs of the hour.
 Salomon v. Salomon & Co. Ltd., [1895-99] All. ER 33 (HL)
Solomon was a prosperous leather merchant who converted his business into a limited company with himself, his wife and his five children as the sole members of the Company. The company purchased the business of Solomon at £39,000 which was paid in terms of £10,000 debentures conferring a charge over the assets, £20,000 in fully paid up £1 share each and balance £9,000 in cash. The company ran into difficulties and liquidation proceedings commenced. The assets of the company were insufficient for debentures to Solomon and left nothing for the unsecured creditors. It was held that the Company was validly constituted and the business of Solomon belonged to the Company and not Solomon.
  I.L.R. 13 Cal. 43
In the instant case, the shareholders of a company transferred a tea estate to their Company. These shareholders pleaded that since they were the only shareholders of the Company, they may be exempted from the ad valorem duty since according to them it was nothing but a transfer to themselves from one form to another form. The Calcutta High Court rejected the plea upholding the separate status of existence of a company, independent of its shareholders.
  A.C. 619
  21 Comp. Cas. 33
 (1972) 2 SCC 788, at Page 806
 Berkey v. Third Ave. Ry. Co., 244 N.Y. 84, 94; 155 N.E. 58, 61 (1926)
 Michael J. Gaertner, Reverse Piercing the Corporate Veil: Should Corporation Owners Have it Both Ways?, 30 William & Mary Law Review 14 (1989)
  Ch 935
  1 W.L.R. 832
  EWHC 2380 (Fam)
 Prest v. Petrodel, infra note 27
 (2014) 9 SCC 407
 supra note 10
 AIR 1986 SC 1370
 (2012) 6 SCC 613
 Ben Hashem v. Ali Shayif,  EWHC 2380 (Fam); Petrodel v. Prest,  UKSC 34
 W.G. Platts, Inc. v. Platts, 49 Wn. 2d 203 (2d. Cir. 1956)
 31 F.2d 265 (2d. Cir. 1929)
 49 Wn. 2d 203 (2d. Cir. 1956)
 159 F. Supp. 693 (D. Colo. 1958)
 429 US 338 (1977)
 629 F. 2d 162 (2d. Cir. 1980)
 supra note 15
 405 B.R. 555 (Bkrtcy. M.D.Pa. 2009)
 2000 W.L. 1262448 (E.D. Va. 2000)
 1998 W.L. 114010 (Va. App. 1998)
  UKSC 34
 supra note 12
 supra note 10
 supra note 27, Para 17-
“Most advanced legal systems recognise corporate legal personality while acknowledging some limits to its logical implications. In civil law jurisdictions, the juridical basis of the exceptions is generally the concept of abuse of rights…a limited principle permitting the piercing of the corporate veil in cases of misuse, fraud, malfeasance or evasion of legal obligations. These examples illustrate the breadth, at least as a matter of legal theory, of the concept of abuse of rights, which extends not just to the illegal and improper invocation of a right but to its use for some purpose collateral to that for which it exists.”
 Lazarus Estates v. Beasley,  1 QB 702, 712
His famous lines particularly read as: “No court in this land will allow a person to keep an advantage which he has obtained by fraud. No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. The court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved, it vitiates judgments, contracts and all transactions whatsoever…”
 2013 (5) SA 42 (WCC)
 128 S.W. 3d 879 (Mo. App. W.D. 2004)
 infra note 41
 (1987) 16 DLR (4th) 208
 151 F.3d 1295 (10th Circuit, 1998)
 186 B.R. 991 (Bkrtcy D.Col. 1995)
 Commissioner Income Tax v. Gotan Lime Stone Khanji Udyog Pvt Ltd, (2004) 186 CTR Raj 125
 Digital Radio (Mumbai) Broadcasting Ltd & Anr v. Union of India, WP(C) No. 6891/2015 & CM No. 12620/2015 (Delhi HC)
 supra note 12
  AC 619
 Report No. 20 (1982), Chapter 5, Para. 119-120. Also reference maybe made to ALRC Discussion Paper No 63, Review of the Marine Insurance Act, 1909 (2000), Chapter 7.
The ALRC considered that the strict legal interest test gave rise to results that were socially undesirable. In its opinion, the rule in Macaura’s case the insured as prevented from recovering the loss actually suffered by him only due to the technical rules. The ALRC also thought that the restrictive test also results in commercially undesirable results.
 Gaertner, supra note 7
 Examples (a), (b) and (c) can be found as illustrations considered by previous authors in this subject, namely Nicholas Allen, Reverse Piercing of the Corporate Veil: A Straightforward Path to Justice, 16 New York Business Law Journal, 25 (2012) and Gaertner (1989), supra; having been adapted to understand better in the Indian context.
 For example, Sections 14, 15, 16, 19, and 26 of the Specific Reliefs Act, 1963 deal with the specific performance of contracts, pre-incorporation or post-incorporation in nature, for either purchase of debentures, etc. On an analysis it is found that even though the Company against which the specific relief is sought has amalgamated with another company to form a new incorporation or if the promoters had entered into some contract in furtherance of the objects of the Company incorporated, it is directed by the Court to make specific performance as if the Company in existence had actually entered into such contract.
 Gonzalo Puig, A Two Edged Sword: Salomon and the Separate Entity Doctrine, 7 Murdoch University Electronic Journal of Law 18 (2000), http://www.austlii.edu.au/au/journals/MurUEJL/2000/32.html (last visited January 7, 2016)
 supra note 12
 Michael Richardson, The Helter Skelter Application of the Reverse Piercing Doctrine, 79 University of Cincinnati Law Review 34 (2011)
 Prest v. Petrodel Resources Ltd.,  UKSC 34; Floyd v. Internal Revenue Service of the USA, 151 F.3d 1295 (10th Circuit, 1998); Hamilton v. Hamilton Properties Corpn., 186 B.R. 991 (Bkrtcy D.Col. 1995)
 Gaertner, supra note 7
 Sections 14, 15, 16, 19, and 26 of the Specific Reliefs Act, 1963 where the Company is already held liable for the contracts of the promoters at the pre-incorporation stage. in such a situation, in the existence of an alternative remedy available for the claimant, there is no necessity of pleading for the reverse piercing of the corporate veil at all.
  UKSC 34, Lady Hale’s judgment at ¶86-90:
“…that section 24(1)(a) (of the Matrimonial Causes Act, 1973) does not give the court power to order a spouse to transfer property to which he is not in law entitled. The words “entitled, either in possession or reversion” refer to a right recognised by the law of property… Nor is there anything in the language of section 24(1)(a) to suggest that it was Parliament’s intention to grant the divorce courts an express power to “pierce the corporate veil” in such a way as to treat property belonging to a limited company as property belonging to the spouse who owns and/or controls the company. The question nevertheless arises as to whether, in a case such as this, the courts have power to prevent the statutes under which limited liability companies may be established as separate legal persons, whether in this or some other jurisdiction, being used as an engine of fraud.”
 The emerging concept is more encouraged by policy makers in light of the substantial impact of the rise of the corporate bodies India has witnessed. A perennial problem of corruption is only aided when it is done under the garb of the corporate veil, the human actors being completely undetectable. Policy makers and courts alike have struggled to attach liability to the guilty in such circumstances, hence the corporations themselves are sought to be imposed with criminal liability under this doctrine. Many statutes in India have incorporated the liability of corporations like the Negotiable Instruments Act and even Section 276-B of the Income Tax Act. Even the 41st Law Commission of India suggested in its report that an amendment requiring punishment to be in terms of fine in case of offender being a body corporate must be made to the Indian Penal Code.
 (2015) 4 SCC 609
 Iridium India Telecom Ltd. v. Motorola Inc., (2011) 1 SCC 74
 United States v. Basic Construction Co., 711 F2d 570 (CA4 1983)
 Berkey v. Third Avenue Railway, supra note 6
Rooha Khurshid & Avaneesh Satyang, Students, National University of Study and Research in Law, Ranchi