"Corporate identity is relevant only till the corporate veil is not lifted": Justice Prathiba M. Singh, Delhi High Court

"If the corporate veil of JVG Group of Companies is lifted, it would follow that the date on which the Provisional Liquidator was appointed in respect of JVG Finance Ltd. would be relevant for unravelling the transactions entered into in the name of other companies as well. Lifting of the corporate veil of the companies would entitle the real transaction to be viewed sans the corporate façade. It is established that the funds of JVG Finance Ltd. were used for purchasing the subject lands albeit in the name of the other group of companies. The said assets are required to be accounted for all practical purposes as assets of JVG Finance Ltd. The corporate identity is relevant only till the corporate veil is not lifted. Once a court decides that the corporate veil is to be pierced; the defence of a company being a separate juridical entity does not arise." The judgement was delivered by Justice Prathiba M. Singh of Delhi High Court on February 22, 2024 in Re-M/S Jvg Finance Ltd vs. Unknown.

The High Court observed: The facts discernible from the record, whether on the basis of the documents produced or the lack of it, clearly establish the same. First of all, there is no credible dispute that the funds for purchasing the lands had been diverted from JVG Finance Ltd....There is no material on record which would establish that JVG Finance Ltd. had permitted the purchase of any property in the name of the other companies from its own funds. There is no justification whatsoever for using the funds of JVG Finance Ltd. for the purchase of the lands in the name of any other companies. The inescapable conclusion is that purchasing property in the name of other entities amounted to siphoning of JVG Finance Ltd.'s assets to those companies. The five group of companies were under the same management and thus, were clearly accountable for the assets of JVG Finance Ltd. albeit, acquired in their name."

The order reads: "The orders passed by the learned Company Court after 05.06.1998 indicate that the endeavour of the learned Company Court was to trace and preserve the assets of JVG Finance Ltd. for winding up the said company. By the order dated 14.10.1999, the learned Company Court directed deposit of titled deeds of lands admeasuring 60 acres located at district Gurgaon, Haryana and exercise to find out details of properties and assets purchased from the funds of investors was under table. By an order dated 03.09.2002, the learned Company Court had expressly interdicted the sale of assets of JVG Group of Companies. In the given facts, we find no infirmity with the view of the learned Company Court in rejecting the application seeking conveyance of the subject lands in its favour. The appeal is accordingly dismissed."