plea of corporate veil
MANOJ SATAPATHY
(Querist) 05 May 2011
This query is : Resolved
Can a authorised signatory/officer of a pvt ltd company defend himself by taking a plea of corporate veil for an act done by his subordinate or himself in the interest of his company ?
Guest
(Expert) 06 May 2011
of course, if any authorised signatory acts for and on bealf of a company, may be limited or private limited company, he cannot be held responsible individually for the act performed by him. Only the company is answerable and can be held responsible for that act.
preet
(Expert) 06 May 2011
Ya, as it is done in the interest of company so the plea of corporate veil is valid....
lawyerpreetkaur@gmail.com
Amit Pateria
(Expert) 07 May 2011
Dear Member,
Whether such defense is available to a signatory depends upon the facts and moreover the nature of the act done by him or by his subordinate.
However there is no doubt that defense of 'act done in the interest of the Company' is the best available defense but the burden to prove lies upon the one invoking it.
The SC in many occasions have held that Corporate veil is the assumption of law that the actions of the corporation are not the actions of the owners of the corporation, so that they are exempted from liability for the actions of the corporation.
M V Gupta
(Expert) 07 May 2011
I beg to differ with the views expressed above. The doctrine of "corporate veil" is used by the courts to discect the acts/actions taken by or on behalf of a company which are illegal or ultra vires of the company's powers and fix responsibility on the individual officers / employees of the company and punish them in accordance with law. The querist should therefore know that he cannot plead it to defend actions taken by him on behalf of the company.
Guest
(Expert) 07 May 2011
Dear Guptaji,
If some misdeed is done by the employee on behalf of the company, as an authorised signatory, the company is punishable by the court of law. Contrarily, if employee has misused his authority the company can punish him, even dismiss him. Besides, court can also take serious note of that to punish him.
M V Gupta
(Expert) 08 May 2011
Dear Shri Dhingra, Thanks for ur response. The courts have changed the view that if an illegal action is taken by or in the name of the company, the company should be penalised. Actions are tken in collusion of the top managements several times. Some of these are of very serious nature attracting imprisonment also. A company cannot be imprisoned. Therefore the courts apply the doctrine of corporate veil, under which the court would lift the veil to see the individuals who are responsible for the acrts and punish them. The query posed by the querist is whther he can plead corporate veil in his defence. Obviously not.
