The document discusses the principle of "lifting the corporate veil" to determine a company's character during times of war. It analyzes a key case, Daimler Company v. Continental Tyre, where the House of Lords ruled that a company incorporated in England could still be considered an "enemy" if its defacto control was held by enemies of the state. The court explained that since companies act through their directors and managers, their nationality and character determines that of the company. Subsequent cases in India have upheld this view that the corporate veil can be pierced to identify those in defacto control and apply the law of nationality to the company during war times.

1. Lifting the Corporate Veil
~Judicial Grounds
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-Sayan Mukherjee

2. • Who is an Enemy?
As defined under section 2(b) of Defence and Internal Security Act, 1971:
ENEMY= - any person committing external aggression
- any person belonging to the country committing external aggression
- others as declared by the Central Government.
• Note: A corporation is said to have assumed enemy character at the time of war, when its defacto control
is held with the enemies of the state.

3. Daimler Company, Limited
v.
Continental Tyre and Rubber Company (Great Britain), Limited and
Another.
BRIEFFACTS:
• R under an agreement with P was a supplier of tyres manufactured in Germany.
• R was a company incorporated in London
• Wherein, out of 25,000 shares only 1 share was held by an Englishman. The rest of the shareholders were
German residents.
• All the directors of the company were Germans.
• Subsequently, a suit for recovery of trade debt was instituted during the First World War.

4. • Contentionof P:
WHETHER TO GIVE MONEY TO THE KING’S ENEMY?
• CONTENTIONOF R:
THE SCERETARY [OF ENGLISH NATIONALITY] HAD THE AUTHORITY TO INSTITUTE ACTIONS /
PROCEEDINGS IN THE NAME OF THE COMPANY FOR RECOVERY OF TRADE RELATED DEBTS.

5. • Trialcourt:
held summarily that the contract was valid.
• Courtof Appeal:
held that the company remains an English CO. regardless of residence of shareholders or directors, either
before or after declaration of war.
• HOUSEOF LORDS:
reversed the judgement

6. JUDGEMENT : HOUSE OF LORDS
• JUST LIKE A NATURAL PERSON, A LEGAL PERSON CAN HAVE AN ENEMY CHARACTER EVEN
IF INCORPORATED IN ENGLAND.
• EXPLAINED THE ANALOGY OF “CONTROL”
• SINCE THE COMPANY ACTS THROUGH ITS DIRECTORS, MANAGERS, SECRETARY, ETC- THEIR
CHARACTER BECOMES IMPORTANT TO DETERMINE THAT OF THE COMPANY’S.
• UNCONTROLLED / UNREGULATED INTERCOURSE WITH THE ENEMY IS UNWARRANTED.
• THE APPEAL WAS ALLOWED AND THE CONTRACT WAS TERMED ILLEGAL UNDER SECTION
1(2) TRADING WITH THE ENEMY ACT, 1914

7. The main principle
- “A COMPANY NEITHER HAS BODY, PARTS NOR PASSIONS. IT CANNOT WEAR WEAPONS NOR
SERVE IN THE WAR”
- “IT CAN BE NEITHER FRIEND NOR ENEMY”
- “IT HAS NO MIND OTHER THAN THE MINDS OF THE CORPORATORS”
- THUS IT IS THE CORPORATORS WHO ARE TO BE IDENTIFIED BY LIFTING THE CORPORATE
VEIL IN ORDER TO UNDERSTAND THE CHARACTER OF THE CORPORATION.
~Buckley L.J. [dissent, CoA]

8. The Situation in India
State Trading Corporation of India Ltd. and ors.
v.
Commercial Tax Officer and ors.
AIR 1963 SC 1811
Persons operating the company = BRAINS
When the brain functions  the Corporation is said to function.
AT THE TIME OF WAR :
- The law of nationality becomes pertinent to determine the enemy character of the company.
- This case discussed the Dailmer Case and upheld its principle.
- The veil is pierced to determine one’s character who is in defacto control of the company.

9. CONCLUSION
• Lifting the corporate veil: An essential while evaluating the company’s
character.
• The defacto control of the company cannot vest in an enemy character.
• Enemy character of a company is against public policy.
• However, this principle as a judicial ground for lifting the corporate veil is
seldom used / applied for it has the prerequisite scenario WAR.

10. THANK YOU