86 | Chapter 10
Lifting the Corporate Veil
In normal course regulatory agencies use various
regulatory tools of technical scrutiny, inspection etc
by treating each company as a separate legal entity.
However the approach of the regulators and en-
forcement agencies need to change when it comes
to tackling the problem of shell companies and
front companies that are used as tools for fraudu-
lent activities. In such cases, it becomes necessary
to lift the corporate veil and identify the individu-
als responsible directly. In the Skipper Construction
Company case, the Supreme Court has very clear-
ly laid down this principle. The fact that promot-
ers and members of a family had created several
corporate bodies did not prevent the Court from
treating all of them as one entity belonging to and
controlled by the promoter and/or members of his
family. As a result the Supreme Court could arrive
at the conclusion that the device of incorporation
was really a ploy adopted for committing illegali-
ties to defraud people. The regulatory and enforce-
ment agencies enforcing corporate laws need to
use this concept while addressing issues where cor-
porate bodies are used for facilitating fraud. While
treating each company as a separate legal entity has
to be norm in corporate regulation, lifting the cor-
porate veil is necessary to investigate and prosecute
the fraudsters using shell/front companies as a tool
for committing frauds.

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