At, High Court of Delhi
By, THE HONOURABLE CHIEF JUSTICE MR. N.V. RAMANA & THE HONOURABLE MR. JUSTICE RAJIV SAHAI ENDLAW
For the Petitioner: Arun K. Sinha, Sumit Sinha, Advocates. For the Respondents: R1, Ajit Warrier, Tanuj Bhushan, R2, Haripriya Padmanabhan, Vikramaditya, Advocates.
Rajiv Sahai Endlaw, J.
1. The appeal impugns the order dated 16th December, 2013 of the learned Single Judge of this Court (exercising ordinary original civil jurisdiction in CS(OS) No.599/2012 filed by the appellant) allowing the application being IA No.10718/2013 of the defendant / respondent no.2 Universal Weather and Aviation Inc. Texas, USA under Order 1 Rule 10 of the Civil Procedure Code 1908 and deleting the defendant / respondent no.2 from the array of defendants in the suit, holding the defendant / respondent no.2 to be neither a necessary nor a proper party to the suit.
2. Notice of the appeal was issued.
3. We have heard the counsel for the parties.
4. The appellant / plaintiff instituted the suit from which this appeal arises pleading:-
(i) that the appellant / plaintiff joined the defendant no.1 Company on 9th July, 2007 as Chief Finance Officer;
(ii) that the defendant no.1 Company is a 100% subsidiary of the defendant no.2;
(iii) that the appellant / plaintiff was required to report to the Country Manager of the defendant no.1 Company and was further required to do functional reporting to the Controller at defendants no.2’s office 'which signifies that the appellant / plaintiff was under the direct control and supervision of both the defendant companies';
(iv) that the appellant / plaintiff was however harassed by being paid lower increments, lower bonuses despite the fact that she had always been efficient in her work;
(v) that the defendant no.1 Company was indulging in various illegal acts, financial irregularities and corrupt practices and which were duly reported by the appellant / plaintiff to the defendant no.2;
(vi) that the appellant / plaintiff was sought to be illegally terminated in the year December, 2009 as she had once again highlighted illegal / incorrect practices of the defendant no.1 Company to Mr. Lex Den Herder, Regional Director Operations of defendant no.2 Company; however to the utter surprise of the appellant / plaintiff, Mr. Lex Den Herder proposed to terminate the appellant / plaintiff; this fact was brought on record by the appellant / plaintiff vide e-mail dated 16th December, 2009;
(vii) 'the plaintiff could no more take such unpleasant treatment due to the harassment and persecution meted out to her and was left with no option but to tender her resignation as the Defendant No.1 and No.2 Company were not ready to mend its ways; the resignation was tendered by Plaintiff vide email dated 06.05.2011 to Defendant No.2 Company';
(viii) on 23rd May, 2011one Mr. Sanjay Gautam took over the custody of records from the appellant /plaintiff;
(ix) that though the appellant / plaintiff was required as of legitimate procedure to serve the statutory notice period of three months in terms of employment contract, i.e. till 5th August, 2011 but the defendant no.1 Company hired a new person for her post before the end of the notice period, humiliating the appellant / plaintiff; and,
(x) 'it is submitted that the plaintiff was terminated vide email dated 09.06.2011 by Mr. Michael Huchinson, Regional Directors of Operations, Asia Pacific Region, Defendant No.2 Company with effect from even date itself, thereby showing the desperation of the Defendant No.1 to No.2 Company'.
accordingly, the suit was filed (i) for declaration that the termination of the appellant / plaintiff’s service with the defendant no.1 by the defendant no.2 is illegal and without any basis; (ii) for permanent injunction restraining the defendants from holding the appellant / plaintiff responsible for the irregularities / financial irregularities / frauds committed by the defendant no.1 Company during the appellant / plaintiff’s tenure as Chief Financial Officer; and, (iii) for recovery of Rs.80 lacs as damages.
5. The learned Single Judge found the defendant no.2 to be not a necessary and proper party to the suit, holding, that it was not in dispute that the employment of the appellant / plaintiff was with the defendant no.1 Company only and merely because the defendant no.1 Company was wholly a subsidiary of defendant no.2, did not make the defendant no.2 a necessary or proper party to the suit.
6. We have enquired from the counsel for the appellant / plaintiff as to what is erroneous in the reasoning given by the learned Single Judge.
7. The argument of the counsel for the appellant / plaintiff is twofold. Firstly it is contended that because 100% of the shares of the defendant no.1 Company are held by the defendant no.2, the defendant no.2 is a necessary party and secondly that the termination of the services of the appellant / plaintiff could have been done by the defendant no.1 Company only and not by the defendant no.2.
8. We remain unimpressed. The first of the aforesaid argument is against the very grain of Company Law. A Company is a distinct legal entity from its shareholder, even if all the shares are held by one person only. Thus, merely because the defendant no.2 holds 100% of the shareholding of the defendant no.1 Company, would not make the defendant no.2 liable for the dues and acts of the defendant no.1. Admittedly both defendant no.1 and defendant no.2 are separate legal entities. No case for piercing of the corporate veil is made out. The Supreme Court in Vodafone International Holding B.V. Vs. Union of India (2012) 6 SCC 613 (para 101) has held that a Company is a separate legal persona and the fact that all its shares are owned by one person or by the parent Company has nothing to do with its separate legal existence.
9. The second argument is equally ambiguous. Even if it is to be presumed that it is the defendant no.2 which has terminated the services of the plaintiff and which the defendant no.2 could not have done, being not the employer of the appellant / plaintiff, that would only make the termination to be illegal but would not make the defendant no.2 Company with whom the appellant / plaintiff had no privity, liable. The claim if any of the a
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ppellant / plaintiff for such illegal termination would remain against the defendant no.1 Company only and not against the defendant no.2. 10. The counsel for the appellant / plaintiff during the hearing has also argued that the appellant / plaintiff was reporting to the defendant no.2. Even if that be so, merely because an employee, in the course of employment, is required to report to another instead of to the employer, would not make such another liable for any claims arising from such employment. 11. Else, no cause of action against the defendant no.2 is disclosed. 12. There is no merit in the appeal which is dismissed. No costs.