Delhi Development Authority v Skipper Construction Co (P) Ltd

Facts

• DDA had a scheme for allotment of plots to companies for commercial use.
• One individual formed multiple private companies and obtained several plot allotments through them.
• The allotments were beyond what any single person or entity was entitled to.
• DDA discovered that all companies were controlled by the same individual.
• DDA cancelled the allotments; the companies challenged the cancellation.
• The companies contended that each was a separate legal entity entitled to independent allotments.

Issue

1. Whether the corporate veil can be lifted where multiple companies are formed by the same person to obtain benefits beyond his individual entitlement; whether DDA was justified in cancelling allotments made to sham companies.

Held

• The Supreme Court upheld DDA's cancellation and lifted the corporate veil. Where a person forms companies solely to evade restrictions on allotment and obtain benefits he could not get individually, the separate personality of those companies will be disregarded. The companies were mere facades created to circumvent the allotment scheme.
• The Court observed that the devices adopted were clearly intended to use the corporate form as a cloak to obtain undue advantage, and the law would not allow this.

Ratio Decidendi

Where the corporate form is used as a device to obtain benefits or advantages that the controller is not personally entitled to, particularly to circumvent regulatory restrictions or public policy, the court will lift the corporate veil and identify the real person behind the companies. Multiple companies formed by the same individual for the same fraudulent purpose will be treated as one.