Rethinking Corporate Structures: The 'Group Of Companies' Doctrine And Its Transformative Impact On Indian Company Law
- IJLLR Journal
- Dec 24, 2024
- 2 min read
Advait Sriram, O. P. Jindal Global University
ABSTRACT
The judgement of the Supreme Court of India in Cox & Kings Ltd. v. SAP India Pvt. Ltd is a revolutionary one which set very important precedents with respect to arbitration and company law. The decision provided in the above-mentioned case established a key doctrine known as the ‘Group of Companies’ doctrine. The main focus of this research paper is to understand how the judgement and the doctrine it established influences the concept of separate legal personality and piercing of the corporate veil in companies.
The ‘Group of Companies’ doctrine in essence allows non-signatory companies within a corporate group to be bound or benefit from an arbitration agreement signed by another group company on the grounds of there being a mutual intention present between the parties to bind both signatories and non-signatories of the agreement. This doctrine stands in direct opposition to the traditional concept of separate legal personality introduced by the decision in Salomon v Salomon & Co Ltd (1897). When a group company defaults, the doctrine allows creditors to look beyond the corporate veil. They can seek recovery from other affiliated entities, the paper will thus analyse how the courts therefore must strike a delicate balance preventing double recovery, and respect each company’s autonomy, while also keeping in mind concerns about the erosion of the separate legal personality principle. The doctrine also implies about how the corporate veil can be lifted more readily in arbitration scenarios to provide recognition to the economic situation of companies under one roof.
Analysing the doctrine with respect to company law, while understanding its criticisms and future implications, the paper helps one understand in depth about how Indian company law must adapt, balancing collective interests of corporate groups and non-signatory parties with legal certainty. It also helps reshape ones understanding of corporate identity and corporate governance along with when exactly individuality and interconnectedness respectively must apply with respect to the “group of companies” doctrine.
