Ms Anita Kaur vs Universal Weather And Aviation ...
2014 Latest Caselaw 2556 Del

            *IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                      Date of decision: 20th May, 2014

+                             FAO(OS) 61/2014
       MS ANITA KAUR                                        ..... Appellant
                   Through:          Mr. Arun K. Sinha with Mr. Sumit Sinha,
                                     Advs.

                                   Versus

    UNIVERSAL WEATHER AND AVIATION INDIA PRIVATE
    LIMITED & ANR                               ..... Respondents
                 Through: Mr. Ajit Warrier with Mr. Tanuj Bhushan,
                           Adv. for R-1.
                           Ms. Haripriya Padmanabhan with Mr.
                           Vikramaditya, Adv. for R-2.
CORAM :-
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
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 appellant / 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.

RAJIV SAHAI ENDLAW, J.

CHIEF JUSTICE MAY 20, 2014 pp