1 ARP167/07 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.167 OF 2007 Kaushik Shah Shares and Securities Pvt.Ltd. ...Petitioners v/s Nirjay Securities Pvt.Ltd. and ors. ...Respondents Mr Sham Mehta i/b M/s M. & M. Legal Venture for Petitioners. Mr V.N. Kantawala for Respondents. CORAM : D.K. DESHMUKH J. DATE : 18TH MARCH 2011. 2 ARP167/07 P.C. :- 1] This is a petition filed under section 34 of the Arbitration and Conciliation Act 1996 challenging the award made by the Arbitral Tribunal of the Bombay Stock Exchange rejecting the claim of the petitioners against respondent Nos.2, 3 and 4. The petitioners also challenge the award passed by the Appellate Tribunal confirming the award made by the Lower Tribunal. The relevant facts are that the Arbitral Tribunal of the Bombay Stock Exchange had made an award against respondent No.1  Nirjay Securities Pvt.Ltd. and in favour of the petitioners. However, the claim of the petitioners that they are entitled to have award against respondent No.5 jointly with respondent No.1 was rejected by the Arbitral Tribunal. Therefore, arbitration petition No.381 of 2003 was filed in this Court. That petition was disposed off by order dated 4th April 2005. The order was passed by consent of the parties. The award of the Arbitral Tribunal rejecting the claim of the petitioners for 3 ARP167/07 an award against the respondent Nos.2 to 5 who, according to the petitioners, were Directors and Shareholders of respondent No.1 was set aside. The Arbitral Tribunal was requested to take up the proceedings again and examine an issue whether the award is liable to be made against respondent Nos.2 to 5 also. Thereafter, proceedings were taken up by the Arbitral Tribunal and an award was made which is dated 19th April 2006. The Arbitral Tribunal found that this is a fit case where corporate veil is to be lifted. On having found that the corporate veil is to be lifted and on actual lifting the corporate veil, the Arbitral Tribunal found that the respondent Nos.2 to 5 are Shareholders and Directors of the respondent No.1. The Tribunal, however, found that because the respondent No.2 said that he alone was managing the affairs of the respondent No. 1 Company, the Tribunal made only respondent No.2 liable alongwith respondent No.1. The Tribunal held that the respondent Nos.3, 4 and 5 are not liable. That award was challenged in appeal by the petitioners, however, the appeal was also dismissed 4 ARP167/07 by the Appellate Tribunal by award dated 26th September 2006. The petitioners therefore have filed this petition challenging both the awards. 2] The learned counsel appearing for petitioners submits that once the Tribunal records a finding that it is a fit case for lifting corporate veil and on lifting corporate veil e Tribunal finds that the respondent Nos.2 to 5 are Shareholders and Directors of the respondent No.1 Company, the Tribunal could not have held that the respondent Nos.3 to 5 are not liable because respondent No.2 claims that he alone was managing the affairs of the respondent No.1 Company. The learned counsel submits that on a finding of the Tribunal that respondent Nos.2 to 5 were Shareholders and Directors of the Company, an award holding respondent Nos.2 to 5 liable alongwith respondent No.1 would have followed as a matter of course. I have heard the leaned counsel appearing for respondent Nos.3 to 5. The learned counsel supported the orders passed by the Arbitral Tribunal 5 ARP167/07 and the Appellate Tribunal. 3] Perusal of the award made by the Arbitral Tribunal and the Appellate Tribunal shows that there is a clear finding recorded by the Arbitral Tribunal that this is a fit case where corporate veil is to be lifted to find out who is behind the respondent No.1 Company. That enquiry revealed that it is respondent Nos.2 to 5 who are Shareholders and Directors of the Company. The Tribunal also recorded a finding that it was a glorified partnership firm. In my opinion, therefore, once it is found that respondent No.1 was a a Company only in the name and in truth and substance, it was a partnership firm, all the Shareholders and Directors of the Company would be in a position as partners of the firm ad therefore would be liable for the liability of the firm jointly and severally. There is no question of respondent No.2 alone being made liable only because respondent Nos.3 to 5 chose to permit respondent No.2 to manage the business of the Company. The Directors of the Company which is a 6 ARP167/07 glorified partnership firm cannot be permitted to escape liability by this method and if they are so permitted, the very purpose of lifting corporate veil would be lost. The Directors of the Company, which is a glorified partnership firm, cannot escape liability by permitting one of the partners to manage business of the firm. In my opinion, therefore, on finding that this is a fit case for lifting corporate veil and on finding that the respondent Nos.2 to 5 are Shareholders and Directors of the Company, an award against respondent Nos.3 to 5 making them jointly and severally liable alongwith respondent No.1 Company should have followed. In the result therefore, the Arbitral award challenged in the petition as also the Appellate award are set aside in so far as it rejects the liability of respondent Nos.3 to 5. It is held that alongwith respondent Nos.1 and 2, respondent Nos.3 to 5 are also liable to pay to the petitioners the amount which has been awarded against respondent No.1 Company. Petition is disposed off. 7 ARP167/07 Parties to act on the copy of this order duly authenticated by the Associate / Private Secretary of this Court. Certified copy expedited. ( JUSTICE D.K. DESHMUKH )