Workmen of Associated Rubber Industry ltd., v. Associated Rubber Industry Ltd.

Workmen of Associated Rubber Industry ltd., v. Associated Rubber Industry Ltd.

 

Fact of the case

“A Limited” purchased shares of “B Limited” by investing a sum of Rs.4,50,000. The dividend in respect of these shares was shown in the profit and loss account of the company, year after year and was taken into account for the purpose of calculating the bonus payable to workmen of the company.Sometime in 1968, the company transferred the shares of B Limited, to C Limited a subsidiary, wholly owned by it. Thus, the dividend income did not find place in the Profit & Loss Account of A Ltd., with the result that the surplus available for the purpose for payment of bonus to the workmen got reduced.

 

Judgement

Here a company created a subsidiary and transferred to it, its investment holdings in a bid to reduce its liability to pay bonus to its workers. Thus, the Supreme Court brushed aside the separate existence of the subsidiary company.

 

Conclusion

The new company so formed had no assets of its own except those transferred to it by the principal company, with no business or income of its own except receiving dividends from shares transferred to it by the principal company and serving no purpose except to reduce the gross profit of the principal company so as to reduce the amount paid as bonus to workmen.Therefore the corporate veil had to be lifted.




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