REVA KHETRAPAL, J. ( 1 ) BY this application under Order 1 Rule 10 Sub Rule 2 read with Section 151 of the Code of Civil Procedure, the defendants No. 2 and 3 pray for deletion of their names from the array of parties on the ground that no cause of action against them has accrued in favour of the plaintiffs. ( 2 ) AT the outset, it would be relevant to note that written statement has not been filed by the defendants " applicants denying the allegations made in the plaint and instead the present application has been filed by the defendants no. 2 and 3 for deletion of their names from the array of parties. ( 3 ) THE defendants-applicants contend that the suit is for recovery of alleged amounts due under various invoices for the supply of material made to defendant No. 1 company from time to time and that the invoices relied upon by the plaintiffs were raised on the defendant No. 1 company and the names of the defendants No. 2 and 3 do not figure in the said invoices. According to them, it is nowhere alleged in the plaint that the supply of material was made to the defendants No. 2 and 3, and the defendant No. 1 company, being a company incorporated and registered under the Companies Act, 1956, as contemplated under section 3, is a distinct legal entity and jurisdictional person in the eyes of law, entirely separate from its members, shareholders and Directors. As such, they have unnecessarily been made parties in the present suit for recovery against defendant No. 1 company. ( 4 ) NOTICE of the above application was issued to counsel for plaintiffs, who has filed a reply contesting the same on the ground that the defendant No. 1 company is a 'sham company' incorporated by the defendants No. 1 and 2, who are husband and wife. Plaintiffs assert that in view of the peculiar circumstances set out in the plaint, the lifting of the corporate veil of the company would be necessary in the instant case for the just decision thereof. Plaintiffs assert that in view of the peculiar circumstances set out in the plaint, the lifting of the corporate veil of the company would be necessary in the instant case for the just decision thereof. ( 5 ) IN order to appreciate the respective contentions of the parties, it would be necessary to advert to some of the averments made in the plaint, which succinctly stated are as follows:- (i) In paragraphs 4 and 5 of the plaint, it is alleged that the defendants No. 2, 3, 4 and 5 on behalf of the defendant No. 1 " company had approached one M/s. Keystone Appliances Pvt. Ltd. , which sells its goods through the plaintiff group of companies as their distributors. (ii) In paragraph 6, it is stated that the defendants No. 2, 3, 4 and 5 had long standing relationship with the plaintiff companies and had been dealing with the plaintiff companies through their partnership firms and/or proprietory concerns for several years. The defendants, it is further stated, approached the plaintiff companies and represented that they were willing to incorporate a company which would exclusively deal with the products being distributed by the plaintiff companies, viz. "terminator" range of car security systems, and would be a dedicated marketing company engaged in no other activity. (iii) In paragraph 7, it is set out that it was with this sole objective that defendant No. 1 was brought into existence by the defendants No. 2 to 5. (iv) Paragraphs 8 to 19 of the plaint deal with the transactions between the parties thereafter and are not pertinent in the context of the present application. (v) In paragraph 20, the plaintiffs have alleged "that the intention of the defendants from the very beginning was very dishonest and the defendants no. 2, 3, 4 and 5 incorporated the defendant No. 1 " company only for the purpose of creating a special purpose vehicle in order to defraud the plaintiffs". (vi) Paragraphs 21 and 22 are also pertinent and are being reproduced hereunder:-"21. The plaintiff has now realized that the defendant No. 1 had no intention whatsoever to do the business. The only objective behind the incorporation of the defendant No. 1 company was to create a conduit to defraud plaintiff of its legitimate dues and divert and misappropriate funds to their private and personal advantage. The plaintiff has now realized that the defendant No. 1 had no intention whatsoever to do the business. The only objective behind the incorporation of the defendant No. 1 company was to create a conduit to defraud plaintiff of its legitimate dues and divert and misappropriate funds to their private and personal advantage. It has come to the knowledge of the plaintiffs that the defendants No. 2 to 5 have diverted and misappropriated the funds of the defendant No. 1 company and have since then purchased movable and immovable properties. 22. That this fact was further corroborated when the plaintiff caused a search to be conducted at the office of the Registrar of Companies only to find that the defendant No. 1 company has not been filing the statutory forms and returns which it was legally obliged to file. The company has neither filed the annual return nor the balance sheet with the Registrar of Companies. Apparently the object was to cheat the creditors of the defendant No. 1 company. The defendant No. 1 company has not disclosed the true and fair picture of the transactions of defendant No. 1 company. It is as such in the interest of justice that the corporate veil of defendant No. 1 company be lifted and all the defendants be made jointly and severally liable to pay the dues of the plaintiff no. 1 company. " ( 6 ) THE true legal position in regard to the character of a Corporation or a Company is not in doubt. The Corporation in law has a legal entity of its own, which is separate and distinct from that of its shareholders and directors. This position is well established ever since the year 1897, when the historic decision in the case of Salomon vs. Salomon and Co. , 1897 AC 22 was delivered by the Court of Appeal, and, indeed, subject to certain exceptions by the application of the fiction that the veil of the corporation can be lifted and its face examined in substance, it has always been a well recognised principle of common law. In Tata Engineering and Locomotive Co. Ltd. (1964) 34 Comp Cas 458 (SC) also, the company wanted the corporate veil to be lifted so as to sustain the maintainability of the petition filed by the company under Article 32 of the Constitution. In Tata Engineering and Locomotive Co. Ltd. (1964) 34 Comp Cas 458 (SC) also, the company wanted the corporate veil to be lifted so as to sustain the maintainability of the petition filed by the company under Article 32 of the Constitution. The request of the company was turned down by the supreme Court on the ground that it was not possible to treat the company as an ordinary citizen for the purposes of Article 19. ( 7 ) IN CIT vs. Sree Meenakshi Mills Ltd. (1967) 63 ITR 609 (SC), however, the corporate veil was lifted for the purpose of preventing evasion of income-tax having regard to economic realities behind the legal facade. In Workmen vs. Associated Rubber Industry (1986) 59 Comp Cas 134, resort was had to the principle of lifting the veil to prevent devices to avoid welfare legislation. And, in the same year, a five judge bench of the Apex Court in Life Insurance corporation of India vs. Escorts Limited (1986) 59 Comp Cas 548 (SC)acknowledged and held that successive inroads had been made since Salomon's case (supra) on the principle of separate legal personality of a Company. In the Escorts case (supra), it was observed that generally and broadly speaking, the corporate veil may be lifted where a statute itself contemplates lifting the veil, or fraud or improper conduct is intended to be prevented, or a taxing statute or a beneficent statute is sought to be evaded or where associated companies are inextricably connected so as to be in reality part of one concern. ( 8 ) IT now stands fairly well established by a line of decisions that the corporate veil may be lifted, the corporate personality may be ignored and the individual members recognised for who they are in certain exceptional circumstances. In Palmer's Company Law (Twenty-third Edition), the present position in England is stated and the occasions when the corporate veil may be lifted have been enumerated and classified into fourteen categories. Similarly, in Gower's Company Law (Fourth Edition), a chapter is devoted to "lifting the veil" and the various occasions when it may be done are discussed. ( 9 ) IN Delhi Development Authority vs. Skipper Construction Co. (P) Ltd. (1996) 4 SCC 622 and in Singer India Ltd. vs. Chander Mohan Chadha and ors. Similarly, in Gower's Company Law (Fourth Edition), a chapter is devoted to "lifting the veil" and the various occasions when it may be done are discussed. ( 9 ) IN Delhi Development Authority vs. Skipper Construction Co. (P) Ltd. (1996) 4 SCC 622 and in Singer India Ltd. vs. Chander Mohan Chadha and ors. (2004) 7 SCC 1 , it has been reiterated that ever since Salomon's case (supra), the Courts have come to recognise several exceptions to the rule of piercing the corporate veil, one such exception being 'when the corporate personality is being blatantly used as a cloak for fraud or improper conduct' [gower: Modern Company Law - 4th Edn. (1979) at p. 137]. Pennington (Company law - 5th Edn. , 1985 at p. 53) also states that 'where the protection of public interests is of paramount importance or where the company has been formed to evade obligations imposed by the law', the Court will disregard the corporate veil. ( 10 ) IN Subhra Mukherjee and Anr. Vs. Bharat Coking Coal Ltd. and Ors. , (2000) 3 SCC 312 where the transaction of sale of its immovable property by a company was alleged to be sham and collusive, the Court held that it will be justified in piercing the veil of the corporation to ascertain the true nature of the transaction as to who were the real parties to the sale and whether it was genuine and bona fide and whether it was between the husbands and wives behind the facade of separate entity of the company. ( 11 ) IN a recent decision, a Single Bench of this Court in Saurabh Exports vs. Blaze Finlease and Credits Pvt. Ltd. 129 (2006) Delhi Law Times 429, placing reliance on the decisions of the Apex court in Singer India Ltd. and Subhra mukherjee (supra), held that where the plaintiff was sought to be defrauded of the amount of Rs. 15 lakhs under the cloak of corporate entity of defendant No. 1 company, such corporate veil must be lifted taking into consideration the fact that defendant No. 1 company was only a family arrangement of the remaining defendants. ( 12 ) IN view of the above, in the present case the conclusion is inescapable that the defendants No. 1 and 2 are necessary and proper parties to the suit. The suit is at a nascent stage. ( 12 ) IN view of the above, in the present case the conclusion is inescapable that the defendants No. 1 and 2 are necessary and proper parties to the suit. The suit is at a nascent stage. Written statement has yet to be filed by the defendants-applicants. Only after pleadings are complete and evidence is adduced by the parties, can the Court arrive at a conclusion whether the present case is one which warrants tearing of the corporate veil. For this purpose, the fraud alleged by the plaintiffs will have to be proved by them and the Court will then have to consider as to whether the fraud is of such a nature as to invoke the exceptions to the well recognised principle of lifting of the corporate veil. Therefore, while I am conscious of the fact that the company is a juristic person and its Directors ordinarily are not personally liable unless it appears that they specifically undertook personal liability, it is, in my view, too early in the day to exonerate the defendants No. 2 and 3 from any liability they might have incurred. ( 13 ) IN view of the aforesaid, the application is dismissed, leaving the parties to bear their own costs. It is, however, clarified that nothing stated in this order shall be construed as an expression of opinion on the merits of the case or shall preclude the defendants from raising such legal pleas and contentions as may be open to them in law. ( 14 ) DEFENDANTS are directed to file written statements within four weeks from today. Replication, if any, be filed within four weeks thereafter. List for completion of pleadings and admission/denial of documents before the learned Joint Registrar on 18. 10. 2006.