BOMBAY HIGH COURT SET ASIDE AN ARBITRAL TRIBUNAL’S DIRECTIONS IMPOSING PERSONAL LIABILITY ON THE SOLE SHAREHOLDER OF A ONE PERSON COMPANY (OPC).

 BOMBAY HIGH COURT SET ASIDE AN ARBITRAL TRIBUNAL’S DIRECTIONS IMPOSING PERSONAL LIABILITY ON THE SOLE SHAREHOLDER OF A ONE PERSON COMPANY (OPC). 

SARAVANA PRASAD V. ENDEMOL INDIA PVT. LTD., 

FACTS OF THE CASE  

The Bombay High Court in Saravana Prasad v. Endemol India Pvt. Ltd., where it set aside an arbitral tribunal’s interim directions that had imposed personal liability on the sole shareholder and director of a One Person Company (OPC), Mr. Saravana Prasad, while upholding the same measures against the OPC itself, Innovative Film Academy Pvt. Ltd. 

KEY HIGHLIGHTS OF THE JUDGMENT 

1. SEPARATE LEGAL IDENTITY OF OPCS AFFIRMED 

The Court underscored that a One Person Company is a distinct legal entity under the Companies Act, 2013. The sole shareholder and director cannot be treated as the company itself—notably, the corporate veil cannot be pierced without specific and compelling reasons like fraud or misuse. 

In other words , the verdict of Solomon vs Solomon once again reiterated.  

2. INTERIM MEASURES LIMITED TO THE OPC 

While the arbitral tribunal’s order directed both the OPC and Mr. Prasad to deposit approximately ₹10.40 crores in a fixed deposit and disclose personal and corporate financial details, the High Court held that these directions were legally sustainable only against the company, not the shareholder 

3. NO BASIS FOR PERSONAL LIABILITY 

The judgment emphasized that there was no contractual basis, personal guarantee, or evidence of fraud or misuse to warrant personal liability being imposed on Mr. Prasad. His role as sole shareholder and director alone could not override the legal protections afforded under the OPC structure. 

BROADER IMPLICATIONS 

• Protection of Entrepreneurs: This ruling reinforces that OPC proprietors are shielded from triggering personal liability, provided they don’t commit wrongdoing or explicitly assume such liabilities via guarantees. 

• Importance for Creditors: It sends a clear message to creditors to secure personal guarantees or collateral if they aim to recover dues from OPCs’ founders. 

R V SECKAR , FCS , LLB 79047 19295