[Chiranth Mukunda is a 3nd Year B.A., LL.B. (Hons.) student at National Law School of India University, Bengaluru]
In IMAX Corporation v. E-City Entertainment Pvt Ltd (‘IMAX’) (30 December 2025), a division bench of the Bombay High Court held that non-parties to an arbitration agreement may be impleaded at the stage of enforcement and execution of an arbitral award by piercing the corporate veil. The Court reasoned that where the award-debtor has transferred its assets to associated companies, while continuing to retain control over those assets through a common holding company, such third-party entities may be proceeded against to prevent frustrating the enforcement of the award. For this purpose, the existence of a requisite intention or motive behind the transfer of assets to evade or frustrate the enforcement of the award was considered necessary.
An arbitral award was rendered in favour of IMAX pursuant to a Singapore-seated ICC arbitration arising from a contract with E-City Entertainment Ltd. IMAX sought enforcement of the foreign award against E-City Entertainment Ltd (Respondent No 1 and the award debtor) and its associated companies, impleaded as Respondents Nos 2 to 4. Respondent No 4 was the ultimate holding company holding approximately 99 percent of the shareholding and exercising control over these associated companies. Following the arbitral award, the award debtor’s assets were transferred to the other respondents pursuant to two court-sanctioned schemes of arrangement/de-mergers. Nevertheless, the Court found that the “sole objective” of these post-arbitral award transfers was to defeat execution of the award. This disclosed the requisite impropriety in the form of an intention to evade an existing legal obligation sufficient to justify piercing the corporate veil. This post analyses the decision on the following aspects.
First, it analyses the implications of distinct legal personality for the execution of arbitral awards, including freezing injunctions against third parties as interim measures ancillary to the enforcement and execution against the award-debtor. Second, the decision in IMAX reflects an endorsement of the ‘evasion principle’ for disregarding the corporate veil, as articulated in Prest v. Petrodel Resources Ltd and Balwant Rai Saluja v. Air India Ltd, in the context of the execution of an arbitral award. Third, it highlights the broader implications for arbitration, particularly whether the impleadment of non-parties solely at the stage of execution violates due process, given that such non-parties would ordinarily not have participated in the arbitral proceedings and would lack the opportunity to challenge the award. Ultimately, these concerns are negatived.
Third Parties’ Assets in Execution: General Rules
A distinct legal personality means a company is separate from its shareholders. It is both the legal and beneficial ownerof its assets and does not hold them as agent or trustee for shareholders, even if they own and control the company (Salomon v. Salomon). Accordingly, mere ownership and control is insufficient to pierce the corporate veil or execute an arbitral award against the holding or other group companies.
In the Isle of Man courts’ decision in Cruz City 1 Mauritius Holdings v. Unitech Limited (2023), the award creditor (Cruz City) sought to enforce an arbitral award against the assets of the award-debtor’s (Unitech) wholly-owned subsidiary, contending that the subsidiary’s assets were held on trust for Unitech. The Court, however, held that the parent company’s de facto control over the subsidiary’s assets was, by itself, insufficient to disregard the subsidiary’s separate legal ownership. A high evidentiary threshold, described as the ‘best likely rationalisation,’ had to be met, considering the subsidiary’s separate corporate identity, to infer a trust over its assets. Moreover, there was no evidence that the subsidiary’s establishment designed to frustrate or evade enforcement of the arbitral award, because an alternative explanation that it was set up for tax purposes was equally plausible.
Chabra Reliefs Against Third Parties
Another way a non-party may become involved in the enforcement process of an arbitral award is through ‘Chabra reliefs,’ named after TSB Private Bank International SA v. Chabra (1992) and cited by the division bench in IMAX [para 293]. These are freezing injunctions against third parties against whom there no independent cause of action, but granted as ‘ancillary and incidental’ measures to prevent frustration of enforcement against the defendant against whom there is a cause of action. A freezing injunction (or Mareva injunction) is an in personam order restraining a person from dealing with or disposing of assets so as to frustrate enforcement.
Such injunctions may be granted against third parties (referred to as ‘Chabra defendants’ or ‘non-cause of action defendants’ (NCADs)) where assets legally owned by those third parties would be available to satisfy a prospective judgment against the cause of action defendant (CAD). In the arbitration context, such relief may be granted under section 9 of the Arbitration Act 1996, read with section 2(2) in the case of foreign-seated arbitrations, which can be exercised against third parties. This is because interim injunctions under section 9(1)(ii)(e) can be granted when it is ‘just and convenient’. In Honasa Consumer Limited v. RGM General Trading LLC (2024), the Delhi High Court considered this clause to be equivalent to the courts’ wide and inherent equitable powers to grant injunctions, analogous to section 37 of the Senior Courts Act 1981 in the UK allows for injunctions when ‘just and convenient – which is the source of freezing injunctions. In other instances, Chabra reliefs be granted under inherent equitable powers of the civil courts under section 151 of the Civil Procedure Code.
Chabra-type freezing injunctions is most commonly ordered where the third party holds the assets on trust for the principal defendant (CAD), who has the ultimate beneficial ownership over them (see, Cruz City 1 Mauritius Holdings v. Unitech Ltd (2014 EWHC, at para 8). However, the jurisdiction has been extended to situations where there is no beneficial ownership or proprietary interest (Broad Idea International Ltd (2020, U.K. Privy Council, at para 88). Drawing from the Australian High Court’s decision in Cardile v. LED Builders (1999, High Court of Australia), Chabrajurisdiction may be exercised where the defendant has some right or ‘substantive control’ over assets of the third-parties amenable to execution through the appointment of a receiver or liquidator exercising the rights of the cause of action defendant.
Nevertheless, the governing test remains whether the relevant third parties can be compelled and their assets would be amenable to execution of a judgment obtained against the CAD because there are “in truth the assets of the CAD” (‘enforcement principle’). In Lakatamia Shipping Co (2014), it was held that the assets of a company of which the principal defendant was the sole director and sole shareholder could not be treated as “his own assets” for the purposes of a Chabra injunction, in the absence of circumstances justifying the piercing of the corporate veil, as only then could such assets be used to satisfy a judgment against him. Similarly, in Linsen International v. Humpuss Sea Transport(2011), since piercing the corporate veil against third-party subsidiaries’ assets was impermissible in the absence of both control and abuse of the corporate structure, it was held that Chabra injunctions could not be granted against those subsidiary companies, as their assets would not have been available to satisfy any judgment against the CAD at the enforcement stage.
It is important to recognise the limits of ‘Chabra reliefs’. As a form of freezing injunction, they operate only as interim measures to preserve assets against dissipation, often accompanied by disclosure orders. Such relief does not finallydetermine whether a third party’s assets are amenable to execution of a substantive award against the award-debtor (CAD). Accordingly, the principles of distinct legal personality and separate ownership of corporate assets remain fully applicable at the final stage of execution, even if Chabra orders are passed against the subsidiary, as shown by Manx Court’s decision in Cru City (above).
Evasion Principle and Execution of Arbitral Awards
Having shown that, to subject third parties’ assets to satisfaction of an arbitral award, it is necessary to disregard the corporate veil. The circumstances in which this may be done can now be considered. Prest and Balwant Rai Salujaarticulate a ‘sham or façade’ based test for piercing the corporate veil. Both decisions adopt what Lord Sumption terms the ‘evasion principle’, under which disregarding corporate personality is justified only where the corporate structure is interposed to ‘avoid’ (in Balwant Rai Saluja) or ‘evade or frustrate’ (in Prest) existing legal obligations or liabilities. This requires the presence of three elements: (i) an existing legal obligation or liability; (ii) an intention or purpose to evade or avoid that obligation or liability; and (iii) control over the company. In essence, the requisite ‘impropriety’ lies in the avoidance of an existing obligation or liability.
Each of these requirements was satisfied in IMAX. First, both schemes of arrangement between the E-City group companies, pursuant to which properties were transferred, were sanctioned after the award was rendered in favour of IMAX, thereby establishing an liability which was ‘imminent’. Second, the Court found that the sole objective of the transfers was to immunise the assets from execution and resultingly avoid the award debtor’s liability. Third, although the assets were transferred to associated companies, control remained with the common holding company (Respondent No. 4) thereby frustrating execution of the arbitral award.
The ‘imminent liability’ standard is useful because foreign awards are treated as a ‘contingent liability’ (Kalyani Transco v. Bhushan Steel(2025), because a foreign award is treated as a ‘deemed decree’ under section 49 only after the court has recognised and adjudicated upon the enforceability of the award under section 47 and 48. Additionally, the Court held that the mere fact that the schemes of arrangement/demergers were court-sanctioned did not preclude a finding of the requisite impropriety. In doing so, it distinguished legality from impropriety, clarifying that a transfer need not be illegal to be improper or constitute a sham.
Previously, the Bombay High Court in Bhatia Industries v. Asian Natural Resources (2016) had held that the corporate veil may be pierced at the stage of execution of an arbitral award. The Court treated two companies as a ‘single economic unit’, permitting execution against assets (coal) owned by one company to satisfy an award against the other. There was no requisite ‘impropriety’ proved. Supreme Court has left the question of law open. Similarly, the Delhi High Court in Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation Ltd (2019) lifted the corporate veil at the stage of execution by applying a broader test of whether the ‘ends of justice’ or ‘public interest’ so required.
With respect, these decisions are inconsistent with the ‘evasion principle’ adopted by the Supreme Court in Balwant Rai Saluja, which expressly rejected a broader public interest-based test for disregarding separate corporate personality. The reliance placed by these decisions on ArcelorMittal v. Satish Kumar Gupta (2018) and Gotan Lime Stone v. The State of Rajasthan (2015) to justify such a broader approach is misplaced.
Arcelor Mittal concerned a statutory ‘see-through provision’, best explained through the ‘concealment principle’ set out by Lord Sumption. This principle does not entail piercing the corporate veil, but merely identifies the real actors behind the company for a specific legal purpose, namely eligibility to submit a resolution plan under section 29A of the Insolvency and Bankruptcy Code. It is thus an application of general law for the specific purpose of identification, rather than a disregard of corporate personality.
Similarly, Gotam Lime is best understood as applying the ‘evasion principle’. In that case, the Court found that the substance of the transaction was the transfer of a company’s mining rights through a share transfer, undertaken to circumvent the statutory prohibition on the direct transfer of a mining lease without the requisite mandatory approval.
Moreover, in principle, application of the broad ‘public interest’ based test to disregard corporate veil at the execution stage risks uncertainty and gives insufficient regard to consensual nature of arbitration. Partly for this reason, the Bombay HC in Mitsu Oak v. Orient Shipping (2020) following Balwant Saluja held that corporate veil can be lifted at the stage of execution of an arbitral award only if there some impropriety. This, it is argued, reflects the correct position.
Due Process and Piercing the Corporate Veil During Execution of Awards
The single judge in IMAX refused execution against Respondents 2 to 4, holding that impleading such non-parties solely at the post-arbitration stage for execution required an “onerous burden” to be satisfied by the award-creditor, given the consensual nature of arbitration. This was because these third-party entities would not have participated in the arbitration proceedings (no opportunity to advance arguments and lead evidence). Moreover, such non-parties cannot challenge the enforcement of the award, as such a challenge under section 48 is limited to parties to the arbitration. This raises possible due process or natural justice concerns.
However, these concerns are less compelling because when an executing court disregards the corporate veil, it does not seek to determine or impose any independent or fresh liability distinct from that of the award-debtor, but merely ensures that the existing legal liability of the award-debtor are not evaded or frustrated (see, the first element mentioned above i.e. requirement of an ‘existing legal liability’ sought to be evaded).
The division bench recognised this when it distinguish Mitsu. In Mitsu, execution was denied against non-parties through piercing the corporate veil because what was sought to be done there was to impose personal or independentliability on the assets of third party to satisfy the award. Here, the division bench emphasised that Respondents 2 to 4 were not being held personally or independently liable. Rather, execution against their assets was restricted only to those property improperly diverted to frustrate enforcement of the award.
Consequently, there is no question of a lack of opportunity to participate in the arbitral process. This is because much like a Chabra injunction ground in the ‘enforcement principle’, execution against such entities does not arise from any cause of action or substantive relief claimed against them personally. Instead, the separate legal personality is disregarded to obtain a remedy against associated companies under common control or ownership, other than the award-debtor company, in respect of a liability that would otherwise be that of the award-debtor company alone.
Concluding Remarks
Therefore, concerns relating to due process and the lack of opportunity to participate in the arbitral proceedings or to resist enforcement of the award under section 48 cannot, in themselves, preclude piercing the corporate veil in the circumstances like IMAX where the award-debtor’s existing liability is being avoided or frustrated. The division bench reasoning, also in line with Lord Sumption’s reasoning Prest, underscores that piercing the corporate veil does notconvert what would otherwise be a contractual/consensual liability arising under the arbitral award to a non-consensual liability. Piercing the corporate veil at the stage of execution, limited to only those assets improperly divested, does not create any new liability that would not otherwise exist, rather it seeks to prevent company’s controllers from evading a liability that already exists. IMAX establishes this position with sufficient clarity.
– Chiranth Mukunda