A group of workers is retrenched by the company that employed them. The company looks thin on assets, but behind it sits a well-funded parent or a set of directors who clearly call the shots. The natural instinct is to pull all of them into the industrial dispute, the company, its directors, and the parent that owns it, on the logic that someone in that group can actually pay. Tribunals are often asked to implead exactly these parties.
Indian labour law usually does not allow it. The employer in an industrial dispute is the company the workers actually worked for, a separate legal person in its own right. Its directors are not that employer, and neither is the company that holds its shares. Unless there is a specific, pleaded reason to lift the corporate veil, directors and a parent company are not necessary or proper parties to the dispute, and an award cannot be made against them. This blog explains why, where the line falls, and the narrow situations where it shifts.
The Employer Is the Company, Not Its Directors or Its Owner
Everything here flows from one foundational rule of company law. A company incorporated under the Companies Act is a separate legal person, distinct from its directors and its shareholders. The Karnataka High Court restated this in Shashikanth Govindalal Mandanna v. YKK India Pvt. Ltd., refusing to let a money decree against a company be executed by arresting its director, and tracing the principle to the House of Lords decision in Salomon v. A. Salomon and Co. Ltd.[1].
A company is in law something different from its shareholders or members. The property of the company is not in law the property of the shareholders. The debts and liabilities of the company are not attributed in law to its members. The company may become insolvent, while its members remain rich. The shareholders may become so reduced in number that there is only one of them left; but he and the company will be distinct persons for all that.
For a labour dispute this has a direct consequence. The person the workers contracted with, the juristic entity that hired them, paid them, and terminated them, is the company. The directors signed documents and took decisions as agents of the company, not in their personal capacity. A parent that holds shares is a separate person again. None of them becomes the employer simply because they stand behind or above the company.
Who an Award Can Bind: Section 18
The Industrial Disputes Act itself limits who can be saddled with an award. Under Section 18 of the Industrial Disputes Act, 1947, an award binds the parties to the industrial dispute, any other parties summoned to appear, and, where a party is an employer, that employer's heirs, successors or assigns in respect of the establishment[2]. A director is not the employer, not a successor to the employer, and not an assign of the establishment. A parent company that merely holds shares is none of these things either. They fall outside the categories the statute makes bindable, which is precisely why a tribunal cannot ordinarily hand down an award against them.
This framework continues under the new labour codes. Section 57 of the Industrial Relations Code, 2020, which is set to replace the 1947 Act, reproduces the same list of persons bound by a settlement or award almost word for word[3]. So the rule on who can be bound does not change with the shift from the old Act to the new Code.
Assets of wholly owned subsidiary/subsidiary cannot be attached to satisfy the award/decree against the parent company
The constitutional bench of Hon'ble Supreme Court of India in Bacha F. Guzdar vs. Commissioner of Income Tax, Bombay AIR1955SC74 (Judgment Dated: 28.10.1954) has held that parent company is only a shareholder of the subsidiary company and has no rights on the assets of the subsidiary company. It was observed that the company is a juristic person and is distinct from the shareholders. It is the company which owns the property and not the shareholders. It was observed that shareholders of the company have the sole determining voice in administering the affairs of the company and are entitled, as provided by the Articles of Association, to declare that dividends should be distributed out of the profits of the company to the shareholders but the interest of the shareholder either individually or collectively does not amount to more than a right to participate in the profits of the company. Further, SC held that dividend received by the appellant is not the agricultural income.
Considering, the above ratio laid down in Bacha F. Guzdar, it can easily be inferred that award passed in a labour dispute involving parent company cannot be executed agaisnt the assets of its subsidiary company.
Moreover, hon'ble Supreme Court in Vodafone International Holdings B.V vs. Union of India & Anr. (2012) 6 SCC 613 (Judgment dated 20.01.2012) had observed that legal relationship between a holding company and wholly owned subsidiary is that they are two distinct legal persons and the holding company does not own the assets of the subsidiary and, in law, the management of the business of the subsidiary also vests in its Board of Directors. A holding company and its subsidiary are separate and distinct legal entities. The holding company owns only the shares of the subsidiary, and such shareholding does not make it the owner of the subsidiary’s assets.
When the Parliament of India had enacted the Insolvency and Bankruptcy Code 2016, the issue of overlapping of seeking attachment of assets belonging to holding and subsidiary companies respectivley in a insolvency proceedings against any one them was well considered by legislature and the protection from the said problem is provided under the Section 36 of IBC 2016 which defines ‘liquidation assets’ of the corporate debtor wherein there is a mandate of clause (d) of sub-section (4) of Section 36 that the assets of an Indian subsidiary of the corporate debtor shall not be included in the liquidation estate and shall not be used for the recovery in liquidation.
Thus, it is no more res integra that assets of a subsidiary company cannot be attached for satisfying the award/decree issued against the parent company.
A Parent or Related Company Is Not a Necessary Party
The clearest authority on the labour side is Lufthansa German Airlines v. Globe Ground India Employees Union. A ground-handling company, Globe Ground India, retrenched 106 workmen. The union got the Industrial Tribunal to implead Lufthansa, arguing that the airline sat at the top of the corporate structure. The Delhi High Court set the impleadment aside. The airline had no equity participation in Globe Ground India, the reference was about the action of Globe Ground India in retrenching its own workmen, and an award has to be executed against the company, not against a shareholder[4].
The award needs to be executed against a company and not against a majority share holder. It is the action of the legal entity, namely Globe Ground India Pvt. Ltd. in retrenching the 106 workmen, which needs to be determined in the Industrial Dispute and not the action of a shareholder.
The court drove the point home with two further holdings. Even a hundred percent subsidiary does not merge into its parent, so employees of the subsidiary are not employees of the holding company merely because the parent owns all the shares or controls the board. And because an Industrial Tribunal is a body of limited jurisdiction that cannot travel beyond the terms of the reference, a passing description of the company as a subsidiary of the airline did not let the workmen pursue a claim against the airline at all. A related or parent company is not made a necessary party just because it is richer or sits higher in the group.
Directors Are Not Personally Liable, So Not Proper Parties
The same logic removes directors from the array of parties. Because a director acts as an agent of the company and is not personally liable for its obligations, courts treat directors as neither necessary nor proper parties to a claim against the company unless there is a specific basis to hold them personally liable. The Delhi High Court applied this in Gurmeet Satwant Singh v. Meera Gupta, deleting the directors from a recovery action where the plaint contained no allegation against them in their personal capacity and no ground to lift the corporate veil[5].
The principle plays out squarely in labour proceedings too. In Nikulbhai Chhanabhai Chunara v. Presiding Officer, Labour Court, a workman tried to add a director as a party opponent in a recovery application under Section 33(C)(2) of the Industrial Disputes Act. The Gujarat High Court refused. A person against whom liability was not fixed in the original award cannot be dragged into its execution, and seeking a director's joinder merely because he performed official acts for the company is misconceived[6]. The Calcutta High Court took the same view in Gautam Sadhan Bose v. State of West Bengal, holding that individuals connected with a club's management were not necessary parties to a conciliation proceeding, because the employer could be represented by its own officers and there was no personal obligation on the individuals under industrial law[7].
Liability Cannot Be Imposed on Someone Who Was Never a Party
There is also a basic fairness principle at work. A person cannot be made to answer for an order passed in proceedings to which they were never a party. The Bombay High Court laid this down decades ago in C. Eduljee and Company Ltd. v. First Labour Court, Nagpur, holding that individual directors who were not parties to the adjudication against the company could not later be prosecuted for breaching it, because they never had the chance to contest the order[8].
The Bombay High Court extended the reasoning in Dipak Ray v. Mafatlal Engineering Employees Union, where executives were prosecuted for the company's alleged breach of an injunction. The court held that, in the absence of a statute creating vicarious liability, a director or officer who was not a party to the original proceedings cannot be made liable in later ones[9]. This matters for a parent company too. If the parent was not a party to the reference, an award cannot be enforced against it later through the back door.
The Narrow Door: When the Veil Can Be Lifted
None of this is absolute. Courts will look behind the corporate form where there are specific and pleaded grounds, such as fraud worked through the corporate structure, a sham or facade set up to defeat workers' rights, or a statutory mandate to treat entities together. The point the cases make repeatedly is that veil-lifting is the exception, it must be argued and proved, and it is normally invoked against directors to enforce obligations, not at large to rope in whoever has money. In Lufthansa, the court refused to lift the veil precisely because none of those circumstances was pleaded[4]. A worker who genuinely believes the corporate structure is being used to defeat a legitimate claim has to set out those facts specifically, not simply assert that the parent or the directors are the real beneficiaries.
The Real Exception: Section 32 and Failure to Implement an Award
There is one situation where directors and managers are squarely exposed, and it is worth being honest about it. Once there is an award or settlement against the company and the company commits an offence under the Industrial Disputes Act, typically by failing to implement it, Section 32 of the Act deems every director, manager, secretary, or officer concerned with the management guilty of that offence, unless the individual proves it was committed without their knowledge or consent[10]. The Madras High Court in Balasubramaniam v. Government of Tamil Nadu held that directors can be prosecuted under Section 32 for the company's failure to implement an award even without the company itself being arraigned, leaving them to prove their innocence at trial[11].
Two points keep this exception in its place. First, it is penal liability for the company's offence, not a route to make directors parties to the adjudication of the dispute itself. The dispute is still fought against the company. Second, even under Section 32, courts have confined prosecution to the officers actually responsible for compliance, declining to drag in senior management who had nothing to do with implementing the award. The deeming clause shifts a burden onto those in charge of management, it does not turn every director into a defendant in the underlying labour case.
What to Do, on Either Side
The practical takeaways differ depending on which side of the dispute you are on.
Workers: name the right employer first. Identify the company that actually employed you and raise the dispute against it. A claim that names only directors or a parent, while leaving out the employing company, can collapse on a basic objection.
Workers: to reach a parent, plead veil-lifting facts. If you genuinely believe the structure is a sham or a device to defeat your rights, set out the specific facts, such as common control of employment, a facade with no real separation, or fraud. Deep pockets alone are not a ground.
Directors or a parent wrongly impleaded: apply to be deleted. Move the tribunal to be struck off the array of parties, pointing to the separate legal entity, the absence of any veil-lifting pleading, and the terms of the reference, which fix the limits of the tribunal's jurisdiction.
Resist execution against personal or parent assets. If an award exists only against the company, object to any attempt to recover from a director's personal property or from a parent that was never a party, as in the recovery cases discussed above.
On Section 32, identify the responsible officer. Where prosecution is launched for non-implementation, a director not in charge of compliance can show that the offence occurred without their knowledge or consent, and that the company had designated other officers to implement the award.
Common Mistakes
Assuming control equals employment. A parent that controls the board or owns all the shares is still a separate person. Control over a subsidiary does not make its workers the parent's employees.
Treating directors as the employer. Directors act as agents. Naming them personally, without alleging a personal undertaking, tort, or veil-lifting ground, invites deletion from the case.
Asserting veil-lifting without facts. Courts will not pierce the veil on a bare allegation. The specific facts of fraud, sham, or single economic control must be pleaded and proved.
Trying to enforce an award against a non-party. If the parent or director was not a party to the reference, the award does not bind them, and execution against them is liable to be set aside.
Confusing Section 32 prosecution with the dispute. Section 32 is about penal liability for non-implementation, not about who is a party to the adjudication of the dispute itself.
The thread tying all of this together is the separate legal personality of the company. The employer in a labour dispute is the company, and the persons an award can bind are fixed by statute. Directors and a parent company sit outside that circle unless a worker can show a real, pleaded reason to look behind the corporate form, or unless the narrow penal liability under Section 32 is triggered by a failure to implement an award. Knowing which of these boxes a case fits into is what decides whether the directors and the parent stay in the matter or walk out of it.
This blog explains the position in general terms. Whether a parent or director is a proper party, whether the facts justify lifting the corporate veil, and how Section 32 applies to a specific officer depend on the precise facts and pleadings, which is where an experienced practitioner adds the most value.