IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:- 26.09.2008 CORAM: THE HONOURABLE MR. JUSTICE K.K.SASIDHARAN W.P.No.17713 of 2000 1. A.K.D.Kailasam 2. A.K.D. Arunachalam ..Petitioners -Vs.- 1. The Chief Engineer/Distribution/Trichy Trichy Electricity Distribution Circle Trichy Region, Trichy. 2. The Superintending Engineer, Trichy Electricity Distribution Circle/ Metering, Mannarpuram, Trichy-20. ..Respondents Writ Petition filed under Article 226 of the Constitution of India praying to issue a writ of Certiorari calling for the entire records relating to the proceedings of the second respondent in his Lr.No.SE/TEDC/TY/DEC/HT/A3/E.HT SC No.156/C.47/2000 dated 27.9.2000 and quash the same. For Petitioners : Mr.C.Prakasam For Respondents : Mr.A.Selvendran O R D E R This writ petition is directed against the proceedings of the second respondent dated 27.9.2000 whereby the petitioners were directed to pay the electricity charges due from the company, of which the petitioners were Directors. https://hcservices.ecourts.gov.in/hcservices/ 2. The factual details as found from the affidavit filed in support of the writ petition are as under:- The petitioners along with four others floated a company in the name and style of "M/s.Sasikala Oil and Extraction Pvt.Ltd." in Venkankudi Village, Trichy District and the said company was registered under the Companies Act. Both the petitioners were Directors of the said Company and the day-to-day administration of the company was managed by one Balakrishnan as Managing Director. The company also obtained electricity service connection bearing No.HDSC 156 and the connection stood in the name of the Private Limited Company. The Company alone was the consumer and the electricity charges were also paid by the company. The Oil Mill Building as well as the land stood in the name of the company. While so, in the year 1995 the company became sick and the petitioners and other Directors were not able to run the Mill and accordingly the service was disconnected on 13.6.1995. Subsequently, the respondents raised a bill for a sum of Rs.4,51,521/- and the petitioners were directed to pay the arrears as if it was their individual dues. The arrears due from the company was shown to be the arrears in respect of the residential connection of the petitioners and as such they have represented the matter before the respondents. Since no action was taken, the petitioners filed W.P.No.2544 of 1998 before this court and this court as per order dated 25.1.1998 disposed of the writ petition on the ground that no show cause notice has been issued to the petitioner before passing the impugned demand. 3. Later, the second respondent issued a show cause notice to the petitioners wherein it was indicated that the arrears due from the company would be shown as the arrears in the residential service connection of the petitioners. Immediately the petitioners have submitted a detailed explanation. However disregarding the defence of the petitioners as contained in the said explanation, the second respondent passed the impugned order dated 27.9.2000 whereby the petitioners were directed to pay a sum of Rs.4,51,521/-, being the electricity charges due from the company. Aggrieved by the said order, the petitioners have come up with the present writ petition. 4. The second respondent had directed the petitioners to pay the dues of the erstwhile company, as the respondents were not able to recover the said amount from the company. Admittedly the company was a Private Limited Company and the petitioners were also Directors along with four others. The impugned order proceeds on the factual premises that the petitioners were Directors of the company, from whom the amount has to be recovered by the respondents. However there was no indication in the impugned order as to whether the company had already been wound up or the petitioners continued to be the Directors of the company so as to enable the respondents to take https://hcservices.ecourts.gov.in/hcservices/ action against the petitioners for collection of arrears. The affidavit filed by the petitioners was also silent with respect to the position of the company as on the date on which the recovery was sought to be made from the petitioners. In case the company was having the land as well as building which originally housed the oil mill, it would enable the respondents to proceed against the property of the company. However there was no indication in the impugned order about the status of the petitioners in the company. 5. In SUNIL PARAMESSHWAR MITTAL V. DY.C.(RECOVERY CELL),C.EX., MUMBAI (1005(188) E.L.T 268 (BOM.), Division Bench of Bombay High Court considered the provisions of the Companies Act and the liability of a former Director in respect of the subsequent transactions and observed thus: "As soon as a company is incorporated, it constitutes an independent juristic person in the eyes of law as distinct from its members constituting it. Even private limited company consisting of only two members has, nonetheless, a separate legal entity. It is entirely different from its members. From the date of its incorporation a company is endowed with certain special rights and privileges and, unlike the partnership firm or a Hindu undivided family, is not a mere aggregate of members. It can carry on business and can acquire and hold property in its corporate name and has other special advantages e.g. to contract with all its members and others. In short, it becomes a body corporate capable of exercising all functions of an incorporated company having a perpetual succession. It remains in existence, irrespective of the changes in its members, until it is wound up and dissolved under the provisions of the Companies Act. The characteristic of company limited by shares is that it enjoys the privilege of limited liability i.e. liability of its member is limited to the extent of the face value of the shares subscribed by each member and the amount remaining unpaid on them for the time being. Thus, considering effect of https://hcservices.ecourts.gov.in/hcservices/ incorporation of a company and its independent juristic existence, a former Director of the Company cannot be held responsible for payment of the liabilities of the company in absence of any specific provision. No contrary provision to persuade us, not to take a view taken hereunder, was brought to our notice." 6. Even though the petitioners have submitted their explanation to the show cause notice issued by the second respondent and there was also mention about the receipt of such explanation in the impugned order, no attempt was made by the second respondent to consider the said objection before fixing the liability on the petitioners. The impugned order was also silent about the steps taken by the second respondent to recover the arrears from the company as well as about the functioning of the company and its status as on the date on which the impugned order was passed. In such circumstances, I am of the view that the matter requires to be considered by the second respondent afresh. 7. In the result, the impugned order dated 27.9.2000 is quashed and the matter is remitted to the second respondent for fresh consideration on merits and as per law. It is needless to mention that due opportunity shall be given to the petitioners before passing appropriate orders in the matter. 8. The writ petition is allowed subject to the above direction. No costs. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar Tr/ https://hcservices.ecourts.gov.in/hcservices/ To 1. The Chief Engineer/Distribution/Trichy Trichy Electricity Distribution Circle Trichy Region, Trichy. 2. The Superintending Engineer, Trichy Electricity Distribution Circle/ Metering, Mannarpuram, Trichy-20. 1 CC To Mr.C.Prakasam, Advocate, SR NO.5548 W.P.No.17713 of 2000 klt(co) pmk/14.10.2008. https://hcservices.ecourts.gov.in/hcservices/