THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.24384 of 2010 December 03, 2010 Between: Sunil Kumar Agarwal, S/o.Late Ramanand Agarwal … Petitioner And The Commercial Tax Officer, Rajendra Nagar Circle, Hyderabad and others ... Respondents THE HON'BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.24384 of 2010 ORDER: (Per Hon’ble Sri Justice Ramesh Ranganathan) The letter of the first respondent dated 10.5.2010 requesting the second respondent not to register the property belonging to the petitioner in Flat No.C2, H.No.8-2-676/1/B/A at Road No.12, Banjara Hills, Hyderabad, is under challenge as being illegal and contrary to the provisions of the Andhra Pradesh General Sales Tax Act, 1957 and the Rules made thereunder. The facts, to the extent necessary for disposal of this writ petition, are that the petitioner is a director of the third respondent company, and its shareholder to the extent of 1/3rd of the shares. The other two directors hold 2/3rd of the shares of the third respondent company. It is the petitioner’s case that the third respondent closed its business of printing cloth from April, 1996; for the assessment year 1995-96, a best judgment assessment order was passed whereby the third respondent was assessed to tax at Rs.6,83,454/-; against the said order, the third respondent preferred an appeal to the Appellate Deputy Commissioner (CT), Hyderabad (Rural) Division; and the said appeal was rejected by order dated 04.10.2006. The first respondent thereafter issued the demand notice dated 16.5.2010 calling upon the third respondent to pay Rs.6,83,454/- being the arrears of revenue due and payable by the third respondent. A similar notice is said to have been issued to the petitioner also. Thereafter, a notice of attachment was issued to the third respondent on 29.7.2010 attaching the property at Avenue No.1 W-B, 8-2, Sy. No.128 situated at Road No.12, Banjara Hills, Hyderabad, on the ground that action has been initiated under the Revenue Recovery Act, 1890. It is the petitioner’s case that, in as much as the third respondent has not yet been would up, no action can be taken against any of the directors of the third respondent company for recovery of the tax due by the third respondent. In the counter affidavit, filed on behalf of the first respondent, it is stated that, since the sales tax dues were not cleared, recovery proceedings were initiated invoking the provisions of the Revenue Recovery Act, and the second respondent was requested, vide letter dated 10.5.2010, not to permit alienation of the property as the revenue was taking steps to recover the dues. Reference is made to the letter given by the third respondent dated 08.7.2010 requesting a month’s time to reconcile as also to another letter dated 03.9.2010 whereby the third respondent informed that their unit was not working for the past 15 years; it was already sick, and was wound up and sold off. The first respondent would further state that as the petitioner was a director of the 3rd respondent, he was liable to ensure that taxes were paid, and his contention that the company was still in existence, and has not been wound up, was not tenable as the third respondent himself had stated that the unit was not functioning; it was sick; and it was wound up and sold off. During the preliminary hearing this Court, on coming to know that the third respondent was registered with the Registrar of Companies, Hyderabad, called upon Sri B.Chandrasen Reddy, learned Counsel for the petitioner, to ascertain whether any order of winding up was passed against the third respondent. Learned Counsel, on verification, would submit that the company still continues to be on the rolls of the Registrar of Companies, Hyderabad, and that no order of winding up has been passed till date. We, therefore, requested Sri P.Balaji Verma, learned Standing Counsel, to ascertain whether the third respondent company had been wound up. The learned Counsel, after verification, informed the Court today that no order of winding up has as yet been passed against the third respondent. Section 16-B of APGST Act reads as under. 16-B. Liability of directors of private company in liquidation: When any private company is wound up and any tax assessed on the company under this Act for any period, whether before or in the course of or after its liquidation, cannot be recovered, then every person who was a director of the private company at any time during the period for which the tax is due, shall be jointly and severally liable for the payment of such tax, unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. It is evidence therefrom that it is only if a private company is wound up, and any tax assessed on the company under the APGST Act for any period, whether before or in the course of or after its liquidation, cannot be recovered that a director can be proceeded against for recovery of the tax due. The pre-condition for invocation of Section 16-B is an order of winding up of the petitioner (a private limited company) and as it is not in dispute that no order of winding up has been passed against the third respondent till date, and the third respondent is not under liquidation, the impugned order is wholly unsustainable and is liable to be set aside. The impugned proceedings are, accordingly, set aside. Needless to mention that this order shall not preclude the respondents from taking action for recovery of the tax due in accordance with law. The writ petition is allowed. However, in the circumstances, without costs. _______________ (V.V.S.RAO, J) ______________________________ (RAMESH RANGANATHAN, J) December 03, 2010 YS