IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR JUSTICE P.R.RAMACHANDRA MENON THURSDAY, THE 28TH MAY 2009 / 7TH JYAISHTA 1931 WP(C).No. 40561 of 2003(D) -------------------------- PETITIONER: --------------- THOMAS GEORGE, MANAGING DIRECTOR, M/S. BLUE CHIP DIOMONDS LTD., THOOMPUNKAL, K.P. ROAD, KAYAMKULAM. BY ADV. SRI.PREMJIT NAGENDRAN RESPONDENT(S): --------------- 1. THE DEPUTY TAHSILDAR (REVENUE RECOVERY) HARIPPAD. 2. THE SALES TAX OFFICER, 2ND CIRCLE, KALAMASSERY, PALARIVATTOM, KOCHIN-25. SRI.V.K.SHAMSUDHEEN, GOVERNMENT PLEADER FOR R1,2 THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 25/05/2009, THE COURT ON 28/05/2009 DELIVERED THE FOLLOWING: APPENDIX PETITIONER'S EXHIBITS: EXHIBIT.P1: TRUE PHOTOCOPY CERTIFICATE OF INCORPORATION OF THE COMPANY M/S.BLUECHIP DIAMONDS LTD TOGETHER WITH THE MEMORANDUM OF ASSOCIATION DATED.23.8.1993. EXHIBIT.P2: TRUE PHOTOCOPY OF THE APPEAL SUBMITTED BEFORE THE APPELLATE ASSISTANT COMMISSIONER OF SALES TAX DATED.9.12.2002 EXHIBIT.P3: TRUE PHOTOCOPY OF THE DEMAND NOTICE ISSUED UNDER THE REVENUE RECOVERY ACT DATED.5.12.2003 BY THE 1ST RESPONDENT. TRUE COPY PA TO JUDGE [CR] P.R.RAMACHANDRA MENON, JUDGE -------------------------------- W.P.(CIVIL)NO.40561 of 2003 ------------------------------ Dated this 28th day of May 2009 JUDGMENT The petitioner is a Director of a Public Limited Company which was having the original name and style as “Global Latex Ltd”, but subsequently changed to 'Blue Chip Dimonds Ltd'., as evident from Ext.P1 Certificate of incorporation issued by the Registrar of Companies. 2. The case of the petitioner is that the petitioner is not liable to be proceeded against for realisation of corporate tax liabilities of the Public Limited Company M/s.'Blue Chip Dimonds Ltd. The respondent department issued Ext.P3 Revenue Recovery notice in the name of the petitioner and some others who are stated to be Directors of the above Company; sustainability of which is under challenge. W.P.(CIVIL)NO.40561 of 2003 2 3. The respondents have filed counter affidavit seeking to sustain the action, placing reliance on section 26(C ) as well as section 22 (4) of the KGST Act contending that the department is very much entitled to proceed against the assets of the Directors of the Company. Further it is added in the last para of the counter affidavit (para 8) that the State tax dues might be directed to be recovered either from the assets of the Company by making necessary direction to the custodian of the assets of the Company namely the Development Commissioner, Cochin Export Processing Zone, Kakkanad (now Special Economic Zone Kakkkanad) and or and from the person and assets of the petitioner and other Directors of the Company. 4. The learned counsel for the petitioner submits that the petitioner has absolutely no objection with regard to the I limb of the above contention and that the petitioner is aggrieved W.P.(CIVIL)NO.40561 of 2003 3 of the steps being pursued against the petitioner and his assets. The learned counsel further submits that the reliance placed on section 26(C ) as well as section 22 (4 ) is also quite wrong and misconceived. 5. For the purpose of convenience of reference section 26 (c ) is extracted below: S.26C: “ Subject to the provisions of the companies Act 1956 (Central Act 1 of 1950) where any tax or other amount recoverable under this Act from any Private Company, whether existing or wound up or under liquidation, cannot be recovered for any reason whatsoever, every person who was a director of such company at any time during the period for which the tax or other amount is due under this Act shall be jointly and severally liable for the payment of such tax or other amount”. W.P.(CIVIL)NO.40561 of 2003 4 It is very much evident from the above provision that the same is applicable only in the case of a Director of the “Private Company” as specifically referred to therein and is not attracted, when the Company is a 'Public Limited Company'. Coming to the case in hand, there is a specific averment in the Writ Petition that the Company in which the petitioner was a Director was a 'Public Limited Company'; which is more evident from Ext.P1 Certificate of incorporation and the Memorandum of Association attached therewith. The above specific averment as to the very nature and status of the Company has not been disputed or rebutted anywhere in the counter affidavit filed by the respondents, but for stating in para 2, that the petitioner claims to be a Public Limited Company. The respondents have not disputed the veracity or credibility of Ext.P1 Certificate of incorporation showing the Company as a Public W.P.(CIVIL)NO.40561 of 2003 5 Limited Company. If the respondents had any doubt as to the genuineness of Ext.P1, they could have very well procured necessary materials from the Registrar of Companies paying requisite fees as prescribed or otherwise. In other words, the claim of the petitioner that the company is a 'Public Limited Company' stands unrebutted. This being the position, Sec.'26C' is not at all attracted to the case in hand; which is more so, since such provision took its breath for the first time, only with effected from 1.4.99; whereas the alleged transaction of the Company is in respect of the assessment year 97-98. 6. Coming to the reliance placed on Sec.22 (4), it is true that the sub section shows, that where any the dealer fails to pay any tax collected by him under the sub section (1) to the Government, any person or persons responsible for such collection on behalf of the dealer including the Director, Manager, Secretary or other officers W.P.(CIVIL)NO.40561 of 2003 6 of the Company shall be jointly and severally liable for payment of such amount to the Government forthwith, as if it were a tax due from him. Obviously the above sub section was also brought into existence, along with section 26 (C) only with effect from 1.4.99. For the very same reason, as given above, the tax liability of the concerned Company admittedly being of the assessment year 97-98, the reliance placed on the above provision of law which was incorporated only with effect from 1.4.99 cannot be pressed into service. 7. In the above circumstances, there is absolutely no legal basis to substantiate the demand under Ext.P3, which hence is set aside. This is without prejudice to the rights and interest of the respondents to proceed against the Company or its assets as permissible under the relevant provisions of law. W.P.(CIVIL)NO.40561 of 2003 7 8. Pursuant to the interim order dtd. 23.12.03, it is pointed out, the petitioner had deposited a sum of Rs.2 lakhs for availing the benefits under the interim order. It is made clear that, if the petitioner has paid the same, it shall be refunded to him within one month from the date of receipt of a copy of this judgment. This Writ Petition is allowed as above. No cost. P.R.RAMACHANDRA MENON JUDGE RAV