Director of Pvt Ltd Company immune from Proceedings under Kerala General Sales Tax Act: High Court [Read Judgment]

A division bench of the Kerala High Court has held that a Director of a Private Limited Company is immune from the proceedings under the Kerala General Sales Tax Act, 1963.

The petitioner, through a writ petition, challenged the constitutional validity of the provisions of Section 26C of the Kerala General Sales Tax Act, 1963. It was also contended that there could be no proceedings taken against the Director of a private limited company and if at all such a proceeding is taken then it has to be subject to the provisions of the Companies Act.

Section 26C specifically speaks of joint and several liabilities of every person who was a Director of a private limited company only if the tax or other amounts recoverable under the Act cannot be recovered for any reason from the private company.

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The bench comprising Justice Vinod Chandran and Justice Ashok Menon held that “Hence the proceedings have to be taken first against the company and there should also be sufficient material to show that the recovering authorities were not able to recover the amounts from the assessee company. There are no such averments made by the Government in the counter affidavit also.

Before the High Court, the Counsel for the petitioner Sri. A Kumar would submit that if at all a proceeding is taken against the Director after finding the recovery against the company to be futile, then the Director would be entitled to raise all available contentions as per the Companies Act.

“We find sufficient support for the above submission from the decision of another Division Bench in Mohammed Harid, v. District Collector [(2014) 2 KLT 102]. This Court had declared that since Section 26C contains a specific clause that it would be subject to the Companies Act if any statutory right or protection is available to the Director under the Companies Act contravention of the same could be taken as a defense against the recovery,” the bench said.