Mahesh Kumar vs State of Rajasthan and Others

P.S. Asopa, J.—With the consent of the parties, the case was heard finally.

The short point involved in the matter is that after issuance of the fresh certificate of incorporation under the Companies Act on 25.2.1994 the form of the Company was changed from Private Company to Limited Company, Therefore, for the dues of sales tax for the subsequent years from 1994-95 onwards, the Directors are not personally liable. The impugned recovery order has been issued against the Director without making any efforts of recovery against the Company.

Mr. Saxena submits that the change of name is the strategy adopted by the petitioners to escape the liability of Directors.

I have gone through the contents of the writ petition and further considered the aforesaid aspect of the matter.

Out of many judgments cited by the counsel for the petitioner in support of his aforesaid contentions, paras 3 and 4 of the latest judgment in K.S. Narasimhan v. CTO, Kuralagam, Annexe, Chennai (2008) 11 VST 283 are as follows:

Heard the learned Counsel for the petitioner and the learned Government counsel who admits that the liability of the director of the company for that matter retired director of the company has been dealt with by Court in the case of Sri George J. Mathew v. Commercial Tax (2002) 1 CTC 285 by a learned single Judge of this Court and in the case of Chjamudeswari and P.R. Sridharan v. Commercial Tax Officer, Vellore Rural in writ petitions Nos. 3085 and 3086 of 2000 by an order dated 5.1.2007. I have held that a company is a legal entity by itself and it can sue or can be sued as a legal entity and any dues from the company has to be recovered only from the company and not from its directors, by relying on the judgments of various High Court, such as, the cases in Desiraju Venkatakrishna Sharma. In re (1955) 25 Comp Cos 32 (AP) , Lalita Shivaram Ubhaykar Vs. Commercial Tax Officer, XII Circle, Bangalore-9 and Another, , Ramachandran Vs. State of Kerala, Punalur Paper Mills Ltd. and Another Vs. District Collector and Others, Nishad Patel v. State of Kerala (1999) 113 STC 395 (Ker), Subash Chandra Kankaria v. State of Rajasthan (1999) 114 STC 413 (RTT).

In view of the decisions referred to above, this Court is of the view that the notice impugned in this writ petition has to be set aside and it is accordingly set aside. The writ petition is allowed. No costs.

In view of the aforesaid legal position, the submission of Mr. Saxena has no force as the company was made a Limited Company after deletion of the Private Company on 25.2.1994 and the assessment are of the subsequent years.

Accordingly the writ petition is allowed. The certificate of public demand dated 18.2.2008 (Ann.9) issued against the Director is not sustainable and the same is quashed and set aside. However, the respondents are free to recover the dues as public demand from the Company.