The petitioner is the Director of a Company, is aggrieved by the proceedings initiated under Section 26C of the Kerala General Sales Tax Act, 1963 (KGST), for recovery of sales tax dues of the Company. The contention raised by the petitioner herein is that as per the Companies Act, 1956, his liability is limited and Section 26C being subject to the provisions of the Companies Act, cannot be invoked to recover dues from a Director, over and above the liability cast by the Companies Act; which would be limited to the share holding of the individual. 2. The learned counsel would place reliance on a decision of a Division Bench of this Court in T.S Mohammed Harid v. District Collector and others in [W.P.(C) No. 6599 of 2005] dated 07.03.2014. Specific reference is made to paragraph 22, which is extracted hereunder:-
It was then contended by the learned counsel for the petitioners that though Section 26C itself opens by stating that the said provision is subject to the provisions of the Companies Act, respondents are proceeding against the Directors of the Private Companies ignoring the statutory provisions of the Companies Act dealing with the liabilities of the Director of a Private Company. Reading of Section 26C itself show that the said provision is subject to the W.P.(C) No. 6275 of 2009 2 provisions of the Companies Act and that even the respondents did not have a case otherwise. Therefore, State and its authorities cannot proceed against the Directors of the Company as if Section 26C contains a non obstante clause entitling them to ignore the provisions of the Companies Act. Here again, we feel that if any statutory right or protection available to a Director under the Companies Act is contravened by the proceedings initiated by the respondents in enforcement of their right under Section 26C, it is always open to the Director concerned to contest the matter in the objections to be filed by them. Therefore, we clarify the position as above and leave the issue at that, with liberty to the party concerned to agitate the matter at the appropriate stage.
3. Necessarily an enquiry is contemplated on the petitioner raising an objection. In such circumstance, the recovery proceedings shall be kept in abeyance and the petitioner is directed to file his objections before the 4th respondent within four weeks, who shall take a decision on the same after conducting an enquiry as contemplated by the Division Bench decision aforecited, within a period of four months from the date of receipt of the objection. The recovery shall be regulated by orders, passed in the objections.
The Writ Petition is disposed of. No cost.
K. VINOD CHANDRAN, JUDGE SB